Not-for-Profit Notebook

Practical insight and analysis on the accounting, audit and tax issues impacting not-for-profit organizations.

How to Make Your Special Event a Financial Success

Many nonprofits depend on the funds raised at an annual gala, conference or other special event to keep their organization in the black. But successful events require a careful balancing act. You need to keep a tight rein on expenses, yet attract and entertain as many generous supporters as possible. Here are some ideas for maximizing revenues.


Net revenues

As in the for-profit world, sometimes you have to spend money to make money. However, a long-held rule of thumb among nonprofits says that the cost of a fundraising event shouldn't exceed 30% of net proceeds. To ensure you’ll stay on — or, better yet, under — budget, prepare financial projections.

Start with your total fundraising goal, which should include funds received from event attendees, sponsors and possibly pre-event appeals. Your financial objective should be realistic, based on your nonprofit’s experience with previous fundraising events. But consider a stretch goal, say from 5% to 20% higher than last year, to energize staff and motivate supporters.

Then, estimate expenses for such items as:

  • Facility rental,
  • Food and beverages, including serving staff,
  • Invitations and decorations,
  • Speaker and entertainment fees and guest stipends,
  • Permits (for example, to charge sales tax or host a raffle),
  • Staff time that would otherwise be spent on core functions,
  • Prizes, awards and incentives,
  • Outsourced event coordination, public relations or marketing, and
  • Special event insurance coverage.

Look closely at your list for expenses that can either be eliminated (because, for example, a sponsor has agreed to cover it) or cut. Say that you held last year’s event in the ballroom of your city’s best-known luxury hotel. This year you might consider a new venue that’s willing to discount the space for the opportunity to host your community’s movers and shakers. Even if you receive sponsorships and discounts, be sure to include the original expenses in your budget should you need to pay the full amount for a future event.

And don’t be afraid to try something entirely different. If you usually host a black-tie affair with a multicourse meal, try holding a more casual event this year, such as a cocktail party with a silent auction. As long as the event is well planned and publicized — not to mention, fun — attendees will probably be just as generous.

Importance of sponsors

It would be impossible to overstate the importance of finding good sponsors. Not only can sponsors help defray expenses with donations of goods and services, but they can help raise your nonprofit’s profile by introducing your name and mission to a new audience. Be careful, however, not to promise too much in sponsor benefits, such as free advertising or endorsements of the sponsor’s products — it could lead to unrelated business income tax problems.

In general, quality trumps quantity. Target well-known names with a connection to your nonprofit. For example, a pet food company makes an ideal sponsor for an animal welfare charity. A successful self-empowerment author might be a great fit for an association meeting of sales professionals. Board members can be particularly helpful in finding sponsors by working their personal and professional connections.

Be sure to approach and lock in sponsors as far in advance of your event as possible. (The good ones receive many requests for help.) Once your event is over for the year, continue to cultivate relationships by regularly checking in with your sponsors. Not only will this help ensure sponsors support the following year’s event, but it may lead to other opportunities to team up.

Keep your focus

These are just some of the important guidelines to keep in mind as you plan a special event. Depending on your nonprofit, mission and support base, you may be able to “break” certain rules, such as the 30% expense metric. However, all organizations should remain focused on the fact that special events are, first and foremost, about raising — not spending — money.

Sidebar: Is that gala really worth it?

A social-services organization hosted an elegant dinner-dance year after year. Yet no matter how hard staff and volunteers worked, the event never seemed to net more than $50,000. Regular attendees enjoyed the event and a group of long-time board members believed that the annual event should continue unchanged — after all, the charity needed that $50,000. But the nonprofit’s executive director had her doubts. There must be more efficient and effective ways to raise money, she thought.

Many organizations are coming to the same conclusion, abandoning traditional galas and other costly and time-consuming special events. Some are replacing them with several smaller events throughout the year that are geared toward specific groups of supporters, such as after-work drink parties for young executives or daytime lecture programs for retirees. Technology is also playing a role. Online auctions and Web events are increasingly supplanting in-person fundraisers and association meetings.

Some nonprofits have simply decided that it’s too risky to rely on the proceeds from one evening. The Seattle Symphony, for example, now depends on its annual event to contribute only 5% to its operating budget. If you’re worried about your organization’s dependence on a single event, talk to your financial advisor.