Nonprofit organizations often rely on fundraising events to generate revenue and support their mission-driven initiatives. However, determining the appropriate spending and allocation of resources for these events can be complex. In this blog post, we’ll delve into the critical question that we are asked by almost all of our clients: What percentage of a nonprofit’s budget should be spent on fundraising event expenses?
Understanding the Guidelines
According to industry standards and recommendations from Charity Watch, a good expense ratio to aim for is 35 percent or less. This means that for every $100 raised, the organization should have paid $35 or less in event expenses. The lower the expenses to raise $1, the higher the efficiency rating.
However, it’s essential to recognize that this ratio may vary depending on several factors, including the size and maturity of the nonprofit, the type of event, and the specific fundraising goals.
Factors Influencing Expense Ratios
If your organization is a start-up or fairly new, you may find you need to allocate a higher percentage of your budget to fundraising events. On the flip side, older and well-established nonprofits may be able to operate with a lower expense ratio. Additionally, smaller nonprofits often face challenges in achieving economies of scale, leading to a larger percentage of funds allocated to event expenses compared to larger organizations. Whether you are a new organization or a well-established one, you will likely only account for direct expenses such as venue, catering and printing costs. It is unusual for organizations to allocate indirect costs such as the time that the Development Director or Executive Director and staff spends on helping to plan the event. Yet, these expenses should also factor into your expense ratio so think through how much time your staff are spending on event logistics and if there is a more cost-effective approach.
Calculating ROI and Evaluating Effectiveness
While understanding the return on investment (ROI) of fundraising events is crucial, it’s essential to delve deeper into evaluating their effectiveness beyond financial metrics. In addition to assessing the monetary returns, a nonprofit should consider qualitative factors such as community engagement, brand visibility, and long-term donor relationships. It is important to collect feedback from your attendees, sponsors, and volunteers, so that you can gain valuable insights into the impact of your events and identify areas for improvement. This holistic approach to evaluation enables you to refine your event strategies, enhance stakeholder satisfaction, and maximize your overall impact.
Striking the Right Balance
As you plan your next fundraising event, you will need to determine the appropriate allocation of resources. Carefully consider the various factors, including organizational size, event type, and fundraising goals. If you can strike the right balance between event expenses and fundraising effectiveness, you will maximize your impact and advance your mission.
Most of our clients don’t know how much money to allocate to expenses. If you need some help crafting your event budget, set up a consultation call!