Critical Statistics For Church Fundraising

March 30, 2009 by  
Filed under Fundraising

whitedove150x131One of the first tenets of selling is to define your market. Once you’ve done that, the next step is to research the demographics of that group of people. Then you need to determine how you can best reach them. Where do they hang out? Finally, you have to choose the medium(s) by which to communicate your message.

If you are involved in fundraising for your church, let’s call a spade a spade: you are selling. If you want to be as successful as possible in your endeavor, you really need to walk through each of the above steps.

I subscribe to Contributions, a publication for nonprofit professionals. Recently there was an article by James P. Gellat, PhD (I have put his bio below) about trends in a number of areas. I have extracted a few that have a bearing on churches. They are all great food for thought and, in my view, should be addressed when putting together any fundraising campaign.

  • Nine countries account for half of the world’s population. In 2050, the four largest countries will be India, China, US and Pakistan. Globally, there are more people over 60 than under 15.
  • In 2007, the number of people in the United States turning 60 increased by 600,000. By 2050, the elderly population will double.
  • The Baby Boom Generation (those born between 1945 and 1964) account for 40% of US households and half the consumer spending. Boomers are twice as likely to own a second home. Even by 2010, spending by Americans 40 or older will be one trillion dollars more than the 18 to 34 age bracket.
  • In addition, it is predicted that 80% of the US population increase in the next 30 years will be immigrants and their children/grandchildren.  By 2016, one in four Americans will be Hispanic.
  • More than one quarter of all US households are singles.
  • About 28 million Americans are classified as “contingent workers”, that is, they work part time, do outsourcing work or work by contract. That is 400% greater than in 1980. While Americans traditionally have commuted to work, today 60% do jobs where the physical location is not a factor.
  • Thanks to technology, all of the routine transactions that a business or consumer does each day are being replaced by some kind of digital technology. For example, there is now one cell phone for every two humans on earth. It is predicted that eventually there will be more cell phones users than people who can read or write.
  • 120,000 blogs are created every day. People are uploading 15 hours of video per minute to YouTube. Facebook has 175 million users, uploads 415,000 videos per day and now is the world’s largest online photo site. Go do your own research on Myspace, LinkedIn and Twitter. The reach these social networks have will blow your mind.
  • Donors who are used to direct mail are “aging out” (what a great term!). Wealthy people are increasingly likely to use the Internet to make their donations.

I hope that these statistics cause you to stop and do the preliminary research about the people you are trying to reach, how they access information today and all the options you have to communicate your message that you never have used before.

James P. Gelatt, PhD, is the author of “Managing Nonprofits in the 21st Century” and general editor of Aspen’s Fund Raising Series for the 21st Century. He is the president of Prentice Associates, a management consulting company specializing in national associations and nonprofits, and a past-president of the Greater Washington, D.C. chapter of the National Society of Association Executives.

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Three Ways To Add Emotion Into Your Fundraising

March 27, 2009 by  
Filed under Fundraising

freedom150x1311If you are involved in fundraising for your church, here are three things you can do to increase the number and size of the gifts.

These suggestions apply to current gifts as well as gifts to your endowment fund. Donors can often see the results of their current gift right away. Gifts that will find their way into the endowment fund may come years later. Nevertheless, it is still possible to apply these three gifting mainstays to future gifts.

In selling, those on the marketing end know that, most of the time, a person buys on emotion and later justifies their purchase with logic. Why do you think the sales person down at the car dealership suggests your taking the car you are considering for a spin around the block? Words are no substitute for the smell of leather and the surge of power you feel by actually driving the car.

Planned giving professionals tell us that donors also give on emotion. In fact, one book I recently read claims that major donors often make their decision to give (and we’re talking million dollar plus gifts) in a split second. That decision occurs a split second after the donor feels the emotion of the application of the funds you are asking for.

Here are three things that can create that emotion for the ministries in your church.

1. Personalize

Communicate clearly how the gift will affect people. Dollar amounts are cold and nebulous. Donors want to see the people with the problems their money will solve. There is no need to bring out the violins. Laying out the problem in front of someone carries enough emotion by itself to tug at anyone’s heartstrings.

2. Quantify

How many shoes will a certain amount of money buy? How many children will the missionary teach? How many people will your gift feed?

It’s a lot easier to relate to a gift’s specific end result, as opposed to $100 or $500. This allows the donor to visualize his or her gift in action. Just running this through the imagination creates emotion.

3. Show

Not only is a picture worth a thousand words, it creates emotion. In today’s high-tech world, “pictures” include the entire gamut of audio-visual tools. Video, video DVDs, audio CDs, podcasts (both audio and video), audio and video on web sites, slide shows – and the list could go on.

Here’s an example that produced good results. Nothing fancy. Just pictures. Our church participates in a larger worldwide program, which sponsors children in third world countries. The program encourages the donor and the child to write back and forth. Often, the child sends pictures they have drawn that end up on the donor’s refrigerator door.

One woman at our church decided to actually visit the little girl she was sponsoring in a Latin American country. Once a year our church devotes part of a Sunday service toward asking people to sponsor a child. Last year, this woman shared many of the photographs of her trip. Pictures of the child she sponsors, her school and village were projected up on the big screen as she moderated her trip and what she saw and learned. It was powerful. The ushers had to pass the tissue boxes out.

The emotion her little presentation and pictures evoked “sold out” all the sponsorships.

If you take the time to translate the dollar amount of your fundraising goal into these three emotion-creating suggestions, I believe your results will be multiplied.

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Three Steps Toward Building an Endowment Fund for Your Church

March 25, 2009 by  
Filed under Financial

sunset_cross_square150x1311For all the good churches do, most of the funding for their ministries come from pledges. What if every church was endowed? Here are some suggestions you can employ in your church to build a bigger endowment fund.

All 88 keys of the Phoenix Symphony’s Steinway piano are endowed. They went for $5,000 a key. Penn State has every position on its football team endowed.

Is your church endowed? If not, why not?

The church I just started to attend just celebrated its 50th anniversary. It’s not a big church – about 350 members. It finished 2008 $33,000 in the red.

This is not unusual. Because of the current economic climate, many churches took a big hit the fourth quarter of 2008. In a December 1, 2008 article, The Barna Group predicted that churches would receive $3 billion to $5 billion less than expected the last quarter of 2008.

Financing ministries from the interest on endowment funds goes a long way toward shielding the good a church can do from economic downturns.

Some churches have done a good job building their endowment fund. I would refer you to ‘Financing American Religion” by Mark Chaves and Sharon L. Miller. However, every church can do more. Here are several of my opinions about some of the steps needed to build a church’s endowment fund.

1. Fish where the big fish swim

You probably have heard of the 80/20 rule, which holds that 80% of anything comes from 20% of the people involved in the activity. With respect to building an endowment fund, it’s more like 98/2. You need to concentrate on major gifts. 98% of the money will come from 2% of your congregation.

2. Solve a problem

While it is true that many donors are 100% altruistic, you stand a better chance of getting a major gift if you can show a major donor how to solve a problem that simultaneously results in a gift to your church.

Most of these problems involve tax savings. For example, how to sell a business without paying a capital gains tax and how to pass on wealth to the next generation without first giving half of the person’s estate to the government are typical examples.

Yes, I know, the tax aspect of major gifts is not the primary reason gifts are made. Most of the time, it’s not even on a person’s list. Nevertheless, if you can show someone who is interested in your cause how to make a gift that satisfies his or her interest and support of your mission and help them solve a problem at the same time, your chances of getting the gift (maybe even a larger one) is enhanced.

3. Provide case study information

I believe that many potential major donors do not know about the planning techniques the law allows that lead to a major gift.

In my financial and estate planning practice of 39 years, I called on numerous business owners who had no idea they had a problem. No one had ever pointed the problem out to them. My view is that it’s the same lack of communication of “what’s possible” that limits the receipt of major gifts by a church.

If you provide examples of what others have done to solve specific problems, people can easily see if the solution might work for them. This is the first step in opening up a dialogue about the possibility of a major gift.

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The Psychology Behind Church Stewardship

March 6, 2009 by  
Filed under Fundraising

brain150x113I’m just starting to read the book, “The 11 Questions Every Donor Asks” by Harvey McKinnon. So far, I think it’s a great book. It is written for fundraisers and people on boards whose partial role is to solicit gifts.  It would certainly make sense to be on the shelf of every pastor’s office as well as every member of the church’s stewardship committee.

By contrast, The Smart Giver, which I publish, is written for the churchgoer. In McKinnon’s book, people in a church congregation are on the other side of the equation as potential donors.

Harvey McKinnon has been involved in fundraising for three decades. He’s pretty much a household word in the profession. The forward to his book was written by Jerold Pannas, who is like the king.

By contrast, I am not a fundraiser. I come from the financial and estate planning world. However, I have spent nearly 40 years (and over 20,000 face-to-face interviews) helping people solve problems, in a lot of cases, they didn’t even know they had before I walked in the door.

Let me give you a quick example. I used to call on business owners with a list of ten questions. Instead of spouting off all my credentials (who cares?) I would simply ask each question one at a time and shut my mouth. Pretty good selling, actually. To make my point, here is one question. This is not true when applying today’s tax rules, but it is a real good example.

Here is the question: “Mr. Business Owner, are you aware that if your wife dies before you do that the IRS is going to want up to 50% of the value of your estate paid to them in cash within nine months?”

To clarify: I live in Arizona, a community property state. When I was using this question, estate taxes were due when either spouse died. Not true today.

To pick up on my story…

As I sat there in silence (extremely hard to do), I often could see the blood drain from my prospect’s face. No one clutched their chest, but I’m sure their heart beat took a leap. The reason was that the businessman’s business generally represented the bulk of his estate. It was all tied up in bricks, mortar and steel. The prospect of having to convert half of it into cash within nine months was scary and in most cases impossible. It would break him and all his hard work would go down the drain.

Of course, I had the solution: simply buy a life insurance policy on his wife.

My point is, though, that most people I called on were fat, dumb and happy. They had no clue they were living with a potential problem that could ruin them financially—much less having to deal with the loss of a loved one.

So even though I am not a fundraiser, I think I am qualified to come up with my own eleven questions. However, the title of my book would be, “The 11 Questions Every Donor Should Ask”.

Why “should” ask? Because, just like my business owner example, most people don’t know enough about all the options they have in making a gift to even know the questions it would make the most sense to ask.

So over the next couple of months, I’m going to give it my best shot to come up my own 11 questions everyone should ask.

Here’s the first one… How can I make a gift to my church without disinheriting my children?

Let’s say you owned a piece of property that now is in the path of progress. You bought it many years ago for a song or inherited it. Your church approaches you and asks you to donate the land because it wants to build a new building.

As much as you may love your church and even be emotionally connected to the cause that the building will promote, here’s the tug of war that may be going on in your mind: you want the property to go to your kids. You always have and they are looking forward to it.

What’s the chance of your making the gift?

On the other hand, what if there were a way for you give the property to the church and still provide your children with an equivalent value as their inheritance? In other words, what if there were a way for you to “give it away and still keep it?”

Let’s flip this around. What if you were the pastor or a member of the stewardship, finance or building committee and you came armed with a plan that would allow the parishioner with the land to make the gift and not cut his children out of his will? What do you think your chances of getting the gift would be then?

Actually, there are a number of ways to “give it away and still keep it.” I can think of four off the top of my head as I write and each is covered within the lessons contained in The Smart Giver.

So, that’s the first question people “should” be asking themselves: “How can I make a gift to my church without disinheriting my children?” Ten more to go. Stay tuned.

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Christian Money Management: The Silver Lining In The Current Bad Economy

March 3, 2009 by  
Filed under Financial

cloudpuff150x131Every cloud has a silver lining. There are two sides to every coin. The knife cuts both ways.

The dire state of the economy has given rise to some of the best opportunities to make a gift to your church seen in decades.

Many gifts in the planned giving arena use the IRS’s current “Section 7520” rate, commonly referred to as the AFR, in the calculation of the income tax deduction you receive as a result of your gift.

Just to give you some historical perspective, a couple of years ago, in March  2007, the AFR was 5.8%. A year later, in March of 2008, it had dropped to 3.6%. In February, 2009, it hit the lowest it has ever been since Sec. 7520 was put into effect in 1989: 2.0%. As I write this, March 2009, it is 2.4%.

What does this have to do with me you say? Let me give you a couple of examples.

Let’s say you are age 75 and have a $50,000 CD down at the bank paying 4%. This only spins off $2,000 a year in interest and the interest is taxable. If you are in the 15% tax bracket, that leaves you with $1,700 to take to the store and buy groceries.

You need more income. Hey, have you noticed the price of bread and milk today? You would not be opposed to increasing your income and helping your church at the same time. In meeting with your financial planner, she suggests you look at a charitable gift annuity. CGAs are pretty plain vanilla—they have been around for over 100 years.

Here is a quick summary of the benefits of using a CGA.

  1. Your income will increase from $2,000 a year to $3,150.
  2. The rules say you can use the February AFR of 2.0 even though you make your gift in March of 2009. This means that 78.7% of the $3,150 is not subject to tax. Bottom line: More money for groceries.
  3. When you die, your church receives $50,000.

Let’s change the assumptions a little. Let’s say you were age 75 in March of 2000 and set up the same CGA when the Sec. 7520 rate was 8.0%. The amount excluded from tax would have been only 53.7%. 

Translation: With today’s low AFR, you pay less income tax and have more money for groceries.

 Another example on the other end of the spectrum. Let’s say you are a multimillionaire and are looking for ways to pass your estate on to your children with the least tax impact possible.

One option may be to use a charitable lead trust. The way this works is:

  1. You contribute (generally income-producing) property to a charitable lead trust that your attorney drafts for you.
  2. Your church (or another qualified charity) receives income from the trust for your life or a certain number of years.
  3. When you die, or when the number of years has expired, the property is distributed to your children.

In a nutshell, given the current AFR, the payout percentage chosen and the number of years the payout will last allows the property to pass to the children at a lower tax transfer cost or even no cost at all.

There’s a lot more to it than that, but for our discussion let’s see how the current low Sec. 7520 rate makes the charitable lead trust more attractive than ever before.

Assume you funded the lead trust with $1,000,000 and set it up to pay 7% ($70,000) a year to your church for 15 years at which time the trust would end and the property dispersed to your kids.

If the AFR was 8% (as it was in Feb. 2000), after doing the math the taxable gift resulting in transferring $1,000,00 to the next generation is $295,040. That is a substantial savings.

However, if the AFR was 2%, the taxable gift would only be $100,549!

In fairness, I should point out that other planned giving vehicles, a lower AFR produces worse results.

I hope the take-a-way from this is that if you are a person who is interested in increasing your income, reducing your taxes, preserving your estate from undo taxation while simultaneously helping your church, it would be prudent to examine the various planning giving techniques which may apply to your situation.

If you represent a church and are interested in raising more money for your ministries and/or building an endowment fund so that eventually your church can finance its operations from the interest on the investments in your endowment fund instead of primarily relying on pledges, it would be wise to communicate and publicize the planned giving techniques that currently have high value due to the low AFR.

This is no small potato. During a planned giving seminar I attended in June of 2008, the attorney from the software company that I use to crunch the numbers indicated that the average lead trust that they consulted on in 2008 was $5,000,000.

If you are a church, I’ll leave you with this thought: A $5,000,000 lead trust that paid out 6% for 15 years would generate an annual income to your church of $300,000. Over the 15 years, it would add up to $4,500,000. If the $300,000 were put in your endowment fund and earned 6% for 15 years, it would grow to $7,400,000 (and change). $7,400,000 at 6% would spin off $444,000 a year forever.

What ministries do you have that could benefit?

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How To Make Tax Free Transfers From Your IRA

March 3, 2009 by  
Filed under Financial

truck150x131Want to potentially lower your taxes and help your church financially? Then acquaint yourself with the IRA Charitable Rollover. Currently, this piece of legislation has a time limit and is due to expire at the end of 2009.

The IRA Charitable Rollover was originally a part of the Pension Protection Act of 2006. It expired 12/31/2007. It was “extended” effective October 3, 2008 and expires again 12/31/09.

It allows persons 70 1/2 and older who have an IRA to transfer up to $100,000 tax-free to the qualified charities of their choice. The operative words are “tax free.”

Transferring an amount equal to or greater than the Required Minimum Distribution from an IRA can lower taxes as an IRA Charitable Rollover satisfies the RMD requirement but is not taxed.

RMDs have been suspended for 2009, but there is a push on to make the IRA Charitable Rollover permanent.

In addition, planned giving professionals and legislators are seeking to extend the tax-free transfers to charitable remainder unitrusts, charitable remainder annuity trusts, pooled income funds and charitable gift annuities.

If you don’t itemize, the IRA Charitable Rollover can enable a gift without any tax consequences. For non-itemizers, charitable gifts are otherwise non-deductible.

Using the IRA Charitable Rollover can possibly lower or eliminate the tax on Social Security retirement benefits.

If you are a generous donor, it can allow you to exceed the 50% of adjusted gross income limitation for cash contributions.

Bottom line: If you do not familiarize yourself with the IRA Charitable Rollover, you may be leaving money on the table.

If you represent a church and do not fully communicate the benefits of the IRA Charitable Rollover to your congregation, you are passing up an opportunity to put a six-figure number in your bank account or endowment fund.

For more information, see the video entitled, “How To Make A Tax-Free Transfer From Your IRA” at

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Robert Cavanaugh, Platinum Author