New Research Proves Cash Is Not King in Fundraising

If you want to raise significantly more money for your nonprofit organization, you need to diversify the types of gifts you seek from individuals. That’s what successful charities do to raise significantly more money each passing year. Conversely, relying solely on cash contributions will likely stunt your organization’s growth.

Those are the key conclusions of a newly released study by Prof. Russell James III, JD, PhD, CFP®, philanthropy researcher at Texas Tech University. The study examined more than one million filings with the Internal Revenue Service by nonprofit organizations.

The following chart reveals that, from 2010 to 2015, nonprofits that consistently received gifts of stocks or bonds grew their contributions six times faster than those receiving only cash:

James’ study found the results are not limited to just those years. When looking at three-year rolling averages, organizations consistently receiving non-cash gifts grew much more quickly than those receiving only cash contributions. The study identified the same general growth pattern regardless of the starting size of the charity or the type of charitable organization.

James observes:

Beyond simple opinions or war stories, the previous results conclusively demonstrate that organizations raising non-cash gifts experience dramatically greater growth in total contributions, both contemporaneously and over the long term. Why? This is likely due in part to the effects of mental framing.

First, it is important to understand that wealth is not held in cash. Census bureau estimates suggest that only about 3% of household wealth is held in cash and checking accounts. When fundraisers ask for cash, they are asking from the ‘small bucket.’ This makes a psychological difference because it changes the reference point for the gift. The same gift may seem ridiculously large when compared to other checkbook purchases (elective expenditures from spendable income), but quite small when compared with total wealth (other non-cash assets). Donors who have never made a gift from assets may simply never have considered giving from wealth rather than giving from spare income. This is particularly important considering findings from experimental research demonstrating that people are much more willing to make charitable donations from irregular, unearned rewards (such as might occur with an appreciated asset) than from regular work earnings.

[Second,] gifts of appreciated assets are also cheaper than gifts of cash because the donor avoids capital gains taxes. This special benefit is particularly important under the new tax law, because it applies to all donors, even non-itemizers who can’t use charitable deductions.”

Intuitively, most fundraising professionals have already known what the James study now proves. So, if fundraisers know they should be seeking cash AND non-cash gifts, why do so many ask for only cash or merely make a feeble attempt to get non-cash donations?

James answers:

If fundraisers are not given additional recognition for the additional effort and expertise required for [seeking such non-cash] gifts, they will be rewarded [instead] for hitting the ‘easy button’ of asking only for cash.”

When fundraisers put in a bit of extra effort to bring in non-cash gifts, they are likely helping their organizations achieve greater rates of growth than would otherwise be the case. Furthermore, the impact of the extra effort will be felt almost immediately. James found that when the appreciated-securities share of overall donations to an organization grows by 10 percent, the nonprofit experiences an overall philanthropic growth rate of 18 percent. With real estate gifts, the results are even more dramatic with a 10 percent growth in share resulting in 26 percent growth in overall donations in the same year!

Among all non-cash-only nonprofits, the average share of giving from non-cash sources was was 27.9 percent. Among nonprofits who received securities the average share was 20 percent.

James summarizes it this way:

Shifting to gifts of non-cash assets drives total fundraising growth in every nonprofit sector, at every fundraising size, in every time period (same year and 3 or 5 years later).”

If you want to keep getting what you’ve always been getting, then keep asking for what you’ve always been asking for. But, if you want to raise significantly more money, start seeking or start putting more effort into seeking non-cash gifts, and do so in the right way.

Seeking non-cash contributions will help you raise more money. You’ll be happier raising more money, especially when your annual review time arrives. Your boss will be happier. Your board will be happier. Those your organization serves will be happier. Even your donors will be happier because you’ll be allowing them to have a greater impact and you’ll likely be helping them to reduce their tax bill. So, what are you waiting for?

For a free download of James’ summary report and a link to his complete technical paper, click here.

That’s what Michael Rosen says… What do you say?

Advertisements

8 Comments to “New Research Proves Cash Is Not King in Fundraising”

  1. Impressive and somewhat surprising statistics. Thanks for looking into this.

  2. Great to see the research on this. I find WAY too many nonprofits neglect promoting non-cash gifts. While it may require special expertise to accept more exotic items, or even gifts of real property, accepting gifts of stock is relatively straightforward and well worth the small effort it takes to learn the ropes and begin to let folks know this will enable them to make a larger contribution than they might have otherwise thought possible. Thanks for this great reminder!

    • Claire, thank you for your comment. I’m glad my post resonated with you. One of the things senior nonprofit managers can do is invest in the professional education of fundraising staff so they can acquire the necessary skills to facilitate non-cash gifts. A small investment can yield a massive return.

  3. Thanks for this very interesting and thought-provoking post, Michael. Anecdotally, it seems to me that non-cash gifts here in the UK charity sector, are currently less sought after. Legacy/planned giving is getting increasing investment from charities but stocks, shares, and now crypto-currency (though I guess this fits into the cash category) still have a great deal of potential.

    • Samuel, thanks for sharing your insights from the UK. Getting non-cash gifts requires more effort than simply seeking cash. So, it’s not unexpected that fundraisers will focus their efforts on what is easiest for them. Add to that the many CEOs and CFOs who place a great emphasis on generating cash gifts, and it’s easy to understand why so many nonprofits spend most of their energy seeking cash over non-cash gifts. However, as you recognize, and the research demonstrates, there is great potential in the non-cash gift category.

  4. We put the Stock/Securities, IRA/QCD and DAF reminder giving options in about 3/4 or the PS: of our fund appeals including those for core direct mail donor segments with the stock@ email address and the 800# to call.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

w

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: