What is Development?
Development is about building relationships with prospective donors over time, with the goal of long-term support. It requires prospecting (identifying a prospective donor), cultivation (educating the donor about your organization’s work over a period of time), asking for support, and stewardship (building an ongoing relationship so that the donor will want to continue supporting your organization).
Sometimes development is used interchangeably with advancement, but these two terms actually mean slightly different things. While development is the process by which an institution shares its mission with the public in order to fundraise for its programs, advancement is more of an umbrella term. It involves not only development but also public relations and government relations.
Create a Plan
Funds can come from a variety of sources, including endowments, donations, grants, and earned revenue. This page will explain each of these sources and the methods you can use to raise funds from each source.
Once you’ve learned about the different sources and methods for raising funds, you can create a fundraising plan describing how your institution will approach fundraising. This approach should build off of your strategic plan and your recent budgets to gain a sense of what you are fundraising for, how much money you need, and which of the specific modes discussed on this page best suits these goals.
Network for Good, a fundraising software geared toward nonprofits, offers many free resources for first-time fundraising, including this 7-step fundraising plan. Additionally, the blog of the American Association for State and Local History (AASLH) offers this useful post on Ten Fundraising To-Dos for small historical organizations. AASLH also publishes a useful downloadable pdf guide called 101 Ideas for New Revenue at History Organizations.
There are two different types of endowment accounts – unrestricted endowment funds and restricted endowment funds. Restricted endowment funds are reserved for specific purposes whereas unrestricted ones are not. Endowments source their funds from donations, but money donated towards an institution’s endowment cannot be spent directly. Rather, these donations are invested and a portion of their earnings are available for use by the institution holding the investment.
Donations toward the endowment are distinct from donations made directly to the institution, which are described in the next section. It is important to note that endowments are less prone to yearly fluctuation than straightforward donations and grants, making them an important source of stable income for institutions of any size, though many small museums have pressing annual financial needs that require planning to manage if you aim to put resources toward building an endowment that will only yield about 5-percent of its interest earnings per year.
Additional information on endowments
There are many ways to secure donations. Individual donations are built upon relationships between potential donors and the people operating and working at the museum. You can develop these relationships through regular contact – options include but are not limited to meetings with museum board members and staff, personal walk-throughs at the museum, private events for certain donors, and opportunities to witness how the museum used the donation. With individual donors, follow-up is key.
A major gifts program targets donors who seek to make a larger contribution. The lower limit of these donations is at your discretion – $500, $1000, and $2500 can all define the minimum donation amount that counts as a major gift for smaller organizations. Major gifts have much in common with individual donations – face-to-face interactions and developing relationships with major gifts donors are the cornerstones of this form of fundraising.
In addition to making direct contact with individual donors, your organization may benefit from fundraising campaigns to solicit donations. For instance, you might hold regular annual fund appeals, a campaign that explains to current and prospective donors why they should consider donating to your institution. The money collected for the annual fund is unrestricted and can be used as needed within the budget. While annual fund appeals often take the form of letters or emails, donations for the annual fund can also be collected through individual meetings and special events throughout the year. Often these campaigns solicit donations from businesses and corporations in addition to private individuals.
More and more often museums are turning to crowd-sourced fundraising platforms like Kickstarter for campaigns that raise funds for a specific project. Kickstarter allows backers (friends, fans, and strangers) to support your project by pledging contributions. You can set an amount goal and deadline while tracking the funding progress. Kickstarter now has a #Museums tag where you can view other museum funding projects. An alternative to Kickstarter is IndieGoGo.
Finally, capital campaigns are donation-based fundraising campaigns defined by project goals related to the buildings (or other “capital assets,” such as property or major equipment) in which the organization is housed. This can include buying new computers, building repairs, funding a new wing, etc. Capital campaigns are major and concentrated efforts that require significant time and resources, usually involving lining up donors for a “silent phase” that amasses some major gifts before launching a public and marketed phase that gets the campaign to its target goal. “The Basics of a Capital Campaign” by The Nonprofit Partnership briefly outlines important characteristics and phases of capital campaigns.
Resources for Maintaining Donor Relationships
- Writing appeal letters is nothing short of an art. Check out these pointers for improving your next letter.
- This Nonprofit Quarterly article provides a template for “The Donor-Centric Pledge,” part of a strategy to communicate clearly and maintain relationships with donors.
- Although the basics of fundraising are typically consistant, fundraising strategies differ based on the size of the organization. Blackbaud has created a video aimed at smaller organizations, “The Secrets to Fundraising Like the Big Boys.”
- The Fundraising Authority also offers fundraising tips for organizations with small, even one-person, development teams.
- Sandy Bradley of The Grantsmanship Center produced this useful guide on how to get donations for a fundraising auction.
Donor Management Strategies and Software
- It’s important to keep track of donor information from year to year in order to both identify and appropriately recognize donors over time. Check out this guide to donor management software.
- Interested in prospect research? We created a sample donor profile, with the types of information you will want to collect.
- Prospect research is an important but time-consuming task. This article contains the basics of prospect research. It is written with libraries in mind, but translates well to museums.
Grants are among the most restricted funds available for small museums and historic homes. Applied for directly through funding organizations, grants are designated for a specific purpose to be used within a given timeframe. Conferring organizations lay out the requirements for their grants, including the size, purposes, and location of the organizations that they seek to fund. Don’t be afraid to get creative with the types of grants that you apply for! Receiving a grant gives your institution and the funded project a degree of vetted legitimacy that you can use to “leverage” support from more donors and other granting agencies. Some grants do also require you to find “matching” support from other sources, but matches may come from unexpected places, including individual donors. There are many different types of grant-giving organizations – government agencies, state agencies, private foundations, family foundations, independent foundations, community foundations, corporate foundations, and national foundations – looking for organizations like yours!
- A good source for researching foundations is GuideStar. Create a free account, and get access to recent 990 forms.
- Smaller organizations often do well applying to family foundations. Here are some things to consider when approaching a small family foundation with a request.
- Fundsnetservices.com is an index for grants and fundraising for nonprofits. The Arts & Culture Grants section provides a list of hundreds of grant opportunities for museums and cultural organizations.
Resources available when applying for grants
- Candid offers information on hundreds of private philanthropic institutions and individuals throughout the United States. The website offers help with proposal writing and a searchable database of prospective funders.
- In many cases the first step to approaching a foundation is writing a letter of inquiry (interest, or intent).
- Another good source is this video on grant writing from the New England Museum Association.
- The Nonprofit Quarterly also offers a helpful resource on the basics of grant and prospect research.
Earned income from a museum can include admissions fees, museum store profits, dining facilities profits, space rentals, and entry fees for workshops and special exhibits.
Additionally, a paid membership program is a central means of earning income for your organization. Before offering this opportunity, define the benefits of paid membership and their cost. You should address the benefits that both the organization and the potential member receive from such a program. It is also important to keep in mind the cost to your organization for paid membership – mailings, special events, and discounted entry all come from your budget. If you decide to initiate a paid membership program, anticipate your costs when deciding the cost to members.
You can also increase your membership numbers through annual membership drives. These drives can offer the same access and benefits as currently paying memberships. If arranging a membership drive, collect or update your mailing list first through board members and their contacts, contact information from previous members, contact information collected at previous events, or other means. This process entails directly contacting people, often through snail mail, to court their visitation and potential membership with your organization. For more information on membership programs, see the drop down menus below.
Note that even tax-exempt organizations may still be taxed on their unrelated business income, defined by the IRS as “income from a trade or business, regularly carried on, that is not substantially related to the charitable, educational, or other purpose that is the basis of the organization’s exemption.” The IRS web page accessed through the link above will direct you to specific information defining “unrelated business income.”
Resources for operating a membership program
- Blue Avocado, an online magazine for nonprofits, lists eight strategic mistakes to avoid when operating a membership program.
- How can small museums use research to build and diversify their membership? This article by Engaging Places LLC will show you how.
- How can museums use digital technologies to grow their membership? This article by Allegra Burnette examines the Museum of Modern Art’s digital membership model.