Werth-It Fundraising Blog

I was teaching a seminar recently to board and staff members of a nonprofit, and someone pointed out that my C.A.T.E. Formula isn’t really a formula.  He’s right.  So let me explain what it is, and see if I can work toward it becoming a formula.

CATE stands for Cost, Amount, Time and Effort.  It’s a way to evaluate whether a method of fundraising is worth your time.  So, Cost would mean all costs; I believe that should include staff time, which is often overlooked.  Amount is the gross amount raised: Amount minus Cost would yield your net amount.  Time is the number of hours of time involved.  Effort is the number of people involved.  The acronym CATE doesn’t have anything to do with my name being Katherine, it’s just the acronym I came up with.

Figuring out the costs of fundraising is a common concern: another client recently asked me about a baseline of costs for special events, whether there is an accepted percent of costs.  I told her that, regretably, for some black-tie galas, it is considered acceptable to spend 67 cents to raise a dollar, that if the event raises $100,000 gross, only $33,000 net would go to the charity.  One way to refer to this is CTRAD, which is pronounced C-Trad, and stands for “Cost To Raise A Dollar.” 

Now one thing the CATE Formula doesn’t consider is the emotional component of fundraising, that people find it emotionally easier to put on a gala than to sit people down and ask them for money.  However, I don’t want people to make decisions solely on emotions: galas may be fun, but if two-thirds of the money goes to the caterers, it’s not an effective use of staff or volunteer time.  After all, it is not the mission of the nonprofit to entertain the donors and put on dinner dances for them.

On the other hand, I don’t want you making decisions on fundraising solely based on raising the most money.  I do think there’s a place for special events, I just prefer those that focus on the mission of the organization.  I prefer a one-hour event that is solely about mission to a four-hour event where people leave not knowing what the organization does.  In the former category, for one-hour events, I think www.Benevon.com does a great job of teaching how to run an effective event that raises a lot of money.  For the latter category, if you want to see a four-hour event that doesn’t focus on mission, look at most golf tournaments and black-tie galas.  People can attend and have only the dimmest idea what the organization does.

But returning to the CATE Formula, I think that one way of making it into a formula would be something like this:

AMOUNT - COST/EFFORT * TIME (Amount minus Cost divided by Effort multiplied by Time) should at least equal what the volunteers or staff would pay NOT to do the event.  For example, there’s an event in Washington, D.C. that raises $120,000 net each year, but it involves 400 people who put in several months of time, including evenings and weekends, to create a three-week performance held several nights a week.  Thousands of people see it.  Divide $120,000 by 400 people, and you can see that each person raises about $300.  Divide that by the number of hours per person, and you see that they’re making less than $5 per DAY of effort.  Now, in this particular case, they’re doing the event for reasons that have nothing to do with the charity — they enjoy doing the performances.  But in terms of the effectiveness of their time, each person involved would be better off just writing a check!

However, from the point of view of the nonprofit (this performance groups choose a different nonprofit each year and it’s a competitive process), the nonprofit has to look at it and say, “If we have to send over two volunteers to staff the ticket booth for six weeks, at six hours a day, and we have to use our volunteers to help these performers raise the money to pay for the costumes and the rehearsal space, is this the best use of our time and resources?”  It may be, or it may not.  That’s for the organization to decide.  But the CATE Formula should help them do it.

Another way to look at the CATE Formula would be to just evaluate the money raised against what the volunteer or staff member makes per hour.  Let’s say someone just makes minimum wage; you would want the fundraising to make more than that.  Therefore, CATE would be:

AMOUNT - COST/EFFORT * TIME > $8.00 PER HOUR. 

The cost per hour depends on who is involved: clearly many volunteers make more than minimum wage in their jobs.  To apply this formula, let’s say that two volunteers put on an event in the home of one of them.  It takes three hours to meet to discuss it, to design an invitation on www.evite.com, to buy the food and to set up (these three hours occur over a couple of days — perhaps the meeting and invite design take 90 minutes one day, for example, and the food and setup occur on another day).  It takes one hour to put on the event, and one hour to clean up.  That’s five hours for two people.  The amount raised is $1,000 from the people who attend, and the cost for food is $50.  Therefore, the CATE Formula is:

$1,000 - $50 = $950 divided by two people multiplied by five hours each = $950 divided by 10 hours = $95 per hour.  That’s better than minimum wage, and it’s better than the cost of their time unless they together make more than $190,000 a year.  (A rough way of calculating your wages is to take your annual salary and divide it in half and take away the word ‘thousand’ and that’s how much you make in an hour.  Thus, someone who makes $50,000 a year makes $25 an hour.  It works because there are 2,000 work hours in a year at 40 hours a week and 50 weeks of work, not including sick days and holidays.)  Therefore, it would be worth it to hold this event (or “Werth-It” if you will, because that’s the name of my company).

A different way to apply this, one that goes back to the question of having a baseline of expenses for an event, is to ask what amount would need to be raised, net, to make it worth the time of the people involved.  So, let’s say for example that you wanted to raise a net amount equal to two times the cost of the salary of the fundraising professional.  Let’s say the fundraising method would take four months full-time of the person, and that they make $60,000 a year.  So four months out of twelve means that the staff member cost is $20,000, and they need to raise $40,000 net.  So CATE would look like this:

AMOUNT - COST/EFFORT * TIME = $60,000 - $20,000 = $40,000/1 person and four months.

You would then evaluate that against the expected results.  You can compare two fundraising methods to evaluate which would be better.

So if you know it takes four months to put on a golf tournament, but the tournament traditionally raises only $25,000, you can figure that putting the staff member on the task probably wouldn’t appreciably increase the results enough to make the effort worthwhile.  Spending $20,000 in staff time on an event that raises $25,000 probably isn’t going to raise the gross to $85,000.  It would not be worth the staff time to put on the event.

Comparatively, you can take that staff member and put their time into going out and visiting major donors, prospects and corporations.  Let’s say that you have a list of 100 donors who are giving $1,000 or more.  In trying to call each person five times, over five different days, perhaps you can reach 70%, and perhaps you can schedule 25 appointments.  If 20 people give money, but the average in gifts and pledges is $4,000, with $3,000 in new money, then you’ve made your $60,000 gross in new money, and you’re averaging less than two appointments a week over 16 weeks.  Now, this depends on having a list of prospects, donors and corporations able to give significant gifts, and many people don’t feel they have that. 

However, comparing the effort of a golf tournament, where people might pay $1,000 or more to play four hours of golf and network, to the effort of visiting people and asking for money, I’d rather just go out and visit people.  If you do want something where people can network, you can put on a one-hour event and accomplish the same task, and you’re not excluding those who don’t golf, for example.

A special thanks to the gentleman who pointed out that the CATE Formula wasn’t yet a formula: I’m very grateful.  I hope this is clearer.  Please give me your input on the CATE Formula by writing in the comments field (I read all comments and post relevant ones).  If you have questions or comments about fundraising, you can write me at katherine@werth-it.com.

Best wishes in your fundraising!