Investing in the future

As incomes tighten, the sector has to make the most of every pound spent.  Most charities raise at least some of their income from donations or from trading. In recent years we’ve seen an increase in charitable donations and trading income, which has helped plug the funding gap created by public sector cut backs. Unfortunately that didn’t magically happen all by itself.  Many charities have been working hard to develop alternative funding sources in order to become more sustainable. So how much should a typical third sector organisation spend on generating income and what is a good return on investment?  It’s almost impossible to answer that question. There is after all no such thing as a ‘typical’ organisation.  Certainly spending too much relative to the return does not go down well, as we have seen from the recent criticisms of the Kiltwalk. That said, results do vary and it’s not just down to whether your campaign or project was a success.  There are many different types of fundraising, which suit different types of organisation and can result in very different returns.  As Joe Saxton points out in his fundraising guide Gimme Gimme Gimme:

“An organisation used to living on statutory or legacy income might have been able to spend less than 5% of its income on raising that income. However a typical fundraising operation would do well to spend less than 25% of income on the cost of fundraising, particularly in the early years of growing income.”

SCVO research has shown that between 2012 and 2013 many organisations reduced the amount they spent on generating funds, hoping this would help reduce overall costs and help them stay afloat.  The top 120 charities in Scotland reduced their combined spend on generating funds from £180million in 2012 to only £136million in 2013.  However, what we are now seeing is a number of organisations realising that actually in order to survive they have to invest in strengthening their long term futures. As every fundraiser knows, any investment now will only start seeing results perhaps next year, possibly only in 3 to 5 years’ time.  Organisations will be keeping a close eye on 2015 and future finances to see which seeds bear fruit.