The real cost of doing business.

The real cost of doing business

It takes money to make money. Every development officer knows that. The problem is deciding, "How much?"

Some fund-raising activities have a cost/benefit ratio that is easy to measure. The result of a gala dinner, for example, isn't difficult

Other fund-raising efforts are long-term and it is more difficult to determine their cost/benefit relationship. A planned-giving officer may cultivate an individual for many years before a bequest is finally made. There is the cost of phone calls, receptions, plane tickets and other expenses. Mostly, however, there is the cost of the time spent by development personnel in cultivating the prospect as well as the time spent by the president, dean, faculty and their staff.

Even in long-term activities, an institution should be aware of its costs and not simply write them off as "necessary." If, after five years or so, the cost of pursuing deferred gifts is not producing results, both the program and the personnel need to be evaluated. The question which must be asked of all fund-raising activities is: "Is it worth it?"

Most fund-raising institutions are necessarily eclectic in their approach to raising money: They develop strategies to tap every possible resource. And, not unlike winning corporations and hockey teams, they compare their performance with the competition. The president of one prestigious hospital told me recently that he suspected his institution might do better with corporations. He thought that the hospital across the way was doing better. I checked and he was right: The other hospital was bringing in about four times as much money. The reason was simple: The competition was spending money on this effort and my client was not. My client's cost side of the cost/benefit ratio was just too low to produce results.

In another instance, the board of a private secondary school told me that the answer to its fiscal problems was foundation funding. They did not consider (until I pointed this out) that they were not engaged in the kind of programs that attract foundation support and that rather than expend money in this direction, the board needed to undertake more personal solicitations, as well as some other things more appropriate to the nature of the institution. Here the potential benefit was too small to warrant the cost.