School Fundraising: Understanding Costs and Choosing a Platform

By Janice

Recently, our nephew’s daughter was selling popcorn as a fundraiser for facilities used by her after-school group. It is a very worthwhile charity, and of course my husband and I wanted to support them. I was told the leaders chose to sell products “so people would get something for their donation,” and they touted that they would keep 50% of sales.

We ordered the 6-bag bundle for $59.95 plus $10.95 shipping. What we received about a week later was a small box with six ~3-ounce bags of flavored popped popcorn. To give a visual, each bag was about the size of my open hand. We paid $70 for 6 small bags, and only $30 of that went to the facility.

This experience reinforced the idea that I would much rather give more of my money to the charity than get these tiny bags of popcorn in exchange.

So Product Sales Aren’t Worth It. What About Online Fundraising?

“Peer-to-peer online fundraising” is the modern approach to fundraising. There are many online fundraisers that all do the same basic thing: Members of a team use a platform to create an online fundraising page to ask family and friends to donate money to the team. That’s it. There’s no door-to-door selling or collecting cash, and people all over the country can be reached, with no delivery fees for products. Donors don’t get any goods in return, but they also don’t get products they don’t want or need - and the team gets to keep much more than 50%.

Some platforms simply provide the team member with a link to their fundraising page, which requires the team to then share their link with family and friends via text, email and/or social media. Other more robust platforms have the team members enter email addresses and/or phone numbers of family and friends directly into the platform, and then the platform automatically sends email and text message requests for donations to those people.

You can determine which type is best for your team, but no matter what, online fundraising is definitely the most effective and efficient way to raise money today.

With Lots of Online Fundraising Companies, How Do I Decide?

After determining what type of platform is best for your team, it then generally comes down to one major factor: cost. Online fundraising companies provide the same basic product, but their fees vary widely due to the additional services they include. Let’s look at the different ways companies charge you for use of their platform.

Commission

This is what the company charges per donation for the team to use their platform. Here are the options companies use and examples of how they are applied to a $100 donation:

• Fixed percentage: 5% commission = net $95 to the team
• Variable percentage based on participation from the team members: For example, 20% commission if 100% of the team participates in the fundraiser (net $80 to team); 25% commission if 80% participates (net $75 to team), etc. These commission percentages can also increase if team goals are not met.

Platform Fee

Some companies charge the donors a “platform fee,” which is a percentage tacked on to their donation that is paid to the platform. What this means is, the donors end up paying the commission either in whole or in part instead of the team. The percentage often varies based on the donation amount; they may be charged less for a bigger donation. For example, a $100 donation might be charged 12% extra at checkout for the platform fee, but a $500 donation might only be charged 10% extra.

Tips

Sometimes you’ll see an option available for donors to “tip” the platform. It often will be auto-filled with a suggested amount, but donors are usually able to reduce or eliminate it. The team does not receive any of this money.

Credit Card Processing Fee

A credit card fee is always charged per donation, and it goes directly to the credit card processing company (Stripe and PayPal are the biggest). The fee is usually 2.9% + $.30 per transaction (around 3% of the donation amount).

Some companies include the credit card fee in their commission. Some don’t charge it to the team but rely on donor tips and contributions to cover the cost. Others make it optional for the donor to pay the fee and then charge the team if they don’t.

Important: Get Your Fee Schedule in Writing

Many online fundraising companies’ websites don’t factually state what fees are charged to run a campaign with them. In order to get this data, you need to contact their salespeople. This is likely because there are many different options for fees that are too convoluted to put on a website and may or may not work for your team - but when you contact them, they’ll have a salesperson ready to “personalize” a fee schedule for you. Consider this: A simple fundraising concept does not need to have a complicated fee structure. If you don’t have the right questions or know the terminology, you may be setting up your team for extra fees. Just be sure to get everything in writing so you don’t get an unwanted surprise at the end of your fundraiser.

Other Things To Keep In Mind When Selecting an Online Fundraiser

You don’t want to alienate your donors. Adding a mandatory platform fee can be frustrating for a donor. They’ve decided how much they are comfortable donating, but when they get to the checkout page, it’s charging them an additional amount as a platform fee. It’s not made clear if the team will benefit from this or not, and they can’t remove it. Conversely, optional fees are better, especially when donors know what it’s for. For example, if the donor is asked to optionally cover the credit card fee, they know this is a direct benefit to the team. A request to ‘tip’ the platform tends to be confusing and leaves donors wondering why they are being asked to do this. In online forums, donors are overwhelmingly against tipping, often having entire discussion boards about their disapproval of the practice.

Research what you are actually getting in an online fundraising platform. This comes down to transparency, features, ease of use and support.

• Transparency This is incredibly important. This is money your team is raising, so you should know everything. Fully understanding the fee schedule. Being able to access real-time data on donations as they come in and reporting on all donations. Knowing when you will receive your money. All of these are essential and should not be hidden from you. Ever.
• Features A company that charges high fees would seemingly have a better platform, but that’s not necessarily the case. Extra fees are often charged to pay for commissioned salespeople whose services may not be needed as well as excess features that your team may not even use. Look for a platform with features that meet your team’s individual needs.
• Ease of Use This is very important for both your team and donors. Team members should be able to set up their fundraising page and invite potential donors in 10 minutes or less. Donors should have a seamless experience to donate quickly and be done with it. If the donation page or checkout is clunky or takes too much time, donors may give up.
• Support Your questions and issues should be addressed in a timely manner. Donors should have a clear avenue to contact the fundraising company with problems or concerns. Having a dedicated sales rep is great if they are responsive - but you are also likely paying extra commission for that service. Ask for references and read reviews.

Ask yourself, “What’s the catch?” A company that doesn't charge a team anything to use their platform but relies on the donors to optionally supplement their costs and profit begs the questions: How does the company stay in business? Can I trust my team members to send their fundraising page link to family and friends on their own? How much more could we raise if we have the platform take care of everything? These are valid questions, so research them. It could be that what they offer might be ok for your team. A fundraising platform is only as good as its reach, so if it’s able to turn potential donors into actual donors, it would be a good choice. If it is free but isn’t able to raise reasonable money for your team, then it may be worth paying a different company for the features and capabilities you want to potentially earn more money.

Making Informed Decisions is Key

Understanding how online fundraising works, knowing the fee schedule, and asking all the relevant questions when deciding which fundraising company to use will give you peace of mind, knowing you are supporting your team the best you can and not setting yourself up for a surprise when the campaign ends.