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Commission Based Fundraising – The Truth!

Posted on 24 November 2009 at 1:49 pm
Viewing 20 posts - 1 through 20 (of 20 total)
  • Anonymous
    24 November 2009 at 1:49 pm #3396

    Hello everyone,

    I am starting this topic due to the countless comments on forums across the internet on the issue of fundraising by commission, which are invariably negative and not balanced in the slightest. What’s more no-one ever seems to offer the view from the side of those who, like me, actually work on a commission basis to fundraise, and what the positive elements of this are (and believe me, there are many!). It actually makes me quite angry when a lot of questions are asked in forums such as these by people from genuine charities, who cannot afford fee-based consultants, and want to know the ins and outs of commission based fundraising, but no-one is giving them any answers to their original questions because they become too active in spouting the age-old party-line given by the various fundraising associations (such as the IFT amongst others) that commission based fundraising is bad, unethical, not advisable, not long-termist, etc, etc. This seems to come from a simple reiterating of wording from sites like the IFT and not actually from a real-world understanding on how fundraising works and the genuine concerns and problems charities have. Now it is time for this to be addressed and for me, a full-time charity fundraiser who works solely on commission, to provide some light on the issue:

    (Note: I apologise for the length of this thread but it has been a long time coming that anyone has defended commission based fundraisers and there is a lot to say and a lot of myths to bust!:

    People are of course entitled to their views, but I strongly disagree with the point that commission based fundraising is unethical and can lead to problems. This goes against anything I have seen in the market place or with any of my clients. Many fee charging consultants say that they constantly have to turn down clients (Charities) that ask if their agencies can work on a commission basis. The one reason you get so many people asking you to do this is the answer to the question many people ask on forums – its because MOST charities have no money to pay the VERY high fees (£250 to £1000 DAILY) charged by consultancies. What’s more, some agencies who only offer fee-based work and are against commission based fundraising, still admit that their fees can amount to 5-20% of the funds they bring in for the client. Our commission varies from 10-20%, so what is the difference? (see http://www.charity-fundraising.org.uk/about-us/faq/ for evidence of this point!)

    I’m afraid the problem is that most people don’t put themselves in the shoes of the charities (the clients) and accept that, as I have personally seen countless times in the charity sector, Charities have a) No or little MONEY to spend on staff, b) no or little TIME to spend on fundraising, c) NEED fundraising, d) Fundraising costs money and has to be paid for! The people that say in response to this “just hire volunteers who will do it for their CV” or “charities who arent willing to spend money on this should probably shouldnt be looking for fundraisers” or “charities should be willing to share the risk”. These ridiculous answers make it sound like charities have a CHOICE, or have some untapped unrstricted gold reserves to tap into! Unfortunately, ladies and gentleman, this does not apply in the real world.

    I think the big point that people miss out on with this issue, is over MOTIVATION. These points that professional fundraisers are professional individuals who need to be treated as such, essentially means nothing in the REAL WORLD. This is because: how can a salaried employee or a fee-based consultant be motivated to apply for larger donations, spend the time on long applications, increase their output and the NUMBER of applications, when they are taking home a nice fee every month?? They cannot possibly be as motivated to do this as those based on commission because they do not have the commission reward to aim for, so what is the point of them increasing their efforts?

    Which unfortunately brings us to the point that most professional consultants on a salary or fee type structure rarely admit – that many consultants are expensive and actually bring in poor results. OF COURSE this is not true across the board, but I have a lot of evidence in charities across the UK that would point to the fact that salaried consultants or employees are actually probably scared stiff of having to prove their worth up against a commission- based fundraiser who is genuinely motivated by his commission to do BETTER for the charity.

    There are countless cases of charities paying either fixed fee consultants a great deal of money or internal employees such as a £45,000 a year salary for a fundraising director (let alone the costs of the whole team around him/her) – but net results can be very poor, with those individuals not motivated to perform above their GENERAL and BASIC duties, or where they simply direct others to do the work. And remember, if firms like mine take 15% commission, then if we were to “Cost” the client £45,000 a year (ie. receive that in commission) then we would have had to have brought them income of £300,000 in first, which is a great deal of money and would be considered an extremely successful year of fundraising for most small and medium sized charities. Would the salaried employee or fee charging consultants have raised this amount? I am sceptical.

    Indeed, I keep seeing examples to show how actually hiring agencies or consultants on daily fees or project fees is much MORE EXPENSIVE to a charity than using commission based fundraisers. The Dialogue Direct Group, a well known fundraising agency, recently went bust, but an article released today (see http://www.thirdsector.co.uk/channels/Fundraising/Article/968891/Real-Fundraising-recruits-Dialogue-Direct-clients/ ) shows that the directors have continued the business in a new guise, The Real Fundraising agency. However – look carefully at the statistics in the above article – “the new agency aims to raise £450,000 for charities in the first 12 months”. And then look at the number of employees they have taken on from the old company (all of whom need to be paid, even if it is minimal!) – which is 37! And this EXCLUDES the directors, who would expect to receive higher salaries than the rest. Think about the maths of this – If my firm raised £450,000 for charities, then we would receive approx £67,500 at 15% commission. This is the “Cost” to the charities. NO other fees would apply. Now on the above assumption of the article, could the same be said for Dialogue Direct? Of course not – how could they pay nearly 40 employees from a pot of £67,500?! The answer how they do it? They charge daily fees and project fees, which are far higher than what we would take from a commission based scheme – and they receive income far higher than the 67,500 we would get, so that they can pay everyone. It is not possible to work any other way, unless all of their staff are volunteers!

    Even this total of £450,000 that they suggest will be raised for ALL their clients in ONE YEAR, with their staff numbers of nearly FORTY PEOPLE seems very poor, at best. I would PERSONALLY hope to raise £100,000-£200,000 PER CLIENT, before you even take into account the other people who work for me (all on a commission structure). If I had 40 people working for me (and we are certainly not that large), with each one targeted to raise £100,000 per client MINIMUM, then you can easily do the maths – I would expect literally MILLIONS to be raised for those clients in total, not less than half a million as with this case. It is strange to the say the least but shows once again the sort of wool that can be pulled over charities’ eyes from a fee-based approach when people aren’t told of the benefits of commission based work!

    However, as another example, I recently raised £20,000 for a particular charity client in the last 6 weeks alone. Yes I take 15% of this, which is £3000 – but the workload required to raise this money was huge: almost £100,000 of proposals were sent out to many many trusts, over 30 schools were contacted and headmasters got on board (the charity does music workshops in schools), and for almost 3 months, 5-7 days a week, my team was preparing applications and writing letters. Would we have worked so hard if we weren’t motivated by commission? Would a salaried employee have worked as hard as us and got a similar amount in? I doubt it.

    Now the people who argue against commission based fundraising , ask yourself this: would the charity have received their £17,000 slice of our work on this last example WITHOUT our input? Of course not. This money has a real value to them – they are now using it to fund workshops up and down the UK, some of which is in Special Needs Schools. The countless emails I get from teachers and headmasters who tell me how grateful and happy they are for us to come in (when they had no budgets and no support from other organisations) is endless, and extremely gratifying.

    And this £17,000 worth of valuable work would NOT have come about if our team was not employed on a commission basis to do the work. Charities are too busy, too underresourced, and too poor to pay out salaries or fees. Whats more, we have a motivation to do the work so get the donor pledges back in record time. The charity “paid” us £3000 to be able to get a £17,000 or 85% slice of the overall pie. If they had chosen not to use our services they would have got nothing, or paid out extortionate fees and who knows the level of return they would have got for that.

    It should also be noted that this charity in question was on the verge of bankruptcy recently, such was its poor state of finances. Could they have afforded a fee-based consultant to get them the money we brought in?

    It is also amusing when nay-sayers of a commission based structure complain that it brings about a willingness to only work for profit and not to work for the cause of the charity. Nothing could be further from the truth and actually I think it is the other way around! Salaried employees earning nice packages and not targeted to get funds in, or consultants earning high fees, have no monetary motivation to go out of their way to help the charity, so actually become more interested in just earning their money, doing an average job (or trying to do a great job but if it doesn’t work they have no monetary reason to worry about it) and less bothered about the cause. Commission based fundraisers like us however, know that a charity may be in a bad state and will only do better if we raise them money. We will also only get paid if money comes in – so we are doubly motivated. Also, only if we understand the cause at heart, agree with it, are interested in it, and believe in helping it, will we be successful in our proposals.

    And another common misinterpretation over commission structured fundraising is that it is short-termist. Again, nothing could be further from the truth, and again it comes down to simple maths and no conversation about ethics. If we don’t KEEP raising the charity money, we will not get paid. Why would we bring them in a successful £20,000, earn our £3000 commission, and then stop? That is similar to saying someone will have a successful year as a bank manager, earn a nice bonus, but then decide to quit and stop because they have done well. They still have bills to pay, a life to lead, a business to run, and need money coming in indefinitely! Why would we suddenly run away if money came in? If anything it will excite us to do more because we will see what is possible!

    Whats more – comments over commission based work being difficult to measure, are again totally unfounded. We receive a % of income brought in through direct work that WE do. Noone else will apply to the trusts we apply to, noone else will crossover or get confused with what we do, we will not do joint appeals with someone else – and if future donations are received in years to come from our first successful appeal then the charity keeps 100%of this. There is no reason why it would ever be difficult to measure the input of our work. It is in fact utterly simple.

    Another example – a mental health charity which is another one of our clients. They again have no time or money to pay fees – but they have a very valuable cause, offering counselling to depressed adults who cannot afford it. This is especially important service at a time of recession. We are currently putting together a huge application to a major donor which has shown a specific interest in mental health. This application form is one of the largest in the “super-trust” world, over 30 pages long, needing countless research, refeerees input, etc. Now, the client in question hasn’t got the time or expertise to do it themselves or the money to pay someone else (the form itself will take weeks of work – and at £1000 a day would they really benefit from paying a consultant to do this?!). However, through our input, the charity could end up being the successful recipient of a large sum of money. Put it this way, even if the application is amazingly successful and we get the full amount we ask for (which will be challenging), then we MAY earn a commission of around £7500. At the top consultancy rate this would have cost the charity the same amount of money for about one week of work (7 days at £1000 per day). Even at £500 a day we are only talking 2 weeks work that they could afford at that rate. But our input for this application will be MUCH more than 2 weeks input.

    And a final point of ethics – nothing is underhanded in what we do, nothing is secretive. As required by law from the 1992 Charities Act, we are required to state in our applications to trusts and other sources of income about our remuneration agreement with our client (the charity), (see http://www.institute-of-fundraising.org.uk/Resources/Institute%20of%20Fundraising/Codes/Payment%20of%20fundraisers%20on%20a%20commission%20basis%202006.pdf) which we do in every case, usually through a full-cost recovery breakdown analysis spreadsheet which shows a % for the overheads payable across the board, including to the fundraising team. Donors see this, yet we still achieve good results. One has to wonder if this is because trusts realise, as most charities in this land do (but seemingly not fee-based consultants!), that in the real world experienced fundraisers must be paid for, and if you have no time or money to do this, then there is only one choice: commission based fundraising.

    Thankyou for listening and making your way through this admittedly long article- and I invite all your comments, though hopefully they will focus on the pros of commission based fundraising and not just reiterate all the negative and unfounded comments that the community usually make on this issue (which frankly are quite boring because they do not solve the question of what a charity can do when it is time and money poor but still needs fundraising to be done!) And if you are a charity who agrees with this line of working – please get in touch as well.

    And in response to all these consultancies such as Wooton George that are refusing to work on a commission basis – this is fine, we will happily take your clients, safe in the knowledge that we are providing income for good causes that could otherwise not be met! If you are one of those agencies – I will happily accept any contact details you have for these missed clients! : )

    Best wishes

    Matt

    26 November 2009 at 10:31 am #11101

    As my company is referred to in the piece by Matt Adam, I feel I should respond with some facts about agency fees.

    Matt claims that 10-20% is an acceptable rate for commission payments and suggests this is better value than paying a fee for a job.

    Matt works, as I understand it, mainly in the field of bid writing to trusts and foundations, so I will focus on this area to make some proper comparisons (other areas that we work in, such as fundraising auditing or strategy work are not a real basis for comparison).

    In many instances our fee work is charged out at far lower rates than the commissions Matt and others are charging. Some examples:

    1. We have worked with a small social welfare charity for 10 years, raising revenue funding for them. The total cost to them in fees has averaged 5% per year over this period.

    2. For one current client, we have raised approaching £1.2 million, at a cost of around 3%

    3. In another instance, we charged a fee of £1,000 for a small piece of work, which brought in a grant of £355,000 – i.e. 0.28% costs.

    4. Where we prepar succesful lottery bids, our fees typically come to around 1% of the amount raised.

    So these examples show that fee based fundraising is often much better value than the 10-20% commission Matt is charging.

    The other point I need to comment on is the actual daily rate charged by agencies. It is certainly true that some agencies do charge £1,000 or more per day (although we are not one of them)and I would also question whether this is value for money. These higher rates tend to be for consultancy and strategic advice, not for the type of hands-on fundraising Matt is offering, however.

    In our case, we charge lower fees for hands-on work than for strategic work. We also try to charge less to the smaller charities which find it harder to cover the fees. I understand that some other agencies also do this.

    In the end of course, it is for clients to decide what is good value and what is not. We have been in the market for 12 years and around 69% of our work is by recommendation or repeat business. In other words, there are a lot of happy clients who recognise the value we offer through our fee based approach.

    We would have made a lot more money by working on commission, but we do not believe this is the right approach for us or our clients.

    Finally, it is worth pointing out that the fee basis is the one recommended by the sector regulator (the Charity Commission), as well as the main profesional bodies (IoF and AFC).

    Anonymous
    27 November 2009 at 6:36 pm #11103

    To declare vested interests first (which is always advisable as it does give a kind of context for comments) – I’m a freelance fundraiser, which includes doing work as an associate consultant for Wootton George from time to time. I post this, though, on my own behalf and the views are mine alone, not those of Wootton George.

    I’m curious on 2 points. (1) On googling (I know, not infallable) the only recent posts abt fundraising on commission are yours, Matt, with the same comments posted elsewhere so not sure of the origin of “countless comments across the internet on forums”. Yes, it comes up from time to time as a query or question but just wondering where the deluge is at present …
    (2) I think the nub of the issue with commission comes to light with your worked example of taking £3k for raising £20k, which may not be much different from what a charity might pay for a fee-based service. The issue comes with the fact that if all the people and places you’d applied to had stumped up the £100k, then you’d have taken £15k, yet the amount of work done had been exactly the same. Yes, the client might be elated to have £85k, but if they’d been using fee-based or project-based help then they’d have £97k so they’ve ‘lost’ £12k that they would otherwise have had.

    Jeremy Sparkes MInstF (Cert)

    Anonymous
    28 November 2009 at 12:07 pm #11104

    Matt, I must admit, I got very bored reading your rant, I hope your grant applications are more focussed and concise.

    Your example od Dialogue Direct/Real shows a lack of understanding of fundraising.

    DD were a face to face agency who recruit individual donors to direct debit. They hire people to stand on the street and engage with the public. Any face to face agency will incur large costs and charities then pay a flat fee per donor – payment by results, not quite commission but something that may cause a bigger storm than the odd rant about commission based fundraising.

    You put a web link to the IoF’s code on commission payment. This code has been updated and will be released any day now once the standards committee wake up from their nap and give it the old rubber stamp of approval.

    Maybe it would be more relevant to wait for the new code and discuss any changes and their implications rather than using this forum to sell your wares.

    rarry

    28 November 2009 at 12:20 pm #11105

    Firstly I run a small web development agency so have no vested interest in this conversation.

    I am joining in because I have a number of issues with your (Matt’s) post, which rather than defending your working practices simply attacks everyone elses.

    It’s your unwarranted attack on charity employees that I want to pick up on in particular.

    Half way through the post you speak of “countless cases” where charities employ a whole team of fundraisers headed by a Director on a salary of £45k.

    You then state that £45k of your fees would equate to £300k of income and how you are “sceptical” that such a team would raise that amount.

    Are you aware that you have diverted from your chosen subject of agencies charging fees and are now attacking charity employees?

    Do you honestly wish us to believe that you are more motivated by your 15% fee than charity employees are by the single cause they have decided to work for full-time?

    Please note that I am not calling your motivation into question, unlike the question marks you have raised over the motivation, professionalism and efficiency of all charity employed fundraisers.

    @simon: Congratulations on a well constructed reply including multiple examples which clearly demonstrate how fees and well thought out campaigns can deliver much higher returns for charities, hence why that method of charging is recommended by the sector regulator and major professional bodies.

    @jeremy: I can recall reading a few posts where fundraisers have explained to charities why they do not work on commission and each time their arguments have seemed reasonable. It is much better to agree to a clearly thought out campaign, where both parties understand what is expected of one another and targets/expected fees are set, than to ask someone to try out a few things and charge commission if income is generated.

    Paul Gardner – LocalCause

    Anonymous
    28 November 2009 at 11:06 pm #11106

    thankyou all for your comments, I expected some heated thoughts and that’s all par for the course because I realise mine were too!

    paulgardner – I wasn’t in any way calling into disrepute the work of ALL charity-employed fundraisers in any way shape or form. I am always in awe of most of the people who work in the charitable sector, and know many who do proper value-adding work and get paid nothing at all. Also I realise there are some fantastic fundraisers paid full-time salaries, and I do know some. What I was saying was I have seen examples of what I believe to be people in comfortable jobs, OUTSIDE the true core workers in the charity (perhaps the board or the founders) who really value the cause, and it is difficult to motivate them to do MORE to bring in money if you don’t have a target / commission structure in place. Of course this is not true
    in many many cases, but It is my opinion that a lot do exist out there, and I think their negativity over commission based fundraising comes maybe (no proof, just my belief) from them perhaps being scared to prove their worth up against targeted fundraisers.

    Rarry – i dont pretend to be an expert on the dialogue group but you are making a different point entirely as you say, one about chuggers on the street getting paid commission, which is not where my argument stems from. The 40 employees who work for the firm directly are different to the many hundreds they have chugging the streets.
    – and i specifically didn’t put any info in here about my company or my profile because i didn’t want to promote myself in a forum about discussion, not about doing business. i hardly think i am selling my wares. if you are referrign to my last line then perhaps you can’t get a ironic joke!
    – re the code on the IFT, again you seem a bit confused, I was putting it up to show the process you have to go through to be above board – surely you would be agreeing with that?

    Jeremysparkes – i dont know what version of google you are using but as well as the various forums i have posted this onto you will see countless others (as well as websites in america) discussing the NEGATIVE sides of fundraising. here are just two:

    http://www.raise-funds.com/898forum.html
    http://www.charityvillage.com/cv/research/rfrm24.html

    Also i should point out that what i found in my research were several old forums on the topic (including on this website), which i responded to by setting up a brand new forum.

    And finally – in response to Simon and some of the other comments are % costs…. I don’t think there is NO place for agencies or consultancies that charge fees, that’s not what I was saying – indeed as our work grows and we get more clients, I would like to not always charge commission for all our work, because there are some activities (such as training, strategic work, etc – and a lot of the ‘super-trust’ work where clients may only want one-off applications to big trusts) which are more applicable to fee-based work instead of commission, and also situations where charities actually have a healthy level of funds to pay fees. Therefore all the examples Simon cited were valid and correct and it was great that his business made money, the charity got good funds, the cost to them was low, and everyone was a winner. this is why all the industry bodies agree with fee based practices, because when it works it works well. But this is not always the case, hence my article and hence what i think the industry bodies are failing to realise.

    What I was trying to argue the case for was that there ARE occasions when you need commission based fundraising (mostly when charities are well run but have no funds to pay fees and still badly need the money otherwise they will go under and there good cause will stop), and that it is valid for that type of work. The best companies will run a mixture of services, as I hope our firm will one day do, but shouldnt (as a lot do) say no entirely to ever working on a commission based structure,thus leaving out struggling charities that have no other way to pay. this is the key point – and ironically noone has yet shown me an example of how these charities could afford fundraising another way?

    29 November 2009 at 9:47 am #11107

    @Matt: Thanks for the clarification over your opinion of charity employed fundraisers, but I still find it hard to find too much truth in your beliefs (and it’s great that you made it clear that nothing you have stated is based on fact).

    All serious charities set themselves targets to raise a set amount of money in order to continually provide and develop their services whilst remaining afloat.

    These targets will be set year on year and reviewed, if not at key points throughout the year then at the end of the year whilst generating their accounts and Annual Report.
    You do seem to have shifted your focus now though from teams lead by Fundraising Directors to Board Members and Charity Founders.

    I would question if it is the job of Board Members and Charity Founders to be actively fundraising. Is it not their job to raise awareness of their cause and ensure the charity is being ran in an effective and proper way?

    However, getting back to the original topic of agency fees vs commission. You are presenting things from a very biased point of view by pitching your hand picked best successes against a range of theoretical worst case scenarios which may exist but quite equally may not.

    You chose to mention one fundraising agency by name which resulted in Simon George presenting some very real fee based successes which, by your own admission, showed your commission based fundraising examples to be significantly less value for money.

    The real question is whether the charities that you achieved success with could have used Simon’s agency and made even more money? Or digging deeper is the decision based purely on cost or are there other factors, such as the charity not having a clear fundraising strategy before approaching a fee based agency, that steers them towards commission based fundraising.

    And finally in response to “… noone has yet shown me an example of how these charities could afford fundraising another way?”. If a charity has no money it is most likely that they could do with some level of developmental assistance which they could tap into through their regional voluntary development agency.

    This may include some training courses or small grants that would allow them to formulate an achievable fundraising strategy including costs analysis for achieving their goals.

    There are also a whole host of ways to raise money online now a days and connecting with people via social media can grow a team of dedicated voluntary fundraisers who are not always going to raise the funds to cover operational costs, but could raise the money for that charity to afford to then run fundraising campaigns delivering higher returns via a firm such as Simon’s.

    Paul Gardner – LocalCause

    Anonymous
    29 November 2009 at 12:23 pm #11108

    Matt

    can’t vouch for my Google but interesting that one of yr links is for a debate in 2002

    I found yours, which is verbatim what you posted here, http://www.ukbusinessforums.co.uk/forums/showthread.php?p=1059964
    so obviously yr keen to generate some interest on a subject that is important to you

    More importantly though, you haven’t commented on my main point which followed yr worked example whereby a group could have £12k
    less to spend on its worthy cause using a commission-based approach.

    It is this aspect of the open-ended nature of the relationship whereby what may be seen as excess profits are taken for no extra work.

    If we were discussing the world of banking, the public would be horrified at that.

    Funders do understand the need to invest in overheads, including fundraising, but would they be content to fund on the basis of the worked example whereby money was taken away from the good cause by a fundraiser who’d done no extra work for it?

    Jeremy Sparkes MInstF (Cert)

    Anonymous
    8 December 2009 at 4:51 pm #11121

    Matt, I note that you’ve found time in the past week to respond to posts on the other forums you’ve used to ‘discuss’ this issue but not to the central point I’ve raised.

    One can only assume then that my concern is correct – that the commission-based fundraising model offers no protection to the charity or donors from excessive sums being taken by the fundraiser.

    This is why it is not recommended and I’d suggest to any group considering using a commission-based fundraiser that it is a requirement of their duty to act in the best interests of their organisation that they make sure that they build in adequate legal protection on this point in to the contract.

    Jeremy Sparkes MInstF (Cert)

    Anonymous
    8 December 2009 at 6:07 pm #11122

    Jeremysparkes –

    Apologies for the delay. As you have already clearly laid out, I have a lot of sites and a lot of posts on all these forums to take care of, so it is a busy job replying to everyone! Hence the delay.

    I don’t think there is much merit in your point unfortunately, because what you have essentially done is just use an example calculation which works for YOUR argument. I can, and now will, use some examples which will again show the merits of using MY commission based fundraising practices. But this doesn’t get us anywhere – for every business and every example, there will be a way of fighting each corner – just as Simon gave some very valid examples of clients he got a lot of money in for for little cost (which i accepted).

    Your point is over the largest of the super-trust applications – but your misleading people if you are suggesting that this is somehow illegal or underhanded. As I mentioned, if a trust requires you to tell them about fundraising costs, or they give the charity a restricted grant that cannot be used to cover overheads, then we cannot take commission from it. We go by the word of the law, and whatever trusts ask us for. There is nothing illegal about that.

    But yes, of course the amounts we receive will be higher if we get 15% on a £100,000 grant, but this is rare because many of the super-trust applications are less forgiving on commission fundraising costs so it is not always possible to apply for these. Hence why for our clients we will aim to reach that target from a whole array of smaller trust applications (which actually reuqires more work).

    And now for another example to back this up – this is a real-life case, and comes from a colleague of mine who has spent a considerable time in the charity sector and once had access at a charity he worked for to the information on grants they had applied for, what they had received, and fundraising costs. He told me they once paid an agency £30,000 and had received £50,000 through them back. This would be the equivalent of us taking a 60% commission, which is not only outrageous in my opinion but some could construe somewhat illegal because it is so high (i.e. once you as the fundraiser are taking MORE than the charity is receiving, on a percentage) – and indeed there was a case in Scotland where someone went to jail for charging 60% from a major charity. If this charity had used our services and we had got them £50,000 then they would have been “charged” £7,500 at our 15% commission rate. This represents a saving over the agency concerned of £22,500. Not bad.

    This is why your point holds no sway and we will just keep going around in circles – yes of course if an agency is skilful enough, or lucky enough, to get £100,000 of grants in and only charge a few thousand (which on most of their rates would mean getting that grant in from about one weeks work, which I doubt is possible), then they could be considered “cheap”. But for every one of those examples I would suggest there is another like the one above where any agency has actually been very expensive to get the money in.

    But finally, as I have to unfortunately keep reminding people in all these forums – you seem unable to answer the heart of my article which is HOW CAN A CHARITY WITH NO FUNDS AFFORD A FUNDRAISING TEAM WITHOUT USING A COMMISSION BASED MODEL? It seems as if defenders of agencies such as yourself can’t actually provide me with an answer, and I guess all I can deduct from that is that you have no answer. And if your answer is like that of some others, namely “they will just have to build up a volunteer base”, then I’m afraid that is a very weak argument. Fundraisers are very skilled at what they do, and you ned specialists. It would also take a lot of time to build up a volunteer network, and may not work. I’d be interesed to hear any other thoughts on this though?

    Not only that, but it is amusing how I have received many personal emails across all these forums already, from charities themselves asking for my services or to at least learn more about them. This is the proof of the pudding – they all have no money to pay agencies, but they need fundraisers. I wonder why they come to us….

    8 December 2009 at 6:51 pm #11123

    Matt

    You’ve raised a number of issues that I’d like to question.

    First, you said “many of the super-trust applications are less forgiving on commission fundraising costs”. Why do you think that is their attitude? Are they simply mistaken, despite the fact that these larger funders often have a long track record of grantmaking and access to some pretty well-informed and experienced professional advisers?

    Are they in fact less bothered about charities than they might claim, if by their policies they are hindering so many new charities from getting started?

    Secondly, you cavil over ‘excessive’ percentages like the 60% being unacceptable. Where do you draw the line at an acceptable percentage? And what if other commission-based fundraisers disagreed with what was acceptable? Who would then be right? Or do all/most commission-based fundraisers agree on an acceptable percentage?

    Isn’t it easier to say no to commission-based fundraising per se?

    Thirdly, I’m happy to answer your key question of what happens to those charities/initiatives that can’t afford fundraisers on a day-rate or project rate. It’s clear – they can’t fundraise quickly or easily. But it doesn’t stop them from fundraising.

    Not having the wherewithal to pay for something can focus the mind on how to go about changing that situation. The basics of locating and applying for relevant sources of funding are not beyond the wit of too many people. You can do a heck of a lot without professional fundraisers, especially in these days of so much funding information and advice online.

    Your final point simply confirms that people desperate for money – for themselves personally, for loved ones, or for cherished projects – will often go for the easiest, quickest, and seemingly cheapest route. “Pay nothing now” is seductive.

    But swap “how can a charity with no funds afford a fundraising team without using a commission-based model?” for “how can a person with no funds afford a house without a 125% mortgage?”.

    Plenty of people/organisations provided people in that position with perfectly legitimate access to cash. But we live in economic times which demonstrate that sometimes a longer term perspective is the better one. And that sometimes people with the best ideas and motives fail or don’t achieve that they want as quickly as they want.

    Anonymous
    8 December 2009 at 7:47 pm #11124

    It doesn’t sound, Matt, as though you offer any contractual protection for those who use your services, and that is the crucial thing about commission-based fundraising when it is left open-ended – an awful lot more money can be diverted away from the good cause then the organisation and/or its donors ever intended.

    Hence, the advice to organisations, if it’s not already being offered to you, then insist on such protection being put into the contract before you sign it.

    Jeremy Sparkes MInstF (Cert)

    Anonymous
    12 May 2010 at 11:33 am #11197

    As the founder, co-owner and Managing Director of the company you have used to base your calculations on the cost effectiveness of F2F Fundraising versus your own approach, I feel the need to clear up the inaccuracies you seem to have based your whole argument on. The figure of £450,000 was in fact our target for money raised by the end of that year, as I said at the time of being asked. We started fundraising in November 2009 so that target was for the months of November and December 2009. I can assure that you with16 different contracts being run this year at Real for various different clients in doorstep, street, private site, dual concept and engagement campaigns we will raise astronomically more than £450,000 you have based your figures on!

    I’m not looking to criticise any other method of Fundraising because a multitude of different approaches have their benefits for different Charities and from my experience I have developed an enormous amount of respect for the Charity sector in making credible, informed decisions as to which approach suits their fundraising needs best. I merely wanted to set the record straight for those figures you quoted so your analysis does not appear as ‘fact’ for those people stumbling across this thread.

    Have a great year, I hope you raise loads of money.

    Regards

    James

    Anonymous
    14 September 2010 at 11:12 am #11129

    The views regarding commission based fundraising, like so many views on subjects ranging from the Lottery to street fundraisers to the global recession tend to be heated and polarized. (I guess we all like a rant from time to time), and nearly always the blog deteriorates the longer it goes on, ending in cyber punch ups! Unfortunately such heated views do sometimes obscure the middle ground, which is invariably the most sensible stand point to take.
    For my penny’s worth I believe there is a place for commission based fundraising for overseas charities not registered in the UK. It provides a lifeline to many charities that do not have the resources to employ a fundraiser or take on a fee paying fundraiser for a limited period (who may or may not be successful of course). However, safeguards need to be in place and we have a written code of conduct focused just on this area which I am happy to share with anyone that wants a copy.

    To sum up:
    A very detailed contract must be drawn up before any fundraising begins. Detailed means getting a good lawyer and not relying on the templates issued by the AFC or similar bodies (Every partnership is different).

    The money that is to be paid in commission should come out of free reserves. If not DO NOT GO THERE! You could easily fall foul of the Charities Act 1992 and in any case I don’t know of one funder that would appreciate commission being paid out of their grant in the UK, US or anywhere in the world come to that.

    To write off commission based fundraising would be a mistake, but treat it with caution. Fundraising whether paying for it up front, or after the event is always a bit of a gamble for the charity. In my view, it is all about the contract.

    Anonymous
    20 September 2010 at 1:12 pm #11260

    Sorry to butt in on your debate!! I would appreciate the details of your company as we are one of those organisations with NO FUNDS for wages for fundraisers!

    Anonymous
    12 November 2010 at 6:35 pm #11273

    Hi everyone,

    I see this debate has continued to garner attention – now coming top of Google when searching “commission based fundraising” and getting more than 6000 reads on this site alone. It has taken me aback with the level of interest, but it has been an interesting journey reading everyone’s comments, and we are now amazingly another year on in the fundraising world!

    I wanted to take this time to offer some open, honest conclusions that we have learnt from our work over the last year, and to perhaps offer a ‘compromise’ on this issue, as that seems like the only way forward with something as difficult as this!

    I continue to believe that many small charities, without any funds, can find commission based fundraising an extremely useful option. The proof is in the pudding: we have received a couple of enquiries each WEEK over the last year from charities wanting further information about this service. We aren’t pushing the service with any advertising at all – but I believe any business in any sector has to base its work on the interest out there: the customer is always right.

    However, I do agree with the posts that commission-based fundraising has only a certain part to play in the whole scheme of charity fundraising, and that perhaps it isn’t the be-all-and-end all option we were first advocating. This comes down mainly to the work we have done for clients on commission over the last year. Whilst we have raised good amounts of money for them, you cannot get away from the fact that simply from an admin / logistical level, commission based fundraising a) takes up a lot of time on our part (as it is technically ‘never-ending’, unlike fee-based short term project work), b) can’t go on forever (which, on such a ‘no-win no ‘fee model is easy to think it does sometimes!) and c) doesn’t always help charities to continue work themselves and set up their own fundraising department in the future.

    This, allied to the fact that we received too many requests to cater for, has led to a two-fold change in the way we work, and one that I think helps to provide a workable and sensible conclusion to this whole argument:

    1. We have put a CAP on the number of fundraising clients we can help at any one time (approximately 5 charities). We also don’t like to often work with a client on commission for more than 12 -18 months, to give other clients a chance to join us and also to allow existing clients to leave us and expand their own fundraising work.

    2. We now offer a middle-ground FEE-PAYING service (much like many other agencies), but in keeping with our underlying thoughts through all of this of value-for-money, have set this purposefully low so that charities can afford it. We feel this is extremely unique as we now charge only £200 per day, no VAT, for short term work – utilising our team of researchers and consultants. Many other agencies we researched charge £600 or more per day, and even freelance consultant charge £300 or more per day, but don’t have access to the teams of researchers we do.

    This second option has been very popular of late, as we have had to turn a lot of charities away on the commission-fundraising side, but they have asked us to do short term project work and pay a small fee instead. This works extremely well: for only 5-10 days work, we can produce specific research reports, write letters and construct applications – all of which will crucially help the charity GO FURTHER themselves in the future with their own fundraising efforts. For a small fee NOW, they will also have none of their future grants decreased by us taking commission out of it.

    We feel this is a great middle-ground to offer now. We won’t stop our commission based work, but now the argument is not so much about commission based fundraising versus agency fee-based fundraising, but more: Why are other agencies charging 3 times more than us for this type of work?

    This was shown clearly to us recently when a large Prison / Re-Offenders charity asked us to bid for a ten-day piece of work for them. They spoke to a number of other parties and ended up choosing us. Their officer felt we were the best value, and had had an interesting conversation with another big agency, who apparently arrogantly asserted they were “the best agency in the UK”. He asked the price: “£500 per day” was the answer. “Perhaps not the best agency in the UK after all”, the officer told me he had replied.

    Good luck in all your fundraising efforts, however you find the money!

    Email me at mattadam1@hotmail.com if you require any further help.

    Many thanks!

    Matt

    Anonymous
    1 February 2011 at 8:04 pm #11297

    http://www.dailymail.co.uk/news/article-1352343/Salvation-Army-millionaire-William-Booth-makes-fortune-donated-clothes.html

    As mentioned before, any organisation considering using commision-based fundraising should ensure that they have adequate protection written into the contract to cover the possibility that the appeal is more successful than they envisaged.

    I’m sure that when the Salvation Army signed up for this they never imagined that it would lead to such negative publicity across the UK media. I expect there will be more than a few people who, for quite some time, will stop and think twice before they give their support to them. It’s also going to absorb a huge amount of time that the organisation could use on other activities. They quite rightly point out how much good has been achieved with their share of what has been raised but it rankles with most people who aren’t “in” the sector that such huge sums aren’t all for the good work.

    So … what may sound like a win-win situation can very easily turn into a lose scenario.

    And if you think that it couldn’t happen to you – in the last 12 months in the depths of recession and although times are hard, I’ve had two appeals which have more than exceeded their target. Delight for the charities but also, quite rightly, no extra money for me – I was paid for the effort that both parties believed would be required to reach the objective. That this effort achieved more for the charity is for their benefit alone.

    Anonymous
    2 February 2011 at 11:39 am #11298

    Interesting article Jeremy. I fully agree that the profits taken in this scenario are probably too high – since it sounds like the company took 40% of the money and the Salvation Army only had 60%. I’ve always said from the beginning that any commission should be a maximum of 20%, so that it is still worthwhile for the fundraiser / company but the charity is getting the lion’s share.

    However, I have to say I fully agree with the positive points made in the article also – and they back-up my opinion given throughout these threads. As the charity’s own spokesman says:

    ‘In the past three years alone, this has resulted in the donation of more than £16million, money which we would not otherwise have received from a national recycling and shop operation.’

    The key part being “which we would not otherwise have received”. That is the crucial issue I think about this sort of work. Would the charity have received their money (£16m) if they WEREN’T using such a company? Such a company brought expertise, their own network, their own employees, and a worldwide business to sell on the clothes and bring profit for the Salvation Army. The charity couldn’t have done this themselves. So the question must be: by giving away millions to this company they raised £16m – but if they kept all the money for themselves and didn’t pay a company, would they have raised less than £16m? Almost certainly. It’s a balancing act.

    It’s a good lesson which applies throughout the commission-based fundraising world. Only the other day a very experienced commission-based fundraiser told me that he had had a meeting with a charity interested in offering him 20% commission on funds raised. He told the charity, to get the point across and be clear from the outset, that “you realise this would mean I would keep £200,000 if I raised you £1m?” – and the Chairman of the Charity replied: “Yes of course, but we would have £800,000!!”. I think there is a big lesson to be seen in this.

    Of course this is only when a charity cannot afford to pay fees. If a charity can, then a low-fee based model is certainly right as well. As mentioned below, we helped a large Prisons charity do some huge applications recently for a big regional Rehabilitation project – but they had a small pot of money put aside which they used to pay our fees, so it was quite right that we were paid a one-off charge and don’t go on to take any money from the success of the campaign (which could run into the hundreds of thousands in terms of donations).

    But I think this ‘one size fit alls’ thinking is wrong – you have to offer both commission based and fee based services, to cater for the different situations charities find themselves in.

    3 February 2011 at 6:04 pm #11299

    You hit the key issue in your first paragraph Matt. You opt for 20% as the reasonable maximum.

    Knowing the different amounts of work involved in (some) grant applications and in running a major event, or in running a direct mail legacy programme and a county-wide coordination street collecting by volunteers, I’d argue you can not compare like with like.

    20% of really hard, long graft might sound valid, but not for something that takes a couple of meetings and which a printer then handles for your charity.

    And in terms of relative income: I’d always go for 20% of a legacy campaign, especially given legacies just keep coming in for years on end, rather than 20% of a street collection.

    So, a standard 20%, or any figure, is not fair.

    That’s just part of the problem with commission-based fundraising. Who gets to choose the ‘correct’ percentage? And does that percentage apply across fundraising disciplines?

    Your point about this money being something “which we would not otherwise have received”. £16m is wonderful. How about if it were £15m, with a little more going to the fundraiser or agent? £14m? £13m still sounds good to me. £10m is still a magnificent sum for many charities. But where is the right level?

    I think you’d find that you, I, and other professional fundraisers might differ on that. And I can almost guarantee that our collected views would differ from those of very many donors.

    That’s why I think the ‘one size fits all’ approach does apply: commission-based fundraising can not be structured to apply fairly, so should be avoided.

    Will that stop people doing it? No, of course not. I think the IoF’s approach of recommending it be avoided is the best in the situation.

    Anonymous
    4 February 2011 at 12:29 pm #11300

    If I’d taken 20% of the money I’d raised for charities I’d not have to worry about why it costs over £50 to fill the battered old car with petrol these days – but then again I’d probably not fancy coming under the microscope of the Daily Mail et al, questions being asked in the House and the Charity Commission wanting to look into the matter.

    If we go back to the fundamental issues raised at the start – firstly, ensure there’s protection for charities in the contract so that excess profits don’t simply end up in the pocket of the sub-contractor who may not have done any extra effort.

    Secondly, ensure transparency with donors – they expect the lions share of their support to be used for the cause. Many understand that some costs have to be incurred – perhaps a simple test when a charity is looking at this is to ask “what would be the reaction of our supporters if it was us they read about in this way in the Daily Mail?”

    Perhaps not the most scientific method but there are many issues of values that can’t be reduced to a mathematical equation and so the old “man on the Clapham Omnibus” approach has much to commend it.

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