• October 2011

The Impact of Opportunity Costs on Fundraising Events

By Roxanne Rukowicz Ladd, Principal
Behind the Scenes Events

Every fall, it is the same situation for folks on the gala circuit. Mailboxes and in-boxes fill with invitations to gala fundraisers on behalf of every cause imaginable. The events are often black-tie, always fun and festive, and feature highly regarded honorees, renowned entertainment, and creative parting gifts.

For many organizations, the allure of producing a fundraising gala is difficult to pass up. They know it will be fun to see their organization’s name in lights, have their logo in print, and play host to all the guests.

The reality, though, is that fundraising galas cost organizations far more money than they realize. All too often, production costs and opportunity costs (which are ever more difficult to calculate) are not always reflected on the balance sheet.

Calculating Opportunity Cost

Production costs will include everything from the venue or hotel rental, catering, audio/video, lighting, décor, invitations, valets, and all the labor that goes into it. Plus everything else that might be dreamed up. The sky is the really the limit on just how big an event can grow.

Opportunity costs—the time spent on behalf of the organization in planning or selling the fundraiser, when other obligations (like cultivating major donors or forming strategic organizational relationships) are being deferred—are difficult to itemize and often overlooked when calculating expenses.

Everything from the time donated by board members to brainstorm themes and sell sponsorships, to the hours dedicated by the executive staff to making calls and sending emails, is time well-dedicated to the cause, but time otherwise lost to fulfilling the organization’s legitimate obligations.

Acknowledging and budgeting for opportunity costs requires organizations to quantify the donated time by attaching a dollar amount to these donated hours.

Can a fundraising gala be a creative revenue-building asset to an organization?

Absolutely. But they can be a low ROI investment too.

Before deciding to host a large fundraising event, begin by considering the following points:

  • What is the purpose of the event? Are you trying to raise funds? Are you trying to raise the visibility of the organization or cause? Understand the end goal.
  • What are the quantitative goals? How much do you want to net? How many new donors versus existing accounts do you want to engage? Do you want these to be re-occurring donations or a one-time offering?
  • Who will engage in the fundraising? Will the board be asked to tap their personal networks? Will the executive leadership connect with the existing donor base? How much time will be dedicated to this cause? What is the dollar value behind their donated time?
  • Who will organize the function? Will the in-house staff make the arrangements? What tasks will be neglected while the event logistics are focused on? Or will an outside firm be engaged?

The Bottom Line

Once you have assessed what it will actually take to produce a successful function, you may find the organization and its staff simply do not have the current tools in place to support a successful gala, or large-scale function.

If you find yourself here, do not fear.

You’ve made an honest assessment of your capabilities and have concluded that your time and resources are better spent on a low-expense endeavor that could otherwise offer significant benefits to your community.

Next steps? Get creative and utilize existing programs as the building blocks to cultivate new and existing donors, raise awareness, or thank supporters.

About Roxanne Rukowicz Ladd

Ranked one of the top meeting and event planners in Washington, DC, for 2009 and 2010 by the Washington Business Journal, Roxanne Rukowicz Ladd’s Behind the Scenes Events, opened its doors in July 2008. Her goal is to offer organizations and individuals access to affordable, full-service meeting and event-planning solutions.

Ladd has worked in the DC meeting and event industry for more than a decade, starting her career in 1999 at the Greater Washington Board of Trade.

Her extensive association and nonprofit planning skills are accented by experience working in the social and entertainment markets. Positions with the Walt Disney Companies and as a freelance wedding and special-event coordinator give her experience with A-list celebrity clients and top-ranking government officials.

For more information, visit Behind the Scenes Events.