Your gala was beautiful. The auction raised a lot of money. Everyone had a wonderful time, and you are exhausted. Now: Do you know if it was worth it?
Parties are fun, and I’m not here to tell you that fundraising events are bad. They’re not necessarily, but I work with nonprofit leaders on grant strategy, and it’s my job to say the uncomfortable thing, with data to back it up. Organizations spend significant resources on events, often without ever calculating whether those resources are worth it. It’s worth looking into, especially because funders are looking at it too. Here’s the uncomfortable part: I think events are fine, but their benefits are overestimated. They present opportunity costs when staff and volunteers who could be doing other things to bring in money spend that time on party planning. I think they generally should be, at best, a minor part of an organization’s fundraising budget.
What the data says about event fundraising
Here’s the data part. According to the Nonprofit Research Collaborative, the average cost to raise a dollar through a special event is 50 cents. A 2:1 return sounds OK until you factor in staff time. If your team spends 200 hours planning and executing an event at an average salary of $25 per hour, that’s $5,000 in labor costs that probably never appeared in your event budget. Your real return just got smaller. The part that not enough people think about is the opportunity costs. Those 200 hours could have been spent doing something else that improves your programs, raises your profile, and builds relationships with funders.
Compare special events to other fundraising strategies. Major gifts cost an average of 10 to 20 cents to raise a dollar. For the English majors in the house (that’s me!), I’ll spell it out: that’s a 5:1 to 10:1 return, compared to 2:1 for events. Every hour your staff, board, and volunteers spend planning, attending, and wrapping up a gala is an hour they’re not cultivating those relationships that bring in funds.
But what about…?
There’s a case to be made for events, and I want to be fair about it. Events can introduce new donors to your organization, and a new donor who gives annually for five years tends to contribute more over time. In theory, an organization paying $0.50 to raise a dollar today could look very different a decade from now if those attendees become long-term supporters. But….That increasing donation amount only happens with intentional follow-up. Research from the Fundraising Effectiveness Project shows that only about 28% of new donors give a second gift. Most event donors, without active stewardship, disappear.
What does this have to do with grants?
This is all relevant to how funders see you. Charity Navigator calculates a fundraising efficiency ratio from your IRS Form 990, and funders may use it when making decisions. More event spending raises your reported fundraising costs, which lowers your score, and some grant applications now ask for your Charity Navigator rating directly.
If your events are generating real long-term value, that’s one thing, but have you checked the data to see if you can find out? If events are running on habit and assumptions, they may be costing you more than you realize, including grant opportunities.
The questions to ask before next year’s planning starts
You don’t need to cancel your gala. You need data.
- What did the event actually cost, including staff time?
- How many attendees gave again the following year?
- What is the lifetime giving of your event-acquired donors compared to donors who came in through other channels?
- What else could your team have accomplished with those hours?
If you can answer those questions, you can make a real decision. If you can’t, that’s the answer.
One more thing to consider
A well-researched grant prospect, a strong application, and a funded award can return 10, 20, or 50 times that investment, with no venue deposit, no catering bill, and no week of recovery afterward. I’m not saying events and grants are an either/or choice. But if your organization is resource-constrained and trying to decide where to put its fundraising energy, it’s worth running the math on both sides.
Learn more:
- Event Fundraising: 3 Metrics to Measure ROI — Graham-Pelton
- Charity Navigator: Accountability & Finance Methodology
- Fundraising Effectiveness Project — AFP