Need to Know - Beware Selling Goods for Fundraising/Charity

Many groups sell goods as a means to raise funds. This type of fundraising is attractive to organizations because people who buy the goods get more from their money than the warm, fuzzy feeling that comes from simply giving it to a good cause. Also, it seems much easier to convince a person to part with her money in exchange for some tangible thing rather than some intangible good. Often, however, organizations are dissatisfied with this type of fundraiser, with good reason. There are many pitfalls for even the well-prepared, and selling goods can be a downright minefield for some organizations.

One problem with selling goods for fundraising is the upfront expense the organization incurs in acquiring the goods – although there some very good product fundraisers that don't require any initial cash outlay.

Delivery of the goods to the “donor” can be another expensive issue. Shipping is expensive; delivery by volunteers can consume time, energy and goodwill on the part of your volunteers.

Overestimating the amount of goods they will be able to sell is a trap into which organizations often fall. Very few paid sales people, let alone volunteers inexperienced in sales, are excited at the prospect of going door-to- door, approaching friends and family, or sitting at a booth. Unfortunately, selling goods often just doesn’t bring in the funds organizations think it will.

There are lots of goods that are simply risky sales, particularly those with a short selling window. Perishable goods and those with dates often cannot be sold quick enough. Two products that come immediately to mind are calendars and flowers.

Finally, one of the most serious consequences of using sales as fundraisers is that relying on such sales too heavily can cause an organization to lose its tax-exempt status. This is not a problem for most organizations as they often use sales as part of larger development plan including public and member donations, program fees, grant funds, tax dollars and the like. However, the IRS is not shy about stripping or denying tax exempt status for some groups. This is a particular problem for social and cultural clubs and groups for which the production and sale of goods is connected with its non-profit mission.

For instance, art schools that fund themselves with the sale of art produced by students may find themselves in trouble with the IRS if they are not careful. This is a complex and often overlooked area of non-profit law, and if an organization thinks it may be treading on the line, it should consider retaining a legal or financial professional for guidance.

Product sales have been very successful for many groups, and can be successful fundraisers for your group with the proper planning and attention to detail.

Jacob Ackart has been involved in many fundraising activities for non-profits. For more information and ideas, including ideas for FREE fundraisers, please visit the Fundraising Ideas Center.

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