Why profit guarantees are too good to be true
To get elementary schools to sign up, many fundraiser companies make enticing offers. They throw out things like additional prizes, invoice reductions, higher percent profits and even cash.
One reason signing bonuses are offered to schools is to try to get them to sign up early. The idea is to lock them up before they’ve had a chance to consider other options.
Another way companies attempt to lure sponsors is to offer fundraiser profit guarantees. If the school falls short of their sales goal, the company will make up the difference.
For example, if a company guarantees that a school will profit $10,000 and they only end up making $9,500, the company is supposed to cover the difference.
Companies are attempting to remove any financial risk of working with them as well as instill confidence. Does this sound too good to be true? Here are some reasons you should avoid profit guarantees.
Profit Guarantees can Backfire
Hypothetically, if schools know they'll receive their money regardless, why should they put any effort into their sale? They're covered by the company, right? Many schools work hard on their sale in spite of the guarantee. But what if their sale doesn’t do well for whatever reason? Can the company make up the difference if a school falls well short? Ethical companies will do what was initially agreed to, no matter what. However, this doesn't always happen. Some schools regret signing up for fundraiser profit guarantees because companies failed to make good on their promise. Unfortunately this makes everyone look bad, not just the company.
Guaranteed Profits are Conditional
The old adage, “everything has a price” is always true. Companies need to protect themselves financially so who's going to assume the risk? You may be asked to do things like:
- Lock into additional programs
- Pay undisclosed fees
Don’t Yield to Rep Pressure
Some companies will only offer their guarantee if you sign up with them on the spot or by a certain date. Don't act impulsively. Instead, you should be allowed plenty of time to make an informed decision on the right program for your school.
Guarantees Don’t Solve Problems
Don’t choose a company because of the guarantee. If you prefer another company that doesn't offer it, you're better off picking the better program, not the guarantee. Many groups signed on with a company mainly because of the guarantee, only to regret receiving an inferior program and subpar service.
Many schools have become conditioned by companies to expect signup bonuses, like fundraiser profit guarantees. Although signup bonuses may capture business for companies, schools will be better off with stronger programs and reliable customer service. Unfortunately, companies offer them because they can't differentiate themselves from their competition any other way.