Your Nonprofit Needs These 5 Types of Donors

You've got to bring in the money if you want to achieve your mission. Here are five financial sources you should consider.

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The following excerpt is from The Staff of Entrepreneur Media, Inc. & Corbin Collins' book Start Your Own Nonprofit Organization, 2nd Edition. Buy it now from Amazon | Barnes & Noble | IndieBound

As your nonprofit organization develops, you'll find you don't have just one type of donor. Here are the five primary types:

1. Prospects. Prospects are people who haven't yet donated but are prime candidates for supporting your organization in some way, large or small. They're people you want to make sure receive your mailings, from your quarterly newsletter to your annual appeal. Some day, when the right pieces come together--extra money in their pocket or a personal connection to your mission-- prospects have a high likelihood of sending you a donation.

2. Individual donors. Individual donors come to donate to your organization for myriad reasons. Perhaps they came to an open house or other event you held, were impressed with the event and your organization, and donated beyond just the admission fee. They may have become a member or donated to a specific cause being showcased by the event.

Perhaps your individual donor responded to a direct-mail piece. Your appeal spoke to an interest of theirs, they were impressed with your statistics, or they remembered a friend of theirs saying they were a member of your organization and really appreciated what you do, and the person donated a small amount for that reason alone.

Individual donors will collectively be the lifeblood of your donor base. No one individual donation brought in this way is going to make or break you, but together they form a large percentage of your annual operating income.

These donors will likely donate, perhaps in just small amounts, again and again. They'll respond to your membership appeal, come to other events, and donate to a special appeal for something specific.

3. Major donors. Major donors rarely happen overnight. They might take years of cultivation, but once they decide to give, they give in large sums. Some may have the capacity to give a large sum annually; some may give only strategically when you are doing a special campaign.

Cultivation and stewardship are important to major donors. They don't want to be "sold to," but they also want to be kept apprised of what your organization is doing--i.e., how you're using their donation.

One of the best ways to steward major donors is to assign each one to the most suitable board member. It's likely many of the major donors came through board member connections to begin with. Help your board members learn how to best steward donors if they don't already know. A plan should be in place for each major donor to receive a certain amount of correspondence each year--not asking for a donation but simply updating them on key initiatives or the overall status of the organization.

When the time comes to ask for a key donation, the board member should plan to bring along the executive director or development director for a face-to-face meeting.

4. Corporate donors. Corporate donors require a completely different approach than individual and major donors. Although they certainly do exist, few corporations give large donations simply to be philanthropic. They expect certain marketing opportunities from their donation--a press release announcing a significant gift, a check presentation photo sent to the papers, naming of a key area in the building to which they're giving, publicity for sponsorship donations before, during and after an event.

Corporations should be key donors and donor prospects in any organization's development plan. The board should be enlisted to help identify corporations for whom your mission would appeal. Corporations don't just donate for their own or their owner's sake; help them understand that your organization's mission is near and dear to the hearts of their employees.

You'll want to figure out the fiscal year for the corporations you plan to approach as much as possible. As you try to gather this information, you might consider creating a corporate mailing piece that can be sent a few times a year to a certain number of corporations. Once you start to collect specifics about their fiscal year, you can group those twice-a-year mailings by the most logical mailing period for a company's fiscal year.

5. Foundations. Private foundations are pots of money set aside by a person, family or other entity for donation purposes. They typically fall under tax-free IRS laws which, for the tax-free status, require them to give away a certain amount of money--typically a percentage of the income or the principal of the fund itself, depending on how it's set up--each year. To do that, they often target types of charities they're interested in and open a grant proposal round once or twice a year during which organizations can appeal to them for funding.

Foundations often prefer to fund programs that actually result in accomplishing the mission of the organization. Few foundations offer funding to capital campaigns, and fewer tend to offer funding of general operating funds for the day-to-day business of the organization. Most require a post-grant report to give them the measurables that show how their funding helped you accomplish your mission.

There are many ways of finding out who offers grant funding in your category of charity. Do a basic search under "grants for" whatever your category is, and you'll come up with some places to start.

The Staff of Entrepreneur Media, Inc.

Entrepreneur Staff

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