The nonprofit sector is the second largest sector in the private economy exceeded only by the manufacturing industry. In 2002, more than $750 billion dollars flowed into and out of the nonprofit sector throughout the United States.
Of these dollars, $240 billion came from the private sector including individuals (76 percent), private foundations (11 percent), bequests (8 percent) and corporations (6 percent). While corporations only represent approximately 6 percent of the total private dollars, there have been dramatic changes (some would say radical) within the corporate world over the past 10 to 15 years.
According to the Internal Revenue Service, corporations may give up to ten percent of their pre-tax income in tax-deductible donations. However, most large businesses give away only about one percent of their pre-tax dollars. Unless corporations have a separately endowed foundation, such as Prudential, giving is very closely tied to profits, and if a corporation does not make a profit one year, giving may drop sharply the next.
Unfortunately, the majority of nonprofits don't know how to ask corporations for money. They approach them in the same way they approach foundations and government, and this is a mistake. To raise money from a corporation, you need to think like one. Think of a corporation as having three doors for nonprofits to enter when they seek assistance.
The first door is called "Membership." This is a very small door around the side of the building where the corporation sets aside a small amount of money to join chambers of commerce, trade associations, and civic groups such as the Lions and Rotary. Corporate membership contributions are generally in the $100-$500 range. If you have a membership program or can develop a corporate category within an overall donor program, this is a good way to get on the corporate radar screen.
The second door , toward the front of the building, is the "Philanthropic" entrance. This is the traditional door, used by the majority of nonprofit organizations. Corporate grants are usually in the $1,000-$10,000 range and are given on a year-to-year basis. The corporate giving staff is frequently housed in the public relations department (a tip-off to the next level of funding) and their goal is to spread the limited philanthropic dollars over a large number of organizations. Corporations like their employees to be involved in the giving process, and so a corporate person on your board or a committee can be instrumental in securing continued or long-term funding for your group.
If the corporation you're targeting does not have a business presence in your community, the chances of receiving much philanthropic support are minimal. However, even though companies in your community are always your best bet, be on the lookout for corporations that will be moving to your area or that are planning to buy out an existing company. They want some quick visibility, so this could be an excellent opportunity to get your organization's message across before they arrive and you're facing competition with many other groups. The high tech, health care and banking industries are prime examples of a rapidly changing business climate where companies are attempting to build a corporate identity and community acceptance as quickly as possible.
Don't forget that companies of all sizes are excellent places to obtain donated office equipment, food and supplies, volunteers and technical experts. Small local businesses are often overlooked, but when every dollar counts, explore your options for free food at board meetings, printing and copying, or flowers for your special event.
The third door , right at the front of the building, is the "Marketing" entrance. Corporations spend billions of dollars every year to market their goods and services. If your nonprofit can assist the company in enhancing its image, reaching potential customers, or reinforcing existing customer relationships, they will want to work with you. And besides, it's good business for corporations to tax shelter their marketing dollars through your organization. This is where the greatest growth in corporate giving is appearing and will likely continue to increase dramatically in the future.
During the past decade, the majority of corporate dollars going to nonprofit groups has come from the marketing rather than philanthropic budgets. In Cause-Related Marketing (CRM), the relationship moves from "grantor-grantee" to one in which projects are set up to benefit both the company and the nonprofit. Bill Shore, director of Share our Strength and author of Revolution of the Hear t, was one of the early people using this technique in the 1980s with Charge Against Hunger , a partnership with American Express. Now we see it everywhere.
What are companies looking to gain from CRM? Usually, most companies are hoping that they will be seen as:
- A friendly and caring corporate citizen responding to critical community needs (corporations are becoming heavily involved in high risk youth and education issues)
- A protector of the environment ("dolphin-friendly" tuna and "save the rain forest" products are overflowing from supermarket shelves)
- A company that treats its employees well (day care and elder care concerns are moving to the top of many corporate agendas)
What does it take for a nonprofit to raise money through cause-related marketing? A bit of chutzpah, a basic understanding of what the corporation and your nonprofit are looking for, some confidence, and a real desire to move the relationship into a true partnership. Put you inside the mind of the marketing director who is asking, "What can this organization do for me?" If you can figure out a way to help the company get in front of customers, while generating resources for your nonprofit, you have a win-win situation.
Can't figure out where to start? Pull together a group of your stakeholders for a creative session and let the ideas flow freely. Think of all the corporations in your area and all the possible projects you might work on together. Some ideas to get you started include:
- A publication or service that meets the needs of your constituents and the corporation's customers . A traffic safety group might obtain corporate sponsorship from an insurance company.
- A needed service for the corporation's employees . A counseling center might negotiate an Employee Assistance Program contract to provide counseling services.
- Help corporations to comply with the law . A disability group might market its "accessibility audit" services.
- Get your message across to the public in a well-traveled corporate thoroughfare . An arts group might obtain sponsorship for a display in a corporate lobby. (This works just as well for human service groups.)
- Persuade a supermarket, restaurant, or locally owned book store to devote a certain percentage of its sales to your group on a given day. Then do your part to increase sales by mobilizing your supporters to shop in that store.
When you have lots of possibilities, you can begin to narrow your focus and pick one or two corporations to approach with your idea.
It's best to start with companies with which you already have a relationship or where you already know someone who can introduce you to a senior executive. Also, your vendors are a logical first place to start with because you are already buying health insurance, office supplies, recreational equipment, banking services from them Consider the bank where you have your account or the company at which a number of your volunteers are employed. You may even decide to consider companies where you're planning to become a customer. If you decide to shift your bank account, use the opportunity to negotiate for a new line of credit or a reduction in service charges.
When you have identified a likely prospect, find out everything you can about them. Request a copy of their annual report and corporate giving policies, review the information in your state's Grants Guide , check out the corporation's web site (if it has one), and talk with other people in the community who have had either philanthropic or business dealings with the company.
Developing the Partnership
The next step is to call up the CEO, the marketing director, or any person in the company who is accessible to you, and discuss the possibility of developing a partnership. Remember that the company is looking for visibility, credibility and new customers. For example, a bank may be interested in marketing its services to the African-American community in your neighborhood. You may have a small budget, but a lot of credibility with the people you serve. A fairly typical approach would be to ask the bank to sponsor a neighborhood fair, special event or other activity.
This is a good start, but it provides a finite sum of money for your nonprofit and only superficial exposure for the bank. Why not offer to follow up the fair by working with the bank over the next year to develop other strategies and opportunities to market their services to your constituency (their potential customers). The difference here is the desire of the nonprofit organization to work with the bank throughout the year on a variety of approaches. This is the basis of a partnership. This is the ONLY form of fundraising that I know of that is partnership driven NOT relationship driven. If you have a relationship with your spouse but not a partnership, what will happen to the relationship over time? My suspicion is the relationship will not last. That is true with corporations as well. THINK PARTNERSHIP that lasts throughout the year, rather than a "one night stand." In this way, you can educate the company about the needs of your community, they can develop products to suit your constituents, and your nonprofit develops a regular stream of income.
Are there risks in this approach? Sure there are. It would be foolish to think that corporate partnerships are a "free lunch." It is important to discuss prospective partnerships with your board of directors and other key stakeholders, particularly if you think the partnership might have any negative repercussions with your staff, immediate constituencies, or existing and future Funders. Remember that the company will probably be much clearer about its self-interest than you will about yours. This is why it's good to have a few business people on your board of directors to help you evaluate opportunities.
Most organizations, if they are going to do any significant amount of corporate fundraising, will pass a gift acceptance policy . This is a formal document that is usually developed by a staff/board committee and formally adapted by the board that talked about the ethical and value 'screens' that your organization use when considering corporate dollars. Will you take money from an energy corporation or an EXON if you are an environmental group? What about taking money from a tobacco company, beer distributor, or a military contractor? Under what conditions will you take or not take money? What is your bottom line? How will this sponsorship impact your constituency? When I was the executive director we would not take money from Coors? What are your limits? Remember that it might be easy not to take funds from obvious polluters and other companies, while it is easy to take money from the progressive companies such as an REI, Patagonia, etc. It is the overwhelming majority of the companies that are somewhere in the 'middle' that we do business with every day. These are the banks, insurance companies, retail stores, restaurants, etc. It is extremely valuable for your organization to look carefully at these issues. When developing this policy it good to form a committee with a couple of business people and others who are 'rock solid' with the organizational values.
NEED NOT APPLY
This kind of corporate solicitation is not for everyone. Generally corporations are conservative institutions that shy away from controversial organizations and start-up groups. Organizations that are involved with social justice, direct action work, have a harder time positioning their organizations with corporations. However this is not always true. When we were working on the passage of the Americans with Disability Act (ADA), Wells Fargo Bank was very supportive of one of the most activists groups in the country, because they wanted to develop 'positive' relations with them. If you are a neighborhood groups with a relatively small constituency, it may be better to start off with neighborhood business, retail stores and others that cater to your constituency.
Bear in mind that corporations are one of the principal engines that drive our society. If we want to have long-term support from this funding source, we need to understand the corporate mindset and ask ourselves how they can support our mission while we help the business support theirs. In some cases, we just want to ask them to pay a membership fee; in others, we will want a straightforward donation; but for those who want to take the relationship into a partnership, the rewards (and also the risks) can be much greater.