Do Auctions and Galas Hurt or Help?

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Auctions. Galas. Raffles. Car washes. Bake sales. Walk-a-thons.  If you do them to raise money, you are, as the saying goes, “stepping over a dollar to pick up a dime.” Here’s why: first, events are time and cost-intensive. They deliver poor return-on-investment, otherwise expressed as “cost per dollar” (see this post for more detail on this essential organizational performance indicator), typically demanding an expenditure of $0.40 and $0.70 for every dollar raised. In other words, a huge share of the proceeds go to the cost of the event – the profit margin may be good compared to a restaurant, but it’s terrible compared to other fundraising strategies, ones that are not only more efficient, but offer the potential for much, much larger gifts, all at a cost-per-dollar at $0.15 or less, and all done in a way that is far more compatible with your mission and values.

Counter-intuitively, the first step to raising a lot more money for your organization is to actually de-emphasize making money at the event itself. Instead of grabbing a little cash now, think about order-of-magnitude larger investments 6, 9, or 12 months in the future.

Don’t treat events as a one-time ask, the format for pretty much every auction and gala out there. Instead, treat them as an opportunity to engage and delight the guests with a compelling demonstration of your organization’s programs and mission. It might take more than a 5-minute video, but it’s worth it.

Sure, people at your event can write a check if moved, but any “ask” should be done with a light touch, with the most emphasis placed on the event being a first step in a long-term relationship building process in which the organization works as a team, coordinating among and between the board, volunteers and executive staff to nurture relationships with attendees and engage in a longer-term process toward winning major a investment in the organization.

Those donors you speak to once each year, but only to ask them for money,  and then carpet bomb with follow up email the rest of the year are unlikely to name you in their will. And the folks that can write you 6-, 7-, and 8- figure checks year after year are so horribly bored by all the same-old fundraising events, you’ll have a very hard time attracting their attention in the first place.

Don’t get us wrong: we are all in favor of charitable fundraising events done well, when they are created to attract and educate people as part of an empathetic and genuine relationship building process. And only if the events themselves are unique and interesting. Properly conceived and executed, fundraising events should instead be, as another old saying goes, friend raising events. Use them for donor acquisition, cultivation, and stewardship, and leave the “ask” for intimate 1-on-1 or small group meetings, and only when the timing is right.

If all this is true, then why are so many dreaded “asks” delivered en mass over loudspeakers – or these days, over your computer speaker, as the auctions and events have all gone virtual? Why do so many organizations still run 1-time fundraising efforts and under-invest in their capacity to create, build and deepen long-term relationships? Many reasons: a failure to analyze performance metrics; the social-proof of so many other organizations doing the same thing; a propensity for short-term thinking; and because starving is scary. Even if everyone in the org is sick and tired of the annual gala, they badly need that $200K or they might not get paid.

In addition to an absence of performance benchmarks, social-proof and fear, there is also the budgetary inertia to explain many auctions and galas. So many executives and board members will grab at that $200K because it’s certain, they’ve never done anything else, and they have a hard time imagining someone writing a check for a million dollars, it was in the budget last year, and they can’t imagine themselves in the position of the university or hospital down the road that cultivates, solicits and wins 7-figure investments every day of the calendar year.

The bottom line is, too many nonprofits purse high-cost, low-return transactional fundraising events because they simply don’t trust that there are other, far more effective means of generating mission-critical investment and partnerships happening right down the road. Change is scary.

Organizations not gripped by the fear of change, ones that are eager to capture a greater share of the billions of dollars in donations made every year, think less about fundraising events and more about concepts like investment and partnership. People may make any number of modest charitable donations each year, but they reserve their major investments– much, much larger sums of money– for organizations they are truly close to. No matter if an influential individual is making a major charitable contribution; directing their foundation to make a grant; overseeing a corporate partnership or agency grant; or making an investment or contract decision, they need to trust that the organization will do what it says it will do. And trust like only happens if the org earns that trust.

Relationship-based fund raising is precisely how top universities and hospitals raise billions. It’s also a strategy that organizations of any size can implement. Not only is it far less expensive and more effective, it’s strikes us as a whole lot more ethical and empathetic. You educate your audience, strengthen your community, and live your values.

So save your events for identifying, engaging, and thanking donors– which, if you are truly on the ball, you call investors.  If you are going to ask for money at the event, make sure it’s a small addendum to a much larger education on what you are doing to change the world.  Consider those small gifts opportunities to say thank you in powerful, creative ways.  Make it the start of a long, personal relationship with your supporters.

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