Non-Profit Fundraising: Moving Beyond the Checkbook

Welcome to the practice of non-profit leadership, a podcast specifically designed for executive directors of non-profit organizations. With a touch of humor, your co-hosts, tim and Nathan, work to provide encouragement, insights and practical strategies to help you be a more effective leader. And now here's Tim and Nathan.

Welcome to episode 109 of the practice of non-profit leadership. I am Nathan Ruby. Well, tim is going to join us next week and today we're going to be talking about some interesting places where you could find the sources for gift so sources for a gift and we've got a couple of little unique things that we want to talk about today. That's a little different than just checkbook giving, but before we get there, something happened to me this week and I would like to. I just like to share a little bit, and one of the things that is different or we think, tim and I think is unique about our podcast is that we are actual practitioners. We are not peer consultants. We do consulting, we do coaching both of us but we are not coaches or consultants. We actually have a day job where we are doing the stuff that we're talking about, and Tim is the chief operating officer of a very awesome, awesome nonprofit doing refugee work around the world, and I run an organization called Friends of the Children of Haiti. We operate a medical clinic outside of Jacque-Malhady and right now, things in the world are. They're tough. It's a difficult place to be doing work internationally, and I just in Haiti specifically. There's just from an operational standpoint, things are pretty tough and it grinds you down and you experience that as well. If you were listening to this podcast, you are probably some leadership position within a nonprofit, and it's hard. This is not for the faint of heart. Last week, I got an opportunity to be on a Zoom call with 40 other leaders from 40 other organizations, of very similar organizations doing very similar to work to what my organization is doing in Haiti, and I got to tell you it was awesome, and it was awesome in a standpoint of nobody really had any solutions, but it was just comforting to know that I'm not the only one struggling. Our staff on the ground is not the only staff struggling. There are issues that are what's the word I want? That are germane to all of us. And it wasn't like I listened for an hour and was like, oh, they're solving it this way. They're just like, oh, they're not going to work for us. And so, yeah, I solved that problem. Actually, it was the opposite. It was I don't know how we're going to solve that. We've exhausted all of our ideas, and does anybody have an idea? And it was like silence. There wasn't anything, but it was rejuvenating. Maybe I don't know if that's the right word To have just know that there's others that are doing their best and just like us, and we're doing our best, and so I hope and I know that I speak for Tim on this as well we hope that we can offer that to you, that a chance to come and listen and hear some of the stories and hear some of the things that's happened. We've got some more guests that are coming up here pretty soon and that have some really cool stories, and so I just I'm excited for this podcast, I'm excited for spending some time with you, and just know that if you're struggling, if you're down, hey, you're not the only one. There's others that are having the same issues as you are, and we're all kind of in this together. So, all right. So I just wanted to get that off my chest. So there you go, take that for what it's worth. So all right. Well, let's get into today's stuff and, as I said, tim will be back with us next week, and so let's say that you have a donor who has made a 250, 500, maybe even a thousand dollar gift for each of the last few years and all of a sudden, you've discovered that this particular donor has a much higher capacity than what they've been giving. So let's say maybe a 5,000 or 10,000 or maybe I don't know maybe even more than that. Let's just say a significantly larger gift than what they've been doing. And so one of the things that you need to figure out with this donor is, if we are going to ask for a much larger gift than what we would normally expect, where is the donor going to access those funds to make that gift? Now, the easiest and most common place for a donor to find the necessary funds to make a gift would be their checkbook. We call that checkbook giving. So you ask for a $250 gift. The donor says I'd be happy to do that. They reach over, they pull out their checkbook, they write a check and they hand it to you. All right, awesome, that's fabulous. You've done your job. You made an ask and the donor responded positively and they gave you a check. That is great. Or maybe, if they're of a little bit different generation or a little bit more technology based, they may say, absolutely, I'd be happy to make that gift. Just shoot me the QR code and I'll take care of that today. So, once again, great job, executive Director. You made an ask and you got a yes. That's awesome. Well, those are pretty easy ways for a donor to fund a gift, but there are other places that your donors may have funds available that they can give out of. So we're going to talk about four different places where a donor can find funds. Those four places are stocks, donor advice, funds and a donor's advice fund, business gifts and real property. So we're gonna talk about each of them individually and then at the end we'll come back and we'll kind of. I've got a couple of pointers for you that will kind of help you maybe find donors and when you do find a donor that has some of these opportunities, how you can work with them to secure those gifts. All right, so let's get to it. All right. Number one is stocks. Now, in stocks, donors typically will use a stock gift for tax liabilities. So now, before I go any further, let's we'll just get the lawyer stuff out of the way. I am not a tax professional, tim is not a tax professional, this is not a tax show. So we're gonna give you the information as we understand it. But before you talk to your donors, make sure that you are talking to advisors that your organization has that are giving you the right tax information. Here and, as always, when you are working with your donors, make sure that they are going to their own specific advisors, whether it be tax or investment advisors and attorneys and tax professionals. Make sure that your donors are always working with their own advisors. You don't wanna get in the way of making a statement and having a donor make a decision on incorrect information, so always protect yourself. So why would a donor wanna gift a stock? Well, there's a couple of reasons. One is tax liabilities. So if a donor has appreciated stock, and when they so, if they appreciated stock means they bought it at X price and now when they get ready to sell, it goes to X plus. So maybe they bought at 100. Now they're gonna sell it at 200. And so they have to pay taxes on that $100 that it's appreciated. And if it's $100 and it's a couple of shares, that's not a big deal. But they could have Berkshire Hathaway, that stock that they bought at 20,000. That's now I don't even know what Berkshire is now 35,000 a share or something, or Apple stock or Alphabet or whatever. And if they have multiple shares it could be a real tax burden. So if they sell that, then they have to pay capital gains on that. Tax Could be ordinary income depends on how long they've had it. But if they gift that stock they could take a charitable deduction and bypass that tax altogether. So real tax incentive to give appreciated stock. There could be another reason of well, it's just sitting there, you know, maybe it's part of their portfolio that they're not actively trading anymore, or it's just not part of what they're trying to achieve in their moving forward and their investment portfolio and they just wanna clean up some. So I've had donors that have given that way before. And the other reason is typically giving a stock is a very easy way to give larger, more impactful gifts. So and it doesn't really often it doesn't really impact their lifestyle. So they may have their income maybe they're a fixed income or maybe they're on retirement income and they have that income all set up, and so giving a larger gift out of their checkbook, out of their income, is not the most convenient way for them. But finding stocks that they have is a way for them to make that gift. So there have been more oh gosh, I don't know how many times multiple times where I would have gotten a no on a gift because it just was more than what their income would allow. But it turned out they did in fact have stocks that they were willing to gift that way. So it does happen. It's something you need to be aware of, all right. So number two First, was stocks. Number two is donor advice funds. Now, donor advice funds, I don't know. To a lot of people they can sound complicated or maybe a little what's the word? A little scary, a little intimidating, but they really aren't. In its very base definition, a donor advice fund is simply a fund that people will deposit an asset could be cash, could be property, could be something else but they put in a asset into that fund and then that fund is typically invested. And then, as the investment grows, once the asset is put into the fund let's just say cash is the easiest to, and it's usually the way most owners do it so they will put in $50,000 into the fund and once they do that, the fund a donor advice fund in and of itself is a charitable entity. So they put that money in and they get an immediate tax deduction. So awesome, they get a tax deduction that is now sitting in the fund and that is an irrevocable gift, which means once they do it, they can't pull it back out again. They can't say, oh nope, I didn't really mean to do that, I want my money back. Once you put the money in there, it is in there to stay. But then what they can do is, over time they use that donor advice fund as their way to make gifts to nonprofits, to people like us. So you can have a donor that has a donor advice fund and they say let's go back to our $250 example. You make the ask and the donor says, absolutely, that was such a good ask, I'm just really compelled to make that gift and I will take care of that. And they call up on the phone or they send an email to their donor advice fund and say, hey, I'd like to make a $250 gift to XYZ charity and a week later that check is in the mail to you at your organization. So basically it's just a fund where people put money in it and then they make their charitable giving out of that fund. Now, once people put deposit into the fund, then that will grow tax-free. There is no taxes on the growth within that fund. So that is also a place for donors to find the funds necessary for a gift and I always think it's interesting on donor advice funds In 2021, so this is a couple of years old, but in 2021, there were $234 billion in donor advice funds. That is B, that is a B. That is a billion with a B. That is a awful lot of money. And I know that even today it's even bigger than that. I don't know what it is today, but it is. It's bigger than that. And here's another tidbit, interesting tidbit Guess what the largest three donor advice funds are Fidelity, vanguard and Schwab. Now, what are the three things that are the same about that? What was that Electric company? What these three things are the same? Anyway, tv show for my youth. Fidelity, vanguard and Schwab are all investment companies. So there you go. So the three biggest donor advice funds just happened to be investment companies. So what they've done is they've gone to their customers, to their clients, and said, hey, we don't want you to take away all of this money because then we won't be managing it. So let's set up a donor advice funds and then we'll manage your charitable dollars as well. So, anyway, fidelity, vanguard and Schwab top three donor advice funds. Okay, so we've got stocks and we've got donor advice funds. Our third unique place to find funding for gifts is a business gift versus an individual gift. So what do I mean by that? So let's take as an example a business owner, and you've probably all have heard the story or read about a story where somebody started a company in their driveway or in their garage and they built it into this massive, really successful business, and we've all heard those stories. So let's think of somebody like that, so an owner of a company, and there are two places to go to that owner for a gift. One is on the individual side, the second place is on the company side. Now, those are two different gifts, and we have talked about several times on this show and you've probably listened to those episodes that in order to get larger personal gifts, you really need to match up the donor's philanthropic goals and their passions with the vision and mission of your organization. And if you are able to successfully do that, connect the dots for the donor, then you have a good chance of closing or securing a larger, major gift. Now there is also for the owner of the company, even the president and vice president. It's the same thing. You have a chance. There's a different pocket of funding that you can ask for and that is on the company side of the equation. And so on the company side it is a very different connecting point. On the company side of the equation you need to match up with helping the company make more profit. Now you may say well, nathan, you sound a little jaded there, a little cynical, and maybe it is a little cynical, but that is what it is and that is the way companies think. Now, maybe earlier, when I first got into this profession, into this industry back in the late 90s, there definitely was a sense where companies had a little more good corporate citizenship and there definitely was more of a hey, we're a member of this community, we want to be good and so we're going to give out of that. And I will tell you, when you get into working with companies for funding and you start working with individuals within the company, that is still definitely there. There are some of the greatest people that I've worked with on gifts are from the corporate side and are individuals within that corporate structure and they are members of the community. Their kids are playing soccer and baseball and softball and hockey and they are going to the same grocery stores that you are and they are part of the community and they want to be good community citizens, no question. But the company still, the corporation still, you still have to be very clear and compelling in showing how supporting your organization will help that organization make more profit. That is just the reality that we live in. Now it is definitely worth finding those gifts and pursuing those gifts because typically not always, but typically when you get corporate funding or company funding, it is typically larger than your normal individual gift, whatever normal gift to you. So if your normal gift is $500, most companies you know they will be in the $1,000, $2,500, $5,000 range. Those are not uncommon gifts from companies and corporations, so definitely worth going after those gifts. Now, the other thing with business and individual gifts is always remember that we just talked about an individual donor who is connected to a company and going after that other pocket of funding. Don't forget the same is true on your corporate funding. So if you have a company, a local company that is supporting you, don't forget the individual side. The owner of the company, the CEO, the president, the vice president, whoever you're working with, those are can be highly compensated individuals and if they are helping you get corporate funding, they may very well be open to a conversation on the individual side. So that goes both ways. Don't forget that. Okay, so we've got stocks, donor advice, funds, business gift versus individual gifts. And the fourth one is property. Now, from a tax status, from a tax definition, there are two types of property. There's real property and there is personal property. Now, real property, think of it as land or things attached to land. So you could have a piece of land. I own three acres. That is real property. Or I own a building. A building is real property. You could own the land building, but not the land. You could own the land and the building. That is real property. And then personal property is a good example of personal property is intellectual property. If you are creative and you wrote a song and it got picked up by a major recording artist and they recorded your song, you are the writer, the author of that song. Author's not the right word. You can write a song, ura, whatever you are it, you own the rights to that song. So you get paid every time that's played on the radio or played on a, downloaded off of a, off of the Apple music. Wherever you get your music, then you will get paid for that. That is property. So, again, real estate, real Property or personal property those are two different tax definitions. We're just gonna lump those all together. Um, so those are. Those are opportunities, you know, and it's one of the most complicated gifts I ever worked on also turned out being one of the largest that I ever worked on Was land that involved act and it had an active mineral mining going on underneath it. It took us months, months to figure that out, but we finally got it. It was a great gift and a significant one to boot. So so those gifts can happen. So pay attention to those. So, alright, so those are our four types of gift stocks, donor advice, funds, business gift versus individual gift and Property. So alright, well, here's a. Here's a few things that might help you that you really kind of need to pay attention to when you're, when you're looking for these type of gifts with your donors. One is you still have to cultivate and ask for the gift. You still have to connect the passion and the desire of the donor to your mission and vision. So what we've gone over today is how is gift vehicles? They're not why a donor is going to give. Remember on the, on the first one, on the stocks, on the appreciated stocks. Remember that you know, tax liability is not never, it's never been in the top five, sometimes it's not even the top ten of reasons why people give. Now, if there's a tax Benefit, will they take advantage of it? Sure, of course. I mean, I don't know anybody, I've never met anybody who's excited to pay taxes. So, yes, they will take advantage of that. But is that the motivator for giving your organization the gift? Absolutely not. You still have to connect a vision and your vision and mission with the donors, passion and philanthropic goals. So don't forget that. Number two, you have to ask about these types of vehicles in advance and and these are typically not first meeting, sometimes not even second meeting Conversations. So you really need to get to know your, your donor, at a deeper level to have some of these conversations. You know, I I think on one of the episodes I told the story about the the donor early on in my career that I got kicked out of the house Because I asked him I basically I don't think I actually said the words how much money do you have? But I think I kind of implied it in the question that I asked and I did. I did. He the the husband. I didn't say anything. He just got up out of his chair and and walked out into the garage and the wife stood up and said well, nathan's, thank you so much for coming. I was so nice to meet you as she was leading me out the door. But I did redeem myself. I did. It took me a year, about a year and a half almost, but I did. I did close that gift, but I set myself back a little waste. So these are typically not not topics that you talk about right off the bat, but you do need to do it. So you know you don't say so. By the way, mr Mrs Doner, do you have a donor advice fund and if so, how much would there be in there? I would not recommend doing that, or you know you wouldn't happen to have any Berkshire or Hathaway stock laying around, would you? No, no, I would not. I would not recommend that either, but you could say something. Like you know, mr Mrs Doner, there are several advantages to gifting of stocks as opposed to making a gift out of your checking account. Is that something that might make sense for you, or you could do something like mr Mrs Doner. You mentioned a while back that you had a piece of property out by the lake that you were thinking of selling. Have you ever considered about gifting that land? There are some real advantages to gifting real estate. So you know, those are, those are ways that you can bring it up While you're talking about a gift, and those are those are real simple ways to do that. But you have to be prepared to do that. So, but maybe do that on the second or third or fourth time that you that you've met with them. All right, here's another one. If you were looking to secure gifts in these areas, you do need to do some legwork ahead of time. So here's a few parts of legwork that you might think about. So in stocks, you need, your organization needs to have their own broker Before you are able to accept gifts stock gifts from donors, and that takes a little bit of time to set up. Last time I set one up for an organization it was about two weeks, because you have to go to the broker, you have to decide which broker you want to set up and account with, they have to do their paperwork and then you have to actually have everyone I've ever set up requires that the board make a. It's in the board minutes. So you actually have to have a board vote that, yes, they approve this. So and now I did mine by email because we were able to do that in the bylaws. But if you don't have, if your bylaws don't allow for an email vote, you're actually gonna have to wait until your next board meeting to go through the process to get the paperwork set up. So you really need to have this done way out in advance. And I would even go so far as to recommend, if you don't have anything right now, if you don't have a brokerage account set up, I would go ahead and do that, even if you don't even know of any donors who have stock gifts. It would be bad, not horrible. But if you have a donor calls you up two weeks before Christmas and says, hey, I've got 4,000 shares of a stock I'd like to give you, can you give me your account number and your transfer numbers? And you say I don't have any and you can't get a board to meet fast enough, that would be sad. So I would go ahead and get that done now. So make sure you get your account with a broker set up ahead of time. And if you don't know a broker, ask your board, ask who they use. I would recommend having somebody local would be your best bet because then they could be a champion for you. So get that account set up ahead of time. That's one. Two Donor advice funds it is pretty common. Donor advice funds are pretty common. They're not difficult. I think it's more of a mental block that a lot of executive directors have. And a donor advice fund is simply a place where your donor has money parked that is generating some interest that they can make gifts out of. So there's really not a lot you have to do on these. You just have to ask the question. Mr and Mrs Donor, like I said earlier, there are we have some donors. There are donors who have some real advantages from giving from their donor advice fund. Is that something that you have and you just have a conversation about that. So not a lot to do on that, just be aware of it. Business gifts I just I'm gonna restate how important it is for that. You understand the ROI of a company donor and you know individuals give division and mission and their own charitable purposes. Businesses are different and if you don't have a very clear, very compelling, compelling, very compelling reason for why giving to your organization will help them bring more customers, be more profitable, then you're not gonna be able to secure a lot of business gifts. And you know, I don't know what that is. Every company is different. But have some ways, and if you're struggling with that, give me a call and tell me what your organization is, what your vision and mission is, and I can help you. I can help you connect the dots on that, but you just you need to be ready for that before you start talking to business owners and CEOs and presidents about giving from their company. And then with real property, by far without doubt, the most important thing is do not do these by yourself. If you are thinking of taking property as gifts, oh boy, go get expertise, get a real estate agent, get a real estate attorney, get a tax accountant, get people that are on your side of the equation to help you with these type of gifts. I had one, a donor, come to me. This was a few years ago and they had this piece of land. I didn't know exactly, it was a town that I wasn't from. I did some research and I found out that this piece of land is like downtown. It's a very expensive piece of land, it's got cars, huge traffic by it. It's like, oh my gosh, this is like we just hit a windfall with this. I had my own real estate people, my own attorneys, and I called and I said hey, this has come up, blah, blah, blah. And they said the real estate person said just a minute, don't do anything, stop, let me do some research. And she called me back 45 minutes later, an hour later or whatever it was. They had an office in that town and so she called some of her colleagues and, sure enough, the piece of land used to be a gas station and it still had tanks buried underneath it. As it turns out, we were not the first charity that that owner had tried to gift that land to. They were looking for a tax deduction without having to be on the hook for the fuel tanks. Anyway, just be careful, you could get yourself in trouble. So just make sure you have experts that are working with you. There you go. Those are the four stocks donor advice, funds, business gift versus individual gift and property. Again, I'll close with this. These are giving vehicles. These are not reasons why people give. You still have to do the work. You still have to do the cultivation. You still have to get people to understand what it is. You do share the vision, share the mission, tell stories, connect the dots and then when your donor says I would love to make that gift, then you help them figure out where the funds will come from, where the assets will come to make that gift. Hope that was helpful today, as we. You know what, as we're wrapping up here, if you could do, tim and I, a favor. The algorithms are to get new people that have never heard about the store heard about the store, heard about this show. Two things One, if you could just share it with somebody another colleague, another organization, somebody down the street or in another town, just if you run into people who are in the nonprofit industry, we'd love for you to say, hey, here's a podcast that I really like. Well, that's assuming that you like it. Give them a listen. That would be awesome. And then, also for the algorithms, if you could leave a review on whatever platform that you're listening to. It doesn't have to be long. It's like hey, tim and Nathan, I love these guys. They've helped me in the past or something like that. It didn't have to be big, but that really helps us get it out to new people and so that we can reach more people with the good stuff that we have to share. And, as always, we love it when people call in. We love people to email us and ask us questions or say, hey, I didn't understand what you said, or yeah, I got what you said, but how does that apply to us? Reach out to us, give us a call, send us an email. We love that stuff. We love to engage with you and have a conversation and see if we can help a little bit more. So, yeah, that's it. Our contact information is in the show notes and that's it. That's all for today, until next time.