Why it pays to invest in fundraiser overhead

The secret to a successful fundraiser from fundraising guru Dan Pallotta

In his TED Talk “The Way We Think About Charity is Dead Wrong," fundraising expert Dan Pallotta makes an audacious claim that should grab the attention of anyone who has ever had to fundraise for a non-profit like a foundation or a school: "overhead matters.” Pallotta challenges the stigma that it’s unethical for non-profit organizations to invest some of their donations into overhead that helps them retain top talent and expand their reach and impact.

See what he means when he talks about fighting a “small pie mentality,” and learn how strategic investment in the right overhead can help your fundraiser not merely return a bigger slice of the pie –  it can help you expand the entire pie.

The Overhead Myth

There's a deep-seated stigma in the world of charity and non-profit giving. That stigma concerns fundraising overhead. Humanitarian and fundraising guru Dan Pallotta puts it like this:  

“We've all been taught that charities should spend as little as possible on overhead – things like fundraising – under the theory that the less money you spend on fundraising, the more money there is available for the cause. That’s true if it's a depressing world in which this pie cannot be made any bigger. But if it's a logical world in which investment in fundraising actually raises more funds and makes the pie bigger, then we have it precisely backwards, and we should be investing more money, not less, in fundraising, because fundraising is the one thing that has the potential to multiply the amount of money available for the cause that we care about so deeply.”

Pallotta goes on to discuss his most successful charities – AIDS Ride bicycle rides and Breast Cancer 3-Day events – that flourished because of overhead and tanked without it. Despite over $100M raised to fight HIV/AIDS and over $190M raised to fight breast cancer, Pallotta’s non-profit went out of business when its sponsors pulled out after bad press surrounding the idea that 40% was invested into overhead. 

Just like that, two of the world’s most successful charities were stopped in their tracks. Why? Because of a destructive double standard. 

“This is what happens when we confuse morality with frugality,” Pallotta argues.  

“We've all been taught that the bake sale with five percent overhead is morally superior to the professional fundraising enterprise with 40 percent overhead, but we're missing the most important piece of information, which is:  What is the actual size of these pies? Who cares if the bake sale only has five percent overhead if it's tiny? What if the bake sale only netted 71 dollars for charity because it made no investment in its scale and the professional fundraising enterprise netted 71 million dollars because it did? Now which pie would we prefer, and which pie do we think people who are hungry would prefer?” 

Adapted from "The Way We Think About Charity is Dead Wrong" TED Talk. Dan Pallotta (2013)

Pallotta speaks to a longstanding belief about nonprofits that it’s somehow unethical if every penny isn’t going directly to the cause. The sentiment is understandable – when you donate to a cause, you want those in need to receive the full benefit of your contribution.  

However, anyone who has ever been required to fundraise knows one thing: fundraising takes significant time and energy. 

Effective fundraising requires strategic marketing, coordinated outreach, and serious manpower. In short, it requires overhead. This overhead is an investment that not only creates a successful fundraiser – it expands the reach of the fundraiser and expands the pool of potential donors. 

Accountability of funds is essential, but so is overhead. The most successful nonprofits and charities, Pallotta argues, invest in the overhead they need to expand their reach and ultimately raise more funds for their cause. They invest in marketing and talent. They invest strategically and confidently. They are fundraising professionals who run fundraisers like they would run a successful business. 

That’s why investing in a professional fundraising solution doesn't just give you back a bigger slice of the pie – it expands the entire pie.

Pallotta thinks the question of “what percentage of overhead does a company take?” is dangerously misleading. “It makes us think that overhead is a negative, that it is somehow not part of the cause. But it absolutely is, especially if it's being used for growth. This idea that overhead is somehow an enemy of the cause creates this second, much larger problem, which is, it forces organizations to go without the overhead they really need to grow, in the interest of keeping overhead low.” 

The correct question is, according to Pallotta, is this: Is the organization leveraging the overhead in an effective way? 

For when that overhead is leveraged effectively, as it was in the case of Pallotta’s work, it leads to record amounts raised for charity.

Overhead in Social Enterprise 

Pallotta’s TED Talk, like his 2008 book Uncharitable and its 2012 follow-up Charity Case, explores the importance of overhead in charities. However, the same logic can be applied to any non-profit, as well as to social enterprises and other for-profit businesses working in the social impact space. 

Snap! Raise fundraising solution allows groups and teams to raise more than ever before with minimal effort, having facilitated over $240M raised for academic and athletic programs throughout the United States since 2014. 

Meanwhile, Columbia University and the University of Notre Dame set records for single-day gifts by using Snap! Advance, Snap! Raise’s sister platform tailored to the needs of the post-secondary education and non-profit sectors. [link to blog post about Snap! Advance] 

Snap! isn’t a charity or a foundation or even a non-profit – it’s a data-driven business grounded in the principles of social enterprise, designed to expand the entire fundraising pie. 

Snap! was created with one goal in mind: to shoulder the burden of fundraising, giving back the time, energy, and resources leaders need to make a difference in their communities. The company’s mission is to make fundraising easier for those whose time is better spent elsewhere – in this case, youth coaches and educators who dedicate their lives to teaching and leading kids. 

The proof-of-concept of Snap! was achieved with high school football teams and marching bands, but the idea has evolved into so much more. In 2018 alone, the Snap! platform has been used to improve access to STEM opportunities for girls in low-income communities in Chicago and facilitate record-setting Giving Days for colleges and universities throughout the United States and Canada. 

Youth and school programs of all kinds can expand the fundraising pie with Snap! Raise.

The principle is identical to what Snap! Raise’s founders initially set out to do for football coaches – community-first group fundraising – but now executed on a scale that was perceived as impossible just 5 years ago. Community leaders focus on the extraordinary work they do; Snap! makes sure they have the resources they need to flourish. They signed up to be band directors, basketball coaches, medical professionals – not fundraising experts. That’s where services like Snap! come in – to help these groups leverage the power and generosity of their communities.  

A healthy investment in fundraising can lead to enormous impact – just look at AIDS Ride and Breast Cancer 3-Days. 

“They raised more money more quickly for these causes than any events in history,” Pallotta explains, “all based on the idea that people are weary of being asked to do the least they can possibly do. People are yearning to measure the full distance of their potential on behalf of the causes that they care about deeply. But they have to be asked.” 

Snap! Raise co-founder and Chief Product Officer Eddie Behringer puts it like this:   

“Traditional fundraising methods undervalue each donor’s capacity to give. The average donation made through Snap! Raise is between $50 and $60. There’s no way you can get that from selling one candy bar to a person.”  

He continues, 

“When you work with a full-service platform, you get a team of people that actually answers questions from donors and white gloves the experience. You need people thinking about how you are stewarding donors from the football team to the basketball team, from the first time they have donated to the second time they donated. Our ultimate goal is to optimize the platform for generating not just the most dollars raised, but also to help our partner organizations build stronger connections with their communities.” 

As Dan Pallotta insists, overhead is nothing to be afraid of. It helps you reach more supporters, raise more money, and run your organization more efficiently. And when that overhead requires no initial investment, coming only after the fundraiser has concluded – as in the case of Snap! Raise – then there's absolutely nothing to lose.

Expand your fundraising pie with a proven process built for impact. Start a fundraiser with Snap! Raise today!

Start a Fundraiser

Dan Pallotta image courtesy of Steve Jurvestson


Stay on the leading edge

Get the latest in fundraising & leadership delivered to your inbox: