Fundraising or Fund Development – What’s the Difference?

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The terms fundraising and fund development are bantered about almost interchangeably. But, there is a difference. Here’s my attempt at an explanation.

Fundraising is probably the easiest of the two terms to define. It is activity that is conducted with the intention of raising money for a nonprofit organization or charity. It usually involves asking people for donations, using a variety of communication methods, asking people to purchase a product or service that supports the charity, or having people participate in an event of some sort. Some extend the definition of fundraising to include activities like sponsorship sales, which is essentially a form of advertising, gaming and gambling activities that benefit charity, and application for funds from government programs.

Fund development is a bit less straight-forward and a bit more of an abstract concept. The way I think of fund development is the process by which organizations use fundraising to build capacity and sustainability. Fund development is a part of the strategic marketing of a nonprofit organization. It is the concerned not only with raising money, but doing so in a way that develops reliable sources of income that will sustain the organization through the realization of its long term mission and vision. Fund development usually involves building relationships with people and other organizations that will support the charity. It requires a strategic plan that relates funding to the purpose and programs of the organization. A part of the strategic plan will be a fund development plan that coordinates various forms of fundraising, marketing, communications, and volunteer management.

There are various ways of categorizing nonprofit organizations and charities. When it comes to determining which require fund development strategies, as opposed to fundraising, I tend to think in terms of three categories. There are organizations that do not concern themselves with development because the membership keeps changing, the goal for fundraising is almost always to meet the immediate needs of the members, and the infrastructure costs are supplied by a larger, affiliated organization. Church youth groups, bands, cheerleading squads, and sports teams, and so on, fit into this category. Participants in these groups are usually involved for a few years, so typically no long term relationships with people outside the group are established, there is no incentive for members to fundraise beyond their immediate needs and they are usually affiliated with larger groups, like schools or churches, which supply needs like meeting space and leadership. These types of groups typically engage in fundraising activities that require minimal organization, leverage volunteer participation and require simple communication strategies.

A second type of organization is primarily member based. Funds are raised from among the members themselves for the purpose of sustaining the organization’s needs, which are usually a building or meeting space of some sort and staff. The money required may be in the form of fees paid to belong to the organization, as in the case of a professional association, or in the form of donations, as in the case of a church. These organizations have a built-in fund development strategy. The supporters of the organization are the recipients of the organization’s programs and services. So the strategy for sustaining the organization and building its capacity usually revolves around the members themselves organizing in a way that provides trust of the leadership to spend funds wisely, communication about how funds are being used, involvement of the membership in budgeting and other decision making processes, and a strategy to build and rejuvenate the membership.

The third type of organization potentially describes the rest of the nonprofit and charitable world. This is the organization that serves the entire community or society in some way. It has a long term vision and strategic plan and requires funding to maintain its service to the community year after year. Sometimes organizations like this have a base of government support, but often must raise funds from a variety of sources to maintain their budgets. This type of organization must have a fund development strategy in place to ensure its long term viability and build its capacity over time. The methods of fundraising it uses may be similar to the other organizations described above, the difference being that underlying its choice of fundraising methods will be the desire to build sustainable relationships with all funding sources.

A key decision an organization must make is what type of fundraising or fund development strategy it should use based on the type of organization it is and if it has long-term needs. Many organizations start with meeting their needs through short-term fundraising strategies and at some point must make the transition to fund development strategies. Otherwise, they will flounder, moving from one fundraiser to another without developing sustainable relationships.

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Source by Ron Strand