So now, let's shift our gears a little bit and talk
about some key fundraising terminologies,
words that you will hear as you embark upon a career in the nonprofit sector.
There are a lot of words we could use and you'll see,
here I've provided a link where you can go look at
additional fundraising terms that are very common in our business.
But I wanted to cover just a few today.
Let me start by defining the word development.
It is another word for
fundraising and it is a word that's evolved over the last 20 years,
to mean just that, fundraising.
We often use the word fundraising in addition to development.
But really the idea behind calling our profession,
the development profession, is all about what the process is.
And again, we're going to talk about that process here in just a moment,
but we develop relationships.
And so, the word development has become
a common word at least among fundraisers and often,
even among donors to describe the work that we do.
We are developing relationships between our nonprofit organizations and the donors.
So, you will hear many of us use these two words interchangeably.
Development and fundraising.
They ultimately mean the same thing but we do more often,
within the profession, use the term development as opposed to fundraising.
Donors. Donors are people who support our organizations,
make charitable gifts each year.
Often, they're called benefactors as well.
You'll hear both terms used quite frequently in our business but generally,
we refer to those who give to us as our donors.
There are different types of gifts we will often talk about in the fundraising world.
First is an annual gift.
Those gifts that come once a year,
at least we hope they come to our organizations at least once a year.
And generally, annual gifts are defined by those
that are given out of discretionary funds.
So individuals who write a cheque,
put a small gift on their credit card each month, but generally,
they are gifting those out of their monthly disposable income.
Major gifts.
These are gifts that tend to be much larger in nature.
They often require that someone think about them for a longer period of time.
They are not annual events for the most part.
These are gifts that can be pledged over the course of several years but often,
they're gifts that donors have to pause and give
great consideration to as to whether or not they can actually afford to make such a gift.
The definition of a major gift varies by organization.
For some organizations a major gift might be $5,000.
For others, it might be $100,000 and that's often defined by the development,
leadership or the fundraising team at any given organization.
But the thing to keep in mind and remember about a major gift is that it
generally requires someone to give it serious consideration perhaps,
over a period of time and very often,
it's not a gift that is made out of discretionary income such as a checking account,
but more often involves assets.
And by assets, I mean that,
for individuals to complete these gift transactions,
they often will have to cash in stock,
perhaps provide gifts of real estate or other things that they may
own beyond just cash in order to actually fulfill the gift.
So major gifts while they don't have a minimum dollar threshold,
generally are thought of as gifts that require more thought and
more time for the donors to consider and actually complete.
Planned gifts.
These are a very unique way of giving.
The largest gifts that are given in any given year in
the United States generally come through the form of planned gifts.
As I mentioned earlier,
these are often bequests.
Eight percent of all gifts last year came through
bequests and that is a form of a planned gift.
Think of a planned gift as a type of gift that is going to happen in
the future or the benefit to the nonprofit is going to happen in the future.
Someone made today, put
a nonprofit or multiple nonprofits in
their state plans as part of their last will and testament.
Those gifts may not be realized for another 10, 20,
30 or 40 years and generally get realized after that person is no longer with us.
Other forms of playing gifts include annuities and trusts.
And these are gifts where the money is invested now,
the proceeds from the funds go back to the individual,
so the actual donor is the beneficiary now.
But again, after their passing and after their lifetime,
the corpus of those gifts come back to the nonprofit organization.
These are, as I mentioned already,
generally the largest gifts of someone's lifetime.
They generally come in the last 20 to 30 years of someone's lifetime and often are
negotiated and discussed when an individual is over the age of 55 or 60.
Unlike annual major gifts which get discussed at
much earlier ages among donors in the United States.
Let's talk about stewardship.
What does that word mean?
It means a lot of different things and very often,
we call it different things in our business.
For example, some of us call it donor relations.
How do we relate to our donors?
How do we steward our donors, and ultimately,
what we mean by this is how do we thank our donors.
How do we show appreciation?
So we steward our donors through thank you notes, thank you letters,
perhaps through events, perhaps through
providing them with annual reports on how their funds have been spent.
But stewardship is a very critical piece of
the fundraising enterprise and we'll talk much more about that later.
Cultivation.
What does that word mean?
What does it mean to cultivate a donor?
Cultivation means that we build a relationship.
Fundraising is, first and foremost,
all about relationship building.
How do we get to know someone?
How do we engage them in the life of our organization or nonprofit?
How do we get them excited about and wanting to support financially our cause?
We cultivate our donors through a process of getting to know them better,
finding out what their interests and passions are,
and matching those interests and passions up with
our nonprofit organizations and our mission of our organizations.
So cultivation is a critical step and one
that leads to larger gifts than what you would otherwise realize.
And again, we will come back to this term a bit later.
What is a Capital Campaign?
This word actually is often used in fundraising and sometimes misused in fundraising.
Capital campaigns by sheer definition are bricks and mortar campaigns.
A capital campaign is generally when you're building a building
or the effort in which you're raising funds is to enhance a facility.
It may be building it from scratch,
it may be renovating an actual existing facility,
but capital means just that, bricks and mortar.
However, many nonprofit organizations refer to a capital campaign as something that is
an all out effort to raise a large sum of money in a given period of time.
Technically, though, that is
a comprehensive campaign and more and more organizations are referring
to their all out efforts to raise large sums of money in
a given period of time, as comprehensive campaigns.
You will hear this term more and more,
but you will still often hear
some organizations refer to their all out efforts as capital campaigns.
It's always good to clarify whether a capital campaign, as defined,
is a campaign to build a facility or renovate
a facility or if it's an all out fundraising effort.
Comprehensive campaigns as I mentioned,
generally are campaigns that last over a period of time.
Five to eight years is not uncommon for
a comprehensive campaign and all gifts count towards this effort.
It is an all out effort to ask a large number of people to
support an organization at different levels.
Comprehensive campaigns also include annual gifts,
major gift, s and planned gifts as we discussed earlier.
Finally, what is an endowment?
An endowment is an investment.
It's putting your money into an investment portfolio,
often invested in the stock market or stocks and bonds,
and the corpus of those dollars invested are never touched.
They stay there in perpetuity and technically forever.
What then happens is the return on
the investment often referred to as an endowment payout,
is what funds the organization.
So let me give you an example.
If a donor were to give us $100,000 to be invested in an endowment,
the idea is that $100,000 will always be there.
And every year, generate income.
Let's assume that the stock market generates 10 percent return.
So on a $100,000 gift,
that would be a $10,000 return.
Organizations generally set a payout rate,
often between four and five percent.
So for the example that we just shared,
let's assume that the payout rate is five percent.
Five percent of $100,000 or $5,000,
would be given back to the charity
every year and spent for whatever it is the donor was hoping to support.
The other five percent on the return,
we'd be reinvested in the endowment,
so that the endowment grows over time and that the corpus grows over time,
so that the donor's dollars have buying power in perpetuity.
The dollar will not be valued the same way today as it will be 20 years
from now and investing in an endowment allows the money to grow,
to keep up with inflation such that the donor's actual pay out each year,
whether it be four or five percent or some other percentage,
continues to add to the cause that they hope to support.
So again, an endowment think of it as a long term investment.
Money set aside in perpetuity where just a very small percentage of it
each year actually is invested in the cause.