What is product fundraising?
Product fundraising seems simple on the surface. Your organization sells a product such as candy, magazines, or Christmas gift wrap, and keeps a portion of the proceeds. However, product fundraising can be as successful as the Girl Scouts' annual cookie sale; or it can leave the organization and its volunteers weary and wondering if it was worth the effort. What do you need to be successful? An enthusiastic volunteer sales force, outstanding products, and superb coordination, from order taking to delivery.
What should I be wary of?
- Be sure that product fundraising is compatible with your organization's mission. Product sales seem to go well with youth organizations but not so well with social service or human rights nonprofits.
- If you have not done product fundraising before, ask your volunteers, board members and supporters if selling a product would be acceptable to them. If you serve youth, ask the parents if they are willing for their children to sell a product. If your potential sales force is not enthusiastic, you will not be able to pull off a product sale.
- Look around your community. Is your area saturated with product sales by nonprofits?
- Choose your product well. Make sure that it is of highest quality, and is something that people really like and use. If the product is something your potential customer would buy anyway, he/she is more likely to buy it from you. On the other hand, if similar products are easily available at retail stores, that could negatively affect your sales.
- Is the product easy to deliver? Does it need refrigeration or other special handling?
- What is the commission on products you are considering? Commissions vary from 25% to 75%. Commissions of 50% or more are preferable, especially if you use a lot of volunteers and expend a lot of energy on the sale.
How do I pick a product fundraising company?
Consider these attributes of any company you might use:
- What is the quality of the products?
- How long has this company been in business? What is its reputation?
- Does the company have good customer service?
- Does the company provide attractive and useful marketing materials? Are these materials free?
- Does the company have clear, written policies and procedures?
- What are its refund and return policies?
- How timely are their shipments of orders?
Do we have to collect sales taxes on our product sales or pay income tax on our profits?
Generally, if your organization is exempt from federal and state taxes, you will not have to collect sales tax on the sale of your fundraising products. But, to be on the safe side, check your state's regulations. The Multistate Tax Commission and AFRDS provides a website where you can check your state's regulations plus there is contact information for the relevant state offices.
If you are a 501(c)(3) organization and if your product sale is conducted primarily with volunteers, you will probably not have to pay taxes on your profit. If you are not an IRS registered, tax-exempt nonprofit, you may have to pay income taxes on your profits from your product sales. Check with a tax specialist and with your state.
Where do I start looking for a good product fundraising company?
Start with these resources:
- Association of Fund-Raising Distributors and Suppliers (AFRDS)
AFRDS is the product fundraising industry's only trade association. It represents some 650 U.S. and Canadian supplier and distributor companies in the product fundraising industry. Its members generate an estimated 80 percent of the industry's gross annual sales of $3.9 billion.
The Association provides an email newsletter, an annual trade show that showcases the latest products in the field, and a number of useful online tools:
- The Fundraising Edge can be downloaded from the AFRDS site and you can subscribe to an electronic version. It has articles on all aspects of product sale fundraising from volunteer management to sales tips.
- The Fundraising Handbook is a how-to guide on how to run a successful sale. It covers setting financial goals, finding a professional fundraising company, and more.
- The Fundraising Report Card helps nonprofit managers make the right choice of fundraising product companies.
- FundraisingKnowHow.com provides reviews of fundraising programs. The articles are excellent, but the site does have a lot of advertising.
- eFundraising.com is a leading provider of products for nonprofit sales. It is a subsidiary of the Reader's Digest Company. It is a solid, experienced company with quality products and fine marketing materials. Its website has considerable information and advice for product fundraisers.
Who are the major companies in product fundraising?
An article in PTO Today names the top 15 companies in product fundraising. The companies listed include:
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