Sticky space

Higher Fundraiser Profit vs. Better Student Incentives

By Clay Boggess on Mar 28, 2020
Higher Fundraiser Profit vs. Better Student Incentives

What schools should be focusing on to raise more money

You might think this is a trick question. Of course, if given a choice, everyone would want a higher fundraiser profit. To be clear, this is not about how much money you end up taking to the bank. That is often referred to as the ‘net profit’ amount. It should be in everyone’s best interest to desire to raise as much money as possible.

Rather, we’re talking about ‘profit percentage’, where a school does a popcorn fundraiser for example, and makes 40% of the gross sales. There are 2 ways that profit percentage is normally established for groups.

One way is based on order volume. This is where a group may order a product up front and turn around and sell it for a profit. Companies offer price breaks to groups for ordering more product. So if the group is willing to place a larger order, they’ll get to keep a higher percentage of the gross retail. These ‘volume discounts’ are already established and can’t be negotiated.

In other cases, schools may be able to negotiate how much they make off of each sold product. This is more common with brochure fundraising where the group takes orders for products first, then submits their order to the company for processing.

It’s not uncommon for a PTA board to decide to only work with one company because they offer them a higher profit than another. Sounds logical. What group in their right mind wouldn’t want to have the potential to make more money off each item?

If you follow this line of thinking to the extreme, why can’t a group negotiate 60%, or even 70% profit? Well, it doesn’t take a rocket scientist to figure out that when 2 parties are involved in something there has to be a compromise. The company also has to make money in order to stay in business and keep offering a service. In other words, both sides need to win.

Yet, schools ultimately have a choice. They can always build their own fundraiser from the ground up and keep most, if not all of the profit. This is usually a lot more work and many groups don’t have the time or the energy. So for the sake of argument, we’re going to assume that this is off the table.

So why would groups not attempt to force the company’s hand and say something like, “We’ll work with you but you have to give us more profit first.”? Some schools are able to throw their weight around by leveraging their previous sales history. Higher volume schools tend to get more profit percent because the overall pie is bigger.

But what are schools giving up in exchange for that higher profit percentage? It turns out, more than they think. Let’s look at one compromise that you may not be aware of, company incentive plans.

How School Fundraising Incentives Work

Older students aren’t as motivated by the traditional prize programs offered by many companies as their younger peers are. Thus, high school sponsors often search for new and better incentive ideas in an attempt to inspire their group to sell and bring in more sales.

Learn why fundraiser prize programs need an overhaul

2 incentive plans that older groups seem to be responding to are cash and sportswear prize programs. These types of prize incentives offer a refreshing alternative and appear to be more suited to high school organizations like sports teams or cheerleader groups.

Traditional prize programs are the least expensive option that companies have in their arsenal and thus they have the flexibility to offer more profit. Yet group sponsors who are struggling to get more students to participate may need more enticing alternatives.

It's also fair to mention that some sponsors may attempt to negotiate a high profit percentage by forgoing the prize program. They often feel that there is already intrinsic motivation for their group members to sell without the need for extrinsic incentives. Our experience is that this strategy has been proven over time to not work. We’ve found that most of these sales typically underperform.

Even elementary schools benefit from better prize programs. We looked at the results of several schools that earned a higher profit percentage using a cheaper traditional incentive plan, and then the next year they switched to a better prize program in exchange for a lower profit percentage. Schools raised more money with the superior incentive plan 100% of the time. And the sales increases were significant.

Fundraiser Profit vs. Participation

So perhaps the most important question that needs to be asked is, “How much money can our school raise?” In other words, groups need to be focusing on maximizing gross retail dollars, not just how much profit they make off each item sold. It can be argued that schools that focus primarily on negotiating a higher profit percentage tend to put less emphasis on doing things that will strengthen their fundraiser.

Stronger prize programs and effective promotional strategies have been proven to be effective in boosting overall sales and need to be foremost in the minds of sponsors. The key to putting more money in your coffer is finding ways to improve school fundraising participation.

Ask yourself this question. If you had to choose, would you take a higher fundraiser profit percentage, or more student participation? If you don’t have your students on board, how much profit you make off what you sell won’t mean as much.

Why fundraising profit percent is overrated

One way to improve participation is to offer better quality prize programs. To get more students off the fence, the prizes at the lowest levels need to be much more appealing. But at the same time, the higher level prizes need to be able to keep the students selling even more items.

The additional items sold should more than offset the lower profit percentage.

Student participation is a critical component of fundraising. Therefore, it may be worth it to accept a slightly lower profit in exchange for getting more students to sell.

Learn how to build support for your product fundraiser

Ultimately, at the end of the day, schools should be more concerned about how much money they bring in by offering better incentives, and less on fundraiser profit percent.

What would you do if you had to choose?

Join the discussion