Why schools shouldn’t focus on profit percent
The higher the profit percentage the better, right? Companies spend millions to tell you that. Just look at what you find when you search Google. “80% profit fundraiser”, “Make up to 90% profit”, or even 100%. This should be good. You want to make more off the items you sell.
But you also want to sell more product. And that’s where the emphasis should be. School fundraisers that focus on sales more than profit percent do better. The promise of a high percent profit is just an advertising hook. It’s a way to lure you onto the site.
Nothing is free. Everything comes at a cost. Let’s take a look at 2 different ways to raise money selling product. You can either order the product up front, or take orders. The former is typically done with a purchase order. This means a promise is made to pay for the product within a certain number of days of receiving it.
To receive that higher profit percentage requires ordering more product. In some cases, a lot more. This may be ok if you’re a large school and can sell off the product. But what if you’re a small group? If you order too much you won’t be able to sell it. And your bill needs to be paid regardless. Yes, you can still make a profit. But the left over product will eat into your earnings unless you somehow sell it off. This requires more work.
If you decide to take orders instead, high profit percentages come at a price as well. You may receive a brochure with higher priced items. This usually means not being able to sell as many items. Again, if you’re a smaller group, this may have other affects. Companies usually require certain order requirements to get free shipping. If you can’t reach the minimum, you may have to pay for shipping. And of course, this also eats into your profits.
Another way higher profit percentages negatively affect schools is incentives. The group may get the less attractive prize program with less appeal for students. This can have a negative effect on fundraiser participation.
Groups that offer better incentives raise more money. Why? More students become involved. Plus, they sell more due to increased motivation.
One school we worked with recently was seeking a 5% increase in their profit percentage. In exchange, they didn’t want any incentives. They figured they'd make up the difference with a higher profit.
They failed to understand that sales performance was more important than profit percentage. Even with more profit, the money brought in was lower. The reason? Low participation. They didn't have enough interested students.
The group made a higher percent profit off a much smaller gross. Instead, they should've focused on ways to make their sale stronger.
The Truth About Fundraiser Companies
Most fundraising companies are alike. They offer average quality products with the same cheap prize programs. Most companies offer their prizes for free. This is used as a way to get groups to sign up. But this is still an advantage for the company. The prize cost remains low so there's a minimal effect on the bottom line.
Lower quality products also mean maintaining certain profit margins for the company. The cheaper the better. It’s all about the presentation. As long as the products look enticing in the brochure, people will buy.
As a trade-off, to draw groups in, some offer higher profit percentages. This is what schools have come to expect. But what are the consequences? Dissatisfied customers, lower sales, and disappointed students. Many companies have also gone out of business using this approach.
Instead, companies should focus more on product quality. This in turn improves customer confidence and results in higher sales over time.
And instead of offering undesirable prizes, schools can motivate students with better ones. This improves participation and ultimately sales for everyone, including the company.
School Fundraisers Pay for a Higher Profit Percent
There's no way around it. Schools must pay for higher profits. The company may not be entirely forthcoming about it, but it's a fact. Lower quality sales campaigns are the result. Companies, and even schools, often justify this. "It's a fundraiser. What do you expect?" Or, “Your helping the school”. As if to say people should appreciate lower quality.
But why shouldn't people expect to get value back when giving to a cause? And what about the students? Many older students know better and choose not to take part in school fundraising. They already know how these prize program works.
It’s thus obvious to draw the following conclusion. Less participation and fewer supporters leads to only one thing, lower sales.
Why the Higher Profit Percent Mentality Remains
So why has nothing changed? Perhaps it's because not enough schools are speaking out. Or some simply move onto other types of school fundraisers.
Let's face it, sponsors are busy. If they get a higher percent profit, they may not have to work as hard on the sale. We’ve seen this time and time again. The mentality is sell the same amount of items and make even more money.
And they'll receive more profit from the items they do sell, even if they don’t sell as much. This is the mindset that leads to fewer students participating.
In reality, students are the engine that drives sales. Your students don’t care what profit the school makes. They want to know what’s in it for them?
So, how do schools raise more money? Remember, you don't take profit percent to the bank, you take money. You can make more if you offer better products and prizes, even with a lower profit percentage. Remember the old saying. A "fast nickel always beats a slow dime every time".