When you donate to nonprofit organizations, not all of your contribution goes directly to carrying out their mission. To some degree, this is unavoidable. All nonprofits have some amount of operating expenses. In order to carry out their mission, there are many people working behind the scenes. However, there are some factors that can improve a nonprofit’s cost structure to drive more impact with contributions.
What are nonprofit operating costs?
Just like any other business, nonprofits have unavoidable business expenses. These expenses can be grouped into three categories: employees, fixed costs, and flexible costs.
While nonprofits may engage volunteers to support some aspects of their mission, all nonprofits have at least one employee who needs to make a living. As of 2019, over 75 million Americans volunteer their time. Meanwhile, the nonprofit sector employed around 22 million people. As a result, employee salaries and benefits may account for a large portion of a nonprofit’s expenses.
Nonprofits also have fixed costs that may differ from organization to organization, but generally include any rent or office utilities, internet, phones, and other necessary tools. Some services may come at a reduced rate for nonprofit organizations, which can help make these expenses more manageable, but most services still cost something to nonprofits.
Flexible costs can vary each month depending on seasonal events, time-sensitive outreach efforts, and more. These costs include marketing efforts like social media ads and email newsletters. They also include platform fees, which may either be charged as a percentage of each donation or a flat monthly rate, plus an additional percentage.
How can I ensure my donation goes to carrying out the mission?
There are a few ways you can help make your contribution count towards the mission. It’s a good idea to do some research on any organization you’re considering donating to. Nonprofits Guidestar.org and CharityNavigator.org score nonprofit organizations based on their cost structure and provide breakdowns of the organization’s spending across key categories.
If you’re able to, consider donating your time in addition to making a monetary contribution. This is also a great way to learn more about the organization you’re supporting and have a direct impact.
If giving back is in your monthly budget, consider setting up recurring donations and spreading the word about your favorite organizations on social media. Both of these strategies can help nonprofits save on marketing expenses while optimizing their donations.
Many charities may provide branded swag as a way to entice and thank donors. These items, like shirts, tote bags, and more can be costly for nonprofits to produce. If given the option, forgo the costly swag and stick to spreading the word about the organization in addition to your donation.
Give extra to cover fees or donate through platforms with reduced fees. Many platforms charge fees for nonprofits to accept donations. Some platforms offer reduced fees or pass-through pricing on the expense of credit card processing, but even a 2-6% transaction fee can be a significant dent in nonprofit funding. Unlike other platforms, bunny.money provides zero-fee donation processing for nonprofits and makes it easy to set up recurring donations.
As a nonprofit, how can I optimize my cost structure?
While there will always be costs associated with doing business, nonprofits can take a few steps to minimize their expenses and optimize the use of donations. Identifying and promoting volunteer opportunities can be a great way to get donations in the form of service. Many individuals may not be able to give at a certain level financially but would be able to support your organization with their time.
Not all services have this option, but it’s always a good idea to ask about nonprofit discounts with any service providers you choose to work with. Many legal firms offer pro-bono advisory services to nonprofits and many online tools, like the Google Business suite, also provide discounts for nonprofits. If possible, look for nonprofit-focused tools that reduce administrative overhead and tasks.
Encouraging repeat donors is an effective way to help reduce your marketing costs in the long run. It costs less to retain an existing donor than to influence new donors. Provide the option for individuals and organizations to contribute monthly or quarterly to your cause. Alongside enabling “micro donations” this can be a great way to make it easier to project donations as well.
Finally, avoid platforms with steep donation fees wherever possible. Unfortunately, the industry standard for online giving platforms is to at least pass on credit card processing fees, which typically start around 2.5%. Many platforms take a great percentage of donations or may instead charge a monthly fee. bunny.money provides no-fee donation processing for charities and nonprofit organizations.