Why 15% Makes Sense

Posted by john hecklinger on February 17th, 2011

People sometimes ask me why we charge a 15% transaction fee.  My cheeky answer is, “So I can be sitting here having this conversation with you.”  As Chief Program Officer at GlobalGiving, my job is to make GlobalGiving more valuable to more organizations around the world.  We work with thousands of organizations, qualifying them, supporting them, disbursing funds to them, monitoring their activities, and maintaining an online platform for them to connect with donors.  Work at this scale would be impossible with an all-volunteer team.  Without great people and robust systems working full-time, GlobalGiving does not work.

Could we find a large donor to fund operations, making the ongoing transactions free?  Maybe, but we believe a transaction-based fee is a better idea.  Funders like Skoll Foundation, Omidyar Network, Hewlett Foundation, Packard Foundation, Rockefeller Foundation, and Kellogg Foundation have invested in our effort to make the transaction-based model work, and we’re almost there.  The model gives GlobalGiving a strong incentive to invest in the performance of our marketplace, which aligns nicely with our partner organizations’ goals and the needs of donors – the more funds flowing, the greater the social impact.  We are motivated to build better tools for donors and project leaders, we aggressively court corporate partners, we attract donors through a strong social media presence, we offer free training and development opportunities to our project leaders, and we find innovative ways to demonstrate results.  We strive to earn our 15%, and GlobalGiving only works if we deliver the value.

So, why do organizations decide that 15% is good value?  We connect them with new donors, we provide donor management tools, and for some organizations we save the expense of maintaining a transactional web platform.  For international organizations, the ability receive tax-deductible contributions in a secure, transparent platform is worth the 15%.  We do not charge organizations an up front fee to participate in GlobalGiving, so fees only exist when donations flow, and we’re careful to explain the fee to all prospective organizations.  Donors should feel good giving to organizations on GlobalGiving, because each organization calculates that our platform is worth 15%.  Donors always have the option of covering that 15%, and over 50% do just that.  Donors should expect to receive quarterly updates and can exercise the GlobalGiving Guarantee if the experience doesn’t meet expectations.  We just finished our best year yet, delivering more funding to more organizations than ever before.

That said, our 15% does not work for many organizations.  For organizations that maintain a web site with transaction processing, or have a staff dedicated to donor management, or do not like to accept project-specific funding, GlobalGiving is probably not a good fit, and that’s fine.  If a donor simply wants to fund general operations of a US nonprofit, that donor should give through that organization’s web site or a portal like Network for Good, both of which have lower fees.

Our commitment to this model holds us directly accountable to the donors and organizations connecting on our platform.  Organizations and donors do not have to use GlobalGiving  If we are not worth our 15%, people will stop transacting, and GlobalGiving will not survive.  If we are worth our 15%, more transactions will happen, we will continue to improve the platform, and we might just improve the efficiency of giving to the most effective organizations worldwide.

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5 Responses to “Why 15% Makes Sense”

  1. [...] Globalgiving tente de justifier pourquoi il retient 15% des dons qui lui sont confiés (GlobalGiving joue l’intermédiaire [...]

  2. Grey Lee says:

    Obviously you can charge 15% as long as clients are willing to provide it. I would not. I would be interested in working with an organization that was transparent about the costs of the service and it seems to me this service could be fee based, rather than commission based. How is what you offer different between a $5k fundraise and a $50k fundraise? Maybe a ceiling of $1500 per project would cover your costs. But hey, if you can get away with it, get what you can. Donate it to something worthy.
    Cheers,
    Grey

  3. Dave Martin says:

    Charging it as a % does not seem fair to me. A fixed fee is fair, but a % is more like a commission than a cost recovery.

    How do the costs of facilitating $10,000 worth of donations for a project substantially differ from the costs for doing so for a $200,000 one?

    yet global giving requires $30,000 to facilitate the one project and only $1500 the other.

    Of course global giving itself needs money to operate, but a fee schedule like this generates far beyond cost – even though non profits do not make a profit – I would rather my money went to giving shelter to a rescued child than a new staffer for a non profit, even a NFP that is really worthwhile like yours.

  4. kconroy says:

    Hi Dave,
    Great question and feedback. Here’s some answers to your questions:

    All projects have a certain amount of fixed overhead costs associated with our rigorous due diligence process, vetting, and setup. These costs are slightly higher for international organizations as there is more work involved. These costs hold steady for a $10K project or a $200K project as our vetting is the same.

    As for donations, typically, most projects are funded using a large number of small donations. So a project with a $10,000 goal might have 130+ donations around $75 each. Similarly, a project with a goal of $200K would then have 2,600+ donations of $75 each. The difference is in the number of donors – and thus the number of credit card charges, bank fees, customer service inquiries, and the like are higher. It does cost us more to handle 2,600 donors than 130 donors.

    Obviously GlobalGiving does require funds to operate. Rather than charge projects setup fees or monthly fees to be on our site (something that many fundraising services do), we have no fixed fees. We do this to ensure that even the smallest organizations can have a fair shot without spending a dime. While it may sound high, the 15% fee mostly cover our costs. We look forward to the day when the 15% more than covers our costs so that we can lower our fee. We have set the fee at the rate required for us to stay in operation. (Unlike some organizations, we’re keeping our staff as small as we can and are working on scaling our operations through productivity and process enhancements rather than more salaries.)

    We’ve been at this long enough to know that despite our efforts to explain it, some people just can’t accept our 15% fee. That’s okay. We’ll continue to work hard to find and vet the best non-profits in the world, provide them with fundraising tools, training, and partnerships, and continue build an incredible platform for donors and non-profits to find and help each other.

    We hope that you’ll continue to keep us in mind and check back in on our impact from time to time even if you don’t want to donate.

    We welcome any feedback or questions.

    Thanks,
    Kevin Conroy
    Director of User Experience and Product Development
    http://www.globalgiving.org

  5. Andres Gentry says:

    Is this website related to http://www.globalgiving.co.uk/? If so, why does that website charge a 10% fee and this website charge a 15%? Thanks,