Commission Based Fundraising - The Truth!

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-Fu... ) 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%20Fu...) 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