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If you’re not a seasoned pro, one of the most important things you need to understand before you start working is “how does fundraising profit work?” There are hundreds of fundraising ideas and just as many companies that you can choose to work with and there really is no standard way to look at profit. So this article, part of the How to Do Fundraisers series, will seek to explain the various ways to calculate profits and give you a few things to look out for.
The first thing you need to understand is what the word profit means. At the most basic level, it the difference between what you sell an item for and the price you must pay for the item. That’s a simple enough concept to understand. The problem happens when people start talking about markup or profit percentages.
Fundraising Profit percentage is simply sales price less cost divided by the sales price. For example, if you sell an item for $10 and your cost is $5, you are earning 50% profit. Markup, expressed as a percentage, can be a bit misleading though. Markup is the percentage of the “profit” as it relates to cost. For example, if you sell the same $10 item that your group pays $5 for, the profit is $5 which is 100% of the cost. The reality is that fundraising companies advertising 50% profit and 100% markup are talking about the same thing. Don’t let that confuse you and be on the lookout for it.
Many of our programs offer flat rate profit percentages with most being either 40% or 50% profit guaranteed. Others offer a staggered profit margin meaning the more items you sell, the greater the percentage of the money your group gets to keep. We try and make it very clear which programs are which but please do not hesitate to ask if you have any questions. For example, the flower bulb fundraiser offers 50% profit while the Go Green Fundraiser ranges between 25% and 55% depending on the number of items sold.
Another thing to look out for as you search for fundraisers to do is add on items being used to inflate the advertised profit percentage. What that means is say you want to do a Smencils fundraiser which offers a guaranteed 50% fundraising profit. We could offer to give you another item that you could sell and not charge you for it but include the money you could potentially raise in the profit percentage calculations. The problem is that the “free” products are rarely a great fundraising idea and rarely actually sell well. We don’t do programs like this because it seems to be an intentional way to mislead customers which we obviously frown upon.
Hopefully this article about how fundraising profits work has helped clear things up a bit for you. If you have any questions about how to figure out profits, please feel free to contact our consultants at 877-448-9746.
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