Situation in the Fundraising Industry

Most readers already know that in the past five years about 60% of fundraising companies across the United States have gone out of business. Some went bankrupt, and others simply closed down. The reasons were many, and included changes in the availability of financing, balance of trade with China, increasing cost of transportation, offering profit levels and services that were financial losses, and unwillingness of the client base to accept lower profit margins and increased costs.

The scientific theory that "nature abhors a vacuum" seems also to be work in the realm of economics these days. As soon as one company goes bankrupt, someone else pops up to give it a try. We have had such an occurrence in the supply chain this year, and it is a major disruption. Late in 2009 an individual who has worked in the industry for a number of years stepped up and started a new import company to capture some of the business left "on the table" by the closing of Giftco and the departure of Scott's from the import market. Since there was not a major import items supplier to the fundraising trade, this individual saw an opportunity.

The problem occurred when products did not arrive as promised. This has affected most if not all companies who supply nonfood items such as kitchen gadgets, ornaments, decor items and the like. Products are starting to arrive now, but this has created multiple backorders for just about every school and league in the country that is using a standard "catalog shopper" program, regardless of what company they contracted with for their fundraiser.

Fundraising product sales are highly concentrated into a two month period, with local sales starting in late July for leagues and in August for schools, with most local sales ending in mid-September, with just a few extending later into the fall. Packing operations start in early September for league sales and extend into November for school sales. Since we are at the middle of October when this is being written and are just seeing some of those imported items arriving at pack operations across the country, the backorder of items is occurring for every company nationwide, and is affecting thousands of schools and leagues.

For those fundraising companies that are in sound financial condition, products will continue to flow and backorders will be filled quickly. For those on shaky financial ground, who are over-leveraged and owe more than their receivables can support this may be the final straw, and some may not be able to afford the additional delivery costs of the backorders. Not only is there a delay in cash inflows, but the cash outflows go longer because temporary workers have to be kept on the payroll longer, until product comes in and is shipped out. So expect even more fundraising companies to go out of business before the fall of 2011.

Please understand that the pack and ship operations around the country that support the local independent fundraising companies have to make their purchases for the fall of 2011 in Feburary of 2011. This is a giant piece of guesswork and a giant gamble for the pack and ship operations. To protect themselves from financial ruin the "smart" companies are only printing a finite number of brochures to support the sale of products they order. Local fundraising companies are also taking protective measures by requiring higher participation levels for services and profit bonuses. When you compare companies, consider whether a company that "offers the moon and the stars" will actually be around to deliver.

Product fundraising remains the best and most efficient way for schools and leagues to raise large sums. In the future, however, it will be necessary to book your program earlier in the year and plan carefully to maximize your success. You may need to accept a lower profit percentage with products can be offered at lower prices, so people will actually buy them. With so many organizations raising funds it is essential for schools and leagues to do everything possible to maximize the number of students or players who actually sell and turn in orders.

There is truly a paradigm shift going on and those who stay in front of it will be rewarded. Those who fail to plan will surely fail.