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Blog > Sponsorship vs Fundraising – what’s the difference?

Sponsorship vs Fundraising – what’s the difference?

posted on Sep 6, 2017
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How’s your 2018 budget looking? Could you use some more funds? Do you have a plan?

Non-profits and charities are increasingly having to diversify our funding streams as donor fatigue sets in, donor priorities shift, and the cost of doing business continues to increase. Basically, organizations can bring in money in three ways:

  1. Fee-for-service (social enterprise)
  2. Sponsorship
  3. Philanthropic donations (fundraising)

Sponsorship and fundraising are often confused, because in both cases, your organization gets a (hopefully) big cheque from a person or company. However, the two are foundationally different. A donor contributes an amount of money without anything in return except a tax receipt, [1] while sponsorship is a commercial transaction.

Sponsorship

Sponsorship is essentially a sales transaction. Sponsors pay for exposure and association with your organization. Sponsoring organizations will usually pay for sponsorship out of their marketing budget. Before you start to approach sponsors, figure out what your assets are and how much they are worth. Assets could include events, programs, and your physical space.

Sponsors do not receive tax receipts, because they are buying a service from you. They also have no say over what you do with the money, so long as you fulfill your commitments in the sponsorship agreement. For example, if a company pays to have their logo on your website, then put their logo on your website.

Fundraising

In fundraising, people give money to your cause because they believe in it. Donors can be individuals, corporations, foundations, or granting organizations such as government departments. Donations can vary in size from pennies to millions of dollars. Soliciting donations is really a matter of linking donors with their passion.

Donors do not receive a service in exchange for their donation, but they may place stipulations on how the money can be spent. Many donors prefer to fund programs or infrastructure, rather than core staff, for example. The Canada Revenue Agency does not require organizations to issue tax receipts, but most eligible organizations are happy to do so.

Fundraising and Sponsorship have a lot in common

Although the transactions are foundationally different, fundraising and sponsorship best practices have a lot in common.

Stewardship

Retaining existing customers is always easier than finding new ones. The same is true of donors and sponsors. Take care of them, acknowledge them, let them know what good their money did, let them know how you achieved the goals of your agreement.

Storytelling

Every potential donor and potential sponsor has literally hundreds of worthy organizations to choose from without even crossing the city boundary. You need to stand out.

Start by listening to their story. What do they care about? If it’s not what you do, then can you make an introduction to someone who does? If it is what you do, then tell your story. Who benefits? How does your mandate link to their passion?

Tailor your approach

Every donor, every sponsor is an individual. You need to take the time to get to know each one individually before you even decide if you have earned the right to ask for money.

Want to learn more?

To learn more about sponsorship and fundraising, come to our upcoming professional development seminars.

Steps to Sponsorship Sales Success

Click here to register Wednesday, September 27, 2017, 1:00-3:00 p.m.

Case for Support: Inspire your Donors

Click here to register Tuesday, October 24, 2017, 9:00 a.m. to 12:00 p.m.

Related posts:

The Five Stages of Sponsorship

Case for Support: Inspire your Donors, Inspire your Staff

What goes into a fundraising strategy?

[1] CARE Canada, "Climb for Africa - Kilimanjaro 2012," 2012. [Online]. Available: http://careca.convio.net/site/DocServer/Fundraising.pdf?docID=301. [Accessed 5 September 2017].
Filed under: Fundraising
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