Top 3 Misconceptions Donors Have When Supporting Nonprofits (That Hurt More Than They Help)

Most nonprofits feel an obligation—a burden, rather—to do as much as possible with as little as possible when running their organization.

But this is more for their donors than it is for the organization itself.

Most often, nonprofit organizations are birthed from a desire to make a social impact in the community at large. A big heart for a big problem. A problem that is out of sight and out of mind for many for-profit sectors.

Yet the truth of the matter remains: A nonprofit must raise money and spend money to be effective.

Raising money is easy for donors to stomach. They know this, support this, and ultimately fund this.

It’s the spending money that raises the eyebrows.

Often, the mindset of donors, and at times nonprofits themselves, in regards to financial distributions, actually end up crippling the cause for which the nonprofit was initially created. Organizations fighting wicked problems massive in scale, with resources that barely skim the surface, actually do more harm than good.

Having any of the misconceptions in this article is understandable.

The problem is, people with good intentions end up hurting the very nonprofits they intend to help. When people support a nonprofit, they must see their donation as an investment in a larger picture. 

Making a wise investment means knowing what it takes for an organization to succeed in its mission.

Here are 3 common misconceptions donors have when supporting nonprofits:

1. Every dollar should go directly to the mission.

Donors want to believe every dollar they give goes directly to the people who need it—straight to the mission, which is understandable. It’s easy to forget that helping the cause doesn’t happen if you don’t have the appropriate infrastructure to deliver that mission.

“Overhead” quickly becomes a dirty word that stifles a donor in a heartbeat.

But the truth is, overhead is not only inevitable but necessary to furthering the mission.

Administrative costs support the general infrastructure, including staff salaries, IT setup and maintenance, training, leadership development, strategic planning, marketing, and the like. All of which are needed to keep the organization running. Without an effective organization and staff to support the cause, no movement would be made toward a solution.

Donors take one look and go, “How much of the dollar I give goes directly to save shelter animals or feed the hungry?” 

This is the wrong question.

The right question is, “How effectively is this organization using this dollar to have the greatest return on investment?”

Making a wise investment means knowing what it takes for an organization to succeed in its mission.

People often judge an organization by the percentage of administrative costs out of the total expenses the nonprofit has for the year, or the overhead ratio.

In his 2013 TED Talk, Dan Pallotta made this very clear: You can run a bake sale and earn $75 for your nonprofit with no overhead. Or you can spend $200 on a radio ad campaign, reach more people and bring in $500 while also increasing your exposure and donor base. 

Why is it wrong to spend more if you end up better off? It’s shortsighted to think spending less is somehow better when often spending less gets you less—and renders you less effective in the long run.

The bottom line is this: Many administrative costs are not expenses, per se—they’re investments. 

And investing in the overhead enables you to reach more people.

2. Donor dollars shouldn’t be wasted on advertising and marketing materials.

After all, can’t you just find somebody to donate those services?

Sure, you can. But you get what you pay for.

Both advertising and marketing are crucial to creating a social presence and credibility. Without which, who would know you existed? When choosing a product, are you more likely to support a well-known brand or a brand you’ve never heard of?

Credibility builds confidence for both the donor and the recipient. 

Donors who are emotionally connected to your organization are worth two times more than your average giver.

Pallotta points out, “If you encourage consumer brands to market the benefits of their products, and tell nonprofits not to advertise all the good that they do, where do you expect the consumer dollars to go?”

Nonprofits have the strength of vision as their most enduring asset. 

There’s a good chance people already know what your organization does. But without marketing and advertising, they are left without knowing why you do it.

Studies show that donors are more likely to support causes they, too, believe in. 

Donors are motivated to support an organization when:

• They are mission-driven

• They trust the organization

• They get to see the impact

• They have a personal connection to the cause

• They want to be a part of something greater

• They have been captivated by the organization

All of which, conveniently, marketing and advertising highlight.

Yet, many nonprofit organizations, even those with nine-figure budgets and no discretionary funding, cannot afford to hire marketing firms or even an in-house marketer. 

But the truth is ... they can’t afford not to.

Donors who are emotionally connected to your organization are worth two times more than your average giver.

So is marketing and advertising a waste of donors’ dollars? Not at all.

3. Donations should be pulled when results aren’t seen instantly.

Don’t get me wrong here. Transparency and accountability are of utmost importance for any credible nonprofit organization. No one would question that.

But the misconception lies in that when nonprofits don’t reach a financially worthwhile goal as soon as they had hoped, many times, the efficiency and competency of that organization are automatically questioned. 

For this reason, nonprofits are reluctant to attempt any bold or daring fundraising endeavors in fear of potential failure and donor pull-out. 

But what happens when you prohibit failure? Innovation is killed. 

Without innovation within fundraising, new revenue isn’t generated. Without the growth of new funds, solving large social problems becomes instantly unobtainable. 

Any business expert will tell you that calculated risk is critical for growth. 

Perhaps a better argument should be that the most significant risk for any nonprofit organization is doing nothing.

What happens when you prohibit failure? Innovation is killed. 

So when considering the support of nonprofit organizations, try to focus on helping nonprofits do what they do best: making an impact.

For organizations to make an impact, they need money to do that. Don’t be swayed by the misconceptions many people buy into. 

The impact is coming. It just takes time ... and resources.

If you want a more in-depth look on this topic, watch Dan Palotta's informative TED Talk.