With so many different software companies out there, it’s hard to figure out which fundraising software is right for your nonprofit. There’s Classy, Funraise, Bloomerang, GiveButter, DonorBox; the list goes on and on. So to differentiate themselves, some companies throw around the word “free” in order to entice nonprofit organizations to choose them. But let’s be honest here, free never really means free because these companies are for-profit companies and they need to make money in order to stay in business.
Let’s take a look at the 3 most common types of business models that fundraising software use to see what is the most economical for your nonprofit.
Fee-based Fundraising Software
The fee-based fundraising model does not charge a nonprofit any upfront costs or monthly subscriptions, which is why companies can use the word “free” in their advertising and marketing. This model also does not require any credit card to be entered because the company takes a fee or a percentage of the funds raised before it ever reaches the nonprofit’s bank account. The percentage varies from platform to platform and even can vary within a platform depending on the type of fundraiser (P2P, sweepstakes, etc.). Some platforms allow the nonprofit to pass the fee onto the donor and/or give the donor the option to “cover the fee” for the nonprofit which then increases their cost. This can still conversely decrease your org’s donations as donors might lower their donation amount to your org in order to stay within their own budget and cover the fees for you. Typical fees range from 5-7%.
Tip-based Fundraising Software
The tip-based model of fundraising software does not take a percentage off the top automatically and also does not require a credit card in order to sign up and use the platform. Instead it focuses on asking the donor for a “tip” to keep the platform free for nonprofits to use. These tips are preset at a higher rate than the fee-based model (7-15% typically) and can cause your donors more stress as they try to keep the platform free for you to use and stay within their budget.
Monthly Subscription Fundraising Software
A monthly subscription is exactly what it sounds like – nonprofits pay a flat price every month to use the fundraising platform and it doesn’t change, no matter how many fundraisers or tools an org uses. A credit card or payment method will be required but there is no pressure on the donor to cover any fees and most of the time, there is only a small (1-2%) fee taken off the top so the money raised is more true to how much your nonprofit will actually receive.
So, how do you know which is right for your nonprofit? It all comes down to what is most economical for your individual organization based on how much money you bring in with online fundraising software.
For example, if your nonprofit raises $5,000/year online, it makes the most sense to go with a fee-based model.
$5,000/year | Fee-based (7%) | Tip-based (10%) | Monthly Subscription (1.5% + $150/mo) |
|---|---|---|---|
$350 taken | $500 taken | $75 +$1,800/yr = $1,875 taken |
$15,000/year | Fee-based (7%) | Tip-based (10%) | Monthly Subscription (1.5% + $150/mo) |
|---|---|---|---|
$1,050 taken | $1,500 taken | $225 +$1,800/yr = $2,025 taken |
If your nonprofit raises over $50K a year, the math shows that going with a monthly subscription puts the most money in both your donors’ and your organization’s pocket.
$50,000/year | Fee-based (7%) | Tip-based (10%) | Monthly Subscription (1.5% + $150/mo) |
|---|---|---|---|
$3,500 taken | $5,000 taken | $750 +$1,800/yr = $2,550 taken |
$100,000/year | Fee-based (7%) | Tip-based (10%) | Monthly Subscription (1.5% + $150/mo) |
|---|---|---|---|
$7,000 taken | $10,000 taken | $1,500 +$1,800/yr = $3,300 taken |
As you can see, there’s really a threshold of $50K for all-sized nonprofits. Once your donations reach $50K+, you need to be using a monthly subscription for software to get the most out of your donors’ money.
This is why UncommonGood’s all-inclusive software platform is based on the monthly subscription model. We want your organization to think like a nonprofit and act like a business by making smart choices that lower administrative costs, keep more money in your bank account, and cause you less stress (you only need 1 login for all of your nonprofit software needs).
Ready to make the switch to 1 monthly fee for all your fundraising, marketing, and operational needs?
