4 Simple Misconceptions Costing Your Nonprofit Residual Funding

Misconceptions

We get it. Your hands are full and you’re focused on executing your current fundraising plan (annual pledge drive/online event/donor cultivation/Giving Tuesday, etc.); you have to be selective about where to invest your energy and attention. But because we know that most fundraisers love the idea of residual income, we thought it might be helpful to deconstruct the most common misconceptions we hear. 

It’s entirely within our collective abilities to generate significant residual income for just about any nonprofit with an engaged supporter base. It’s up to professional and volunteer fundraisers to decide whether to capture it and thrive or abandon it and struggle.

Misconception #1: Only “generous” brokers/agents will participate, so buyers and sellers will have fewer to choose from.

Reality check: Competition, NOT generosity, drives brokers to GLADLY pay referral fees. 

It’s natural to assume that IIC only works by finding generous agents. But the truth is that brokers participate because they want to beat the competition to get the next client. We’ve asked agents hundreds of times: “Would you like to have a referral?” That translates to, would you rather get most of a commission or none of it?” We’ll let you guess which answer we hear every time. Because of our mission, those referral fees are converted to funding for the nonprofits chosen by the buyer or seller. We charge the same amount that residential agents around the country keep telling us is the typical referral fee they’re glad to pay brokers: 25% of their commission. Agent Generosity is not part of the equation in IIC.

It’s up to the prospective real estate client, not the broker, whether they want their transaction to benefit a nonprofit they care about. They don’t have to explain this to or ask the permission of the broker they want to use, because IIC makes those arrangements for them.

A related misconception is that brokers who agree to pay a referral fee won’t work as hard as they would if they were getting the full commission. The truth is brokers thrive by giving their clients the best possible service, hoping to turn them into repeat clients. The public is unaware that brokers frequently pay referral fees and/or co-broker a transaction with agents from the same brokerage firm and even from other firms, always resulting in only a fractional commission being earned by each of them. Additionally, the exact amount of a commission can not be calculated before the transaction is completed – hence their focus is on landing that next client, not on the amount of the commission. 

Misconception #2: There’s not enough “upside” in it to try something new.

Reality check: The typical sale or purchase of a $300,000 home generates $1,300 of unrestricted funding from IIC. In normal times, each year about 5% of U.S adults will buy or sell a home. For every 100 supporters you have, you’re probably missing out on about $6,500/year. Commercial leases can generate even larger sums. IIC has distributed up to $30,000 resulting from relatively small office leases. If it doesn’t cost your supporters anything, wouldn’t you want them to have that opportunity to support you?

Yes, we realize that most new initiatives require a bigger lift than the funding sources that are tried and true with systems and staff accustomed to  them. And, probably entail getting buy-in from organization leadership. Which means you have to explain the new plan and its projected ROI. Investing In Communities is no different in this regard. 

Here’s what we’re betting on: unlike events and strategies that rely on a novelty factor, Investing In Communities funding grows with your supporters’ awareness  of its availability for their free use. It’s like planting a fruit tree; it takes a little effort to plant and you won’t have any fruit for awhile. But as the tree grows, so does your harvest each year. As it is with IIC, it’s important that you plant the tree, and that you water it, regularly. But, IIC planting and watering can be automated and takes little, in terms of development resources. 

Misconception #3: Nobody buys or sells homes during a pandemic  

Reality check: The residential market is hot! Your supporters are STILL buying and selling homes; You’re missing out ($1,300 X 1-5% of your supporters every year)

2020 has been unlike any other; pandemic, politics, social unrest, mass unemployment, wildfires and killer storms. One could be forgiven for thinking that everyone is hunkering down. But the housing market is hot.  And as long as Americans continue to have kids, change jobs, age and downsize, there will continue to be homes bought and sold. Even if there were a 20% decrease, about 4% of Americans would still be buying and/or selling homes.

Misconception #4: Residual revenue? At no cost to my supporters? There’s gotta be a catch.

Reality Check: IIC funding is significant and free to nonprofits, and it doesn’t cost their supporters a dime. All true. But there’s got to be a catch. The only challenge is that to get IIC funding, your supporters need to remember to come to IIC before signing a brokerage agreement. 

Yes, we hear this all the time, and we know the dreaded mental shortcut that happens in many people’s heads. “If it sounds too good to be true, it probably is.” Continuing with the tree-planting metaphor, the same might be said about  planting a seed and in a few years you get bushels of fruit. 

Most people aren’t aware that competition for clients causes marketing to be the largest expense for agents. Getting a referral and paying the typical referral fee is what agents want to do more often! So, until competition goes away, significant residual revenue is yours to capture or abandon. 

You might think the catch is too much effort for your supporters to use IIC. But the truth is, we’ve made it easy for them. And people tell us they really appreciate the help we give by providing multiple agents, qualified because they specialize in the type of transactions you want to have. They simply fill out a super-short form (see image below) at the bottom of your nonprofit’s IIC landing page, then IIC will collect a little more info from them by phone or email, and then IIC makes the arrangements with the broker of their choice. IIC can provide referrals based on the specifics of the desired transaction or we can make arrangements with a broker they already have in mind. After we set it up, there’s no difference to the consumer or the broker in the rest of the buying, selling, or leasing process.

simple sign-up form for IIC

The  challenge is getting them to remember to use IIC before they sign up with a broker.  This simple and thoughtful action on their part can generate far more funding than if they simply wrote a check. Herein lies the key to the holy grail of IIC fundraising. The good news is that we have strategies to help you do this, from simply sharing your IIC landing page in newsletters and social media to setting up a challenge grant. We’ll help you every step of the way, because we don’t succeed unless our members do.

Are you a tree planter or a tree shaker?

There’s no question that being able to go out and “shake the trees” or “make it rain” is highly valued in nonprofit fundraising. One could argue that “making the ask” is one of the hardest parts of fundraising, and it can yield big checks. However, planting and growing a tree is about taking the long view. That too can yield bountiful harvests year after year

What’s keeping you from planting your IIC tree?

apple tree

(312) 955-4900