#25 How much will you pay for a donor?

December 10, 2017

What is the fairest and most reasonable fee for a new donor? A comment on my last post got me thinking about the best way to remunerate a face-to-face fundraising agency.

 

The most common formats are the one-off upfront fee with either a rebate or clawback. For those not in the know, a rebate is a discount, whilst the clawback is a refund.

 

The rebate is great if you have consistent and predictable attrition with your agency and product because it takes all the thinking out of the equation. You pay your money and you get your donors.

 

The clawback if perfect if you are new into the industry. Even though it is more administratively heavy, it gives you a refund for your donors that do not debit in months zero to three (depending on your contract). This means you do not need to rely on your supplier’s best-guess for attrition, and you only pay for what you get.

 

Responses to the recent donor survey from Frost & Sullivan, 66% of donors believe that the agencies should not receive a fee higher than 10% of the total donation, which means that most agencies charge double what the average donor considers to be fair.

 

There is a third. It is a rare beast, but can work for the right agency and right proposition. It is the hourly rate. This is where you tell your supplier how many new RGs you want per week, and they work out how many shifts they will require on the streets to provide this volume for you. They charge for the number of hours their staff need to recruit the donors, plus a percentage to cover their risk and effort. So, if you want 50 new donors they may calculate that they need seven fundraisers working five days per week, eight hours per day. 7 x 5 x 8 = 280 hours at $X per hour plus a fixed percentage on top. This does not guarantee volume or quality, and must only be taken-on with sufficient contractual protections in place.

 

But could there be a fourth way? Before launching Fundraising Partners Door-to-Door, I searched for the most ethical, honest and transparent fee structure possible. I wanted one that the donors would approve of, gave value for money to the charity, allowed the employment model for all staff, and didn’t cripple me with debt.

 

The one that ticked the first two boxes left the final two bare. It was simply not possible to provide high quality donors in a profitable manner.

 

I wanted to charge a small upfront fee of around 10% of the assumed annual gift per donor, plus a monthly commission payable only if the donor is still giving. This means that I would still be getting paid every month if the donor was giving ten years later! Sadly, without an angel investor, I would have to foot the wage bill for a couple of years before I could break even on an average fundraiser*. Instead, like most, I opted for the upfront payment model with a clawback.

 

The search continues. With the industry under pressure, the churn and burn attitude of some agencies must end. Every dodgy deal or fraudulent sign-up casts a shadow over our channel and turns the public against us. We cannot keep signing up huge volumes in the knowledge that 20% will cancel before they are exported to the charity, a further 20% will never make a debit and 50% will cancel in Year 1.

 

We need to find a structure that rewards the agency for producing the desired volume, the highest-quality, is donor-friendly and doesn’t break the bank.

 

Please let me know your thoughts and experiences.

 

* Source: Frost & Sullivan Individual Donor Survey June 2017. Average fundraiser working nine months at a 1.2 billable daily sign-up rate.

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