Commision based software vendors are syphoning money out of the nonprofit sector.

In response to this post at the nonprofit blog exchange. 

http://nonprofitblogexchange.blogspot.com/2007/01/missionfish-and-spotlight-on-healthy.html

I'm not sure what Emily, the writer, intended but it's time for some knowledge. 

Missionfish takes out almost $100 for a $999.99 donation given through an Ebay auction. 

This is a travesty. 

http://www.missionfish.org/About/aboutdonation.jsp and click the "MissionFish Share" tab. 

A 10% fee is unacceptable. 

I hope that the good people that send proceeds from their auction to nonprofits realize that they can get more money to their organization if they just waited till they receive all the money from their auction and then donated online or sent a check. 

Can someone from MissionFish explain this pricing structure? 

From the MissionFish website...

"Because we’re a nonprofit, we keep a small part of each donation processed to offset bank fees and other expenses. Our share is based on the size of the donation: our percentage gets smaller as the donation gets bigger. We never take more than 20% of any donation, and our average share is roughly 10%."

The problem I have is with this, "Our share is based on the size of the donation."  Why?  Isn't MIssionfish delivering the same value on a per transaction basis regardless of the size of the donation.  Unless -  Missionfish is saying that it has something to do with the % that the donor chooses to give or the value of the product that was auctioned.

MissionFish is a nonprofit which also means that it won't get taxed on this income.  They don't need to charge so much. 

Why not set a price per transaction and tell everyone what it is and go from there.  $5 per transaction, $10, whatever.  Figure out variable costs, determine demand, and calculate the profit maximizing price for your service.  No one will hold that against Missionfish.  This is America.  But stop with the percentage crap.  It's flat out lazy.  Figure out a damn price.

10%??? Are you kidding me?

Let's see what it could potentially cost MissionFish to do this.  MC and Visa charge 2.3X% or so per transaction.  So we know that CC companies take about 2.3 % or so.  That leaves 7.7% of each donation for Missionfish.  Online merchant account provders might take another 25 cents or so per transaction.  That leaves Mission fish with 7.7% of each donation less 25 cents.  We know that Missionfish's bank won't charge a variable fee based on the size of a deposit so putting and keeping the money in their bank account shouldn't cost anything.  EFT'ing the money to the nonprofit should cost about 25 cents per transaction.  Mailing a check to the noprofit should cost a buck.  That leaves 7.7% of a transaction less 50 cents to a dollar.  For a $999.99 donation, that comes out to $76 margin for MissionFish and $76 less for the nonprofit.  Where is the rest of the money going????? 

Who is taking the rest of the money and why?

Donor's that use MissionFish are are being duped.  Nonprofits that use it are cheating their donors.

Commision based software is not ethical. 

Someone needs to push back on the firms - Kintera, Convio, etc... that use this model.   Commission based pricing by humans is despised.  Fundraising consultants that charge percentages are treated like pariahs and rightfully so.  What about the software vendors?

AAFRP - are you listening?

I've been on this soapbox for a while and will stay on it till vendors price their software based on the value they deliver and not on the generosity of donors. 

Comments

[Sean Milliken]

Thanks for starting this conversation – I think it’s an important issue that doesn’t come up outside of nonprofit management circles very often. I’m the Executive Director of MissionFish and I’m always happy to talk about how and why our service works like it does. I don’t want to persuade you to give up your soapbox; however, I do want to respond to some of your statements and questions.

Q: Why not set a per-transaction price?
A program like MissionFish can’t be viable with a flat-deduction model, because as you’ve pointed out, payment processors charge a percentage of each payment. Let’s go with your assumption that we pay a 2.3% fee for Visa card payments and let’s say we kept $10 of each donation. We would be upside-down on every donation over $435 ($435 X 2.3% = $10.05). Plus, if you give anything less than $100, we’d be keeping more than 10% of your gross gift – give $10 and we’d keep it all.

When eBay Giving Works started, we kept $3 + 2.9% of each donation we processed. We required a $10 minimum donation from our donors, and then we were still keeping 33% of those gifts. (Notice that the bulk of our deduction was in the $3 flat amount, not the 2.9% variable amount.) As you might imagine, there are many, many items that sell on eBay for less than $10. Therefore, our $10 minimum denied a significant number of eBay sellers the opportunity to participate. Plus, we felt like 33% just wasn’t a fair amount to keep.

We spent 12 months analyzing the problem, trying to figure out how best to:
• lower our minimum-required donation from $10
• reduce our share of those smallest individual gifts from 33%
• and ensure that on-average nonprofits get a fair amount across the board

In the end our sliding scale percentage was the best way to go, even if it is so complicated that we give you a calculator (http://www.missionfish.org/About/aboutdonation.jsp) to figure out our share from your listings.

Q: Isn't MissionFish delivering the same value on a per transaction basis regardless of the size of the donation?
“Value” is a tricky concept. Is it defined by what you would pay for something? If so, our research shows that nonprofits are willing to let us keep much more than 10% of the donation to benefit from this service.

Is it defined by what you pay vs. what you get? When you add up all of the funds that have been raised by our program (Community Selling + Direct Selling) over the past three years, our nonprofits have received more than $50 for every $1 that we get.

Is it defined by what it costs us to provide our service? Even if you ignore the several million dollars we’ve invested to date in building this service, our share doesn’t come close to paying the hard operating costs each year.

I think you’re seeing what we do too narrowly. You’re only thinking about community seller transactions where the item actually sells. There’s plenty of value for nonprofits in transactions where. . .

- The seller is the nonprofit (Direct Selling)
Direct selling is a very big part of our program. We don’t charge nonprofits a thing to be direct sellers. Plus, it’s actually free for nonprofits to sell on eBay too – if they go through eBay Giving Works. That option alone saves the average direct seller 6-7% of their sales price in eBay fees, and wouldn’t be possible without what we do.

- The item doesn’t sell
Every nonprofit in our program has the chance to get many, many brand impressions – because their logo will appear on every listing where they might potentially benefit. If the item doesn’t sell, they’ve still gotten those impressions for free.

You say that nonprofits that use these programs are cheating their donors.
I agree with your underlying assumption here - that a nonprofit has the obligation to maximize their resources in pursuit of their social mission. However you’re assuming that there’s a cheaper way to do what we do, and that nonprofits are acting in bad faith by choosing us.

If there were a cheaper, better way of doing this, eBay and our 9,700+ nonprofit participants would have abandoned this program already in favor of that alternative.

Assume that we didn’t exist, would it be better for a single nonprofit to bear the tremendous costs of technology, training, marketing and legal necessary to conduct this type of fundraising themselves? Or is it better for them to share those costs with other the organizations (nonprofit and for-profit) that provide our funding?

In the nonprofit sector, it is generally accepted that you can spend up to 35% of your money on administrative and fundraising costs, and still be considered a cost-effective organization. When you look at the total amount of money nonprofits get from this program, we’re only keeping 2%. I’ve been in the nonprofit sector for more than 13 years, and I have never seen a more cost-effective fundraising program than MissionFish.

I’m sure that you will know all of this already, but here are a few links for your readers about fundraising standards around the country:
http://ag.ky.gov/consumer/charity/active.htm
http://ag.ca.gov/charities/publications/2005cfr/2005_CFR_report.pdf
http://www.doj.state.or.us/charigroup/pdf/2006_report.pdf
http://www2.state.id.us/ag/consumer/tips/charities.htm

Thanks again for the opportunity to be a part of this discussion. We left a nonprofit seven years ago because we had an idea about a more efficient way of raising money, and I appreciate the passion of someone that is looking to make things better. I don’t know if I’ve addressed all of questions, but hopefully I’ve offered you another perspective.

Sean Milliken
Executive Director
MissionFish