Paying On A Percentage Is Bad For Agencies Too

By | January 20, 2017

What It Is:

Asking a development consultant or grant writer to work for a percentage of the grant award or campaign, usually in lieu of an hourly salary or fee for service.

Here is a link to a position paper about the issue by the Association of Fundraising Professionals, and frankly, they say it better than I do:

Association of Fundraising Professionals – position_paper

Why It’s Considered Outside of the “Best Practices” for Fundraising

Development officers, and fundraisers other than grant writers:

Major gift, capital campaign, and even annual giving personnel and consultants should not have a personal stake in the amount a donor gives, such as a percentage of the gift, because establishing a lifelong relationship with donors is your first goal. Why risk pressuring a donor to give more than they are comfortable with giving? You could lose the donor altogether.

Savvy donors are well educated about philanthropy and will research your agency to see how it operates. They will probably have a fair understanding about nonprofit “best practices.” They (or their accountants) will look at salaries and consultant fees on your tax return through GuideStar. If, for example, you embark on a capital campaign, they will want to know how their money will be spent.

Grant writers who are paid on a percentage of the grants awarded would probably be inclined to only work on proposals that have the best chance of being funded. This matters because:

Many supporters, including foundations, will not fund requests the first time they are approached. They may consider an agency after two or three proposals; meaning after two or three years. There are several reasons for this:

  1. Foundations and corporate funders need time to ensure they are making a good (and safe) investment. I’ll never forget one foundation that came for a site visit. They told us that they had just made a site visit to an agency that wanted funding for a swim program for people with developmental disabilities. There was no pool. There were no agreements (e.g. memorandum of understanding – “MOUs”) to use anyone else’s pool. It was a bogus program designed to raise grant funds.
  2. In larger cities, such as Los Angeles, where I live, foundations and corporate funders have their own professional groups. In these groups, they discuss the major issues facing their cities and surrounding areas. I hear that they also discuss local nonprofits and how they are – or are not – addressing those issues. These issues change, and an agency’s issue may be “tabled” for another, more pressing issue, meaning that they may not get a lot of grant funds for a while.
  3. Foundations may have made funding commitments for large projects and are not considering new agencies for a year or two, although they may not state that on their F990 or website. This means that if the foundation looks like it may not fund the first grant proposal, the fundraiser would probably not send it. But it also means the agency does not get the opportunity to make introduce itself to the foundation and set themselves up for the next funding cycle.
  4. Foundations are required to spend a percentage of their assets each year. Some under-spend, some over-spend. If a foundation over-spends one year, they can count the overage as a qualified expenditure for the next year. This means that they will probably donate less money. Also, a grant professional that is working on a percentage may decide it is not worth their time to approach a foundation that over-spent the previous year, as the chances of the foundation taking on new nonprofits is slimmer.

Other considerations:

All the other staff are being paid and this forces the fundraiser into a “volunteer” position for a lot of their work. It is unfair and unethical: not all of the grants will be funded no matter how good they are written and packaged. I know, I was told that my grant proposal and packaging was one of the best a foundation had ever received. We got the money, but I’ve been turned down a lot too.

Good and clear writing are of course important but not essential to winning grant awards. I’ve seen proposals that had typos and still get funded. The funders either trusted the agencies or liked the issues. Good writing will bring in more money, a comprehensive grant strategy will bring in more money, but it ain’t just the writing. It’s the cause, the backup materials, especially the budget, the level of transparency, flexibility, and the ability to identify, accomplish, and evaluate goals that support the mission. These are all things that a grant writer has to put in place in addition to the grant.

How will an agency put a line item in their budget for paying their fundraiser on a percentage of the donations or grants, particularly when so many foundations look down on the practice?

I give agencies copies of their grant proposals so they can have their administrative staff send copies to other foundations whenever possible, which saves the agency money.

An experienced grant writer is giving their:

knowledge of the local industry

prior experience with individual foundations and corporations

knowledge of what components make a persuasive grant package (budget, evaluations, etc)

knowledge of how to create an overall grant strategy for the agency that will benefit them for years to come

I would not work for a percentage, but if I did, obviously the priority would be given to agencies that were paying me.

What Happened When I Was Asked To Work For A Percentage

A close friend, who makes more than twice as much money as I did at the time, asked me to write grants for her. She wanted me to work for a percentage of the grant awards. Prior to this, she asked me to work for a friend – also for a percentage of the grant awards. My friend is in the comfortable triple-digit salary range. (An experienced grant writer will study an agency’s F990 before agreeing to work for them, for pay, for a percentage, or for free.) I thought I explained this to her pretty well (from an agency’s perspective) the first time she asked, but she didn’t get it.

Being friends, I agreed to meet with her friend to see if I could give them some direction. The agency was not even registered as a nonprofit in our state. They’d moved from another state and didn’t bother to do any paperwork or file any tax returns. They were operating at a big deficit and needed money fast.

If I agreed to work for a percentage, I would probably earn nothing for at least a year. I would have to start from scratch to build a development program (budget, F990, annual report, etc), and that takes time. They would obviously have to go through the registration process in our state, which also takes time.

In this agency’s case, smaller private funders would be more likely to contribute to them because they are less likely to conduct “due diligence” research. Unfortunately, their donations might not be tax deductible, but they may not care if they like the agency. I spent a few hours with the manager, for free of course, and gave him some ideas for private fundraising that would work in the near-term, ideas for getting registered in our state, ideas for long-term fundraising, and wished him the best.

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