Although financial contributions likely fuel most of your nonprofit’s operations, your organization can also benefit from collecting in-kind donations from its individual and corporate supporters. In-kind donations—gifts of goods, services, and other non-cash assets—provide your nonprofit with additional financial flexibility and a new way to involve donors in furthering your mission.
However, as with most types of donations, in-kind gifts will be most effective for your organization if you solicit and manage them strategically. In this guide, we’ll walk through three tips for doing just that! Let’s get started by reviewing best practices for asking donors for in-kind gifts before we dive into management strategies.
1. Craft Compelling Donation Requests
Similarly to requesting financial donations, the best way to ask for in-kind contributions will vary depending on audience and gift size. If your nonprofit needs many small in-kind gifts, cast a wide net with your organization’s mass marketing channels. For example, an animal shelter that needs recurring donations of pet food and cat litter for its day-to-day work might create a page on its website listing these requests, and then promote the opportunity through monthly newsletter blurbs and social media posts.
However, if you’re requesting a larger in-kind gift from an individual or approaching a business about an in-kind sponsorship opportunity, it’s best to create a tailored donation request. In this letter, make sure to include:
- Your nonprofit’s branding—according to Loop, including your logo, colors, typography, and brand messaging in donation requests helps build trust with your audience, in addition to making them look more professional.
- Information about your mission, supported by impact stories and statistics that demonstrate how you’ve made a difference so far.
- A specific ask that aligns with the supporter’s ability to contribute—for example, if you’re requesting pro bono legal services, find a lawyer who specializes in the type of work you need done and outline the tasks you want them to complete in your letter.
- Donor recognition and benefits so the donor or sponsor knows what is in it for them if they contribute (for instance, co-marketing opportunities for in-kind auction sponsors leading up to the event).
- A return deadline to increase the likelihood of getting a timely response without pressuring the recipient to make a decision immediately.
If possible, schedule face-to-face meetings with potential in-kind donors and sponsors so you can walk through the request together and answer any questions they may have. The letter will serve as a leave-behind if you can meet with the donor and present your fundraising ask if scheduling a meeting isn’t feasible.
2. Establish a Gift Acceptance Policy
Imagine you work for a nonprofit that provides free after-school tutoring to local elementary students. To encourage program participants to practice their reading skills at home, you decide to ask for in-kind donations of used books. Your request gains traction in the community, and your organization creates a robust lending library for its students.
But during this donation drive, you receive a few books that are too damaged to include in the library or are too advanced in their reading level for elementary schoolers. You regret that you won’t be able to use these gifts in your program, especially since the donors likely meant well. How can you prevent this situation from occurring during future donation drives?
The answer is to implement a gift acceptance policy, which is among the most important financial policies for nonprofits. In it, you should outline:
- The types of gifts (both in-kind and monetary) that your organization can and can’t accept.
- The conditions under which you’ll accept each type of gift—for instance, the tutoring nonprofit in our example should specify that donated books should be designated as children’s or middle grade and that their covers and pages must be fully intact and legible.
- The procedures for recording various kinds of donations (more on this to come!).
If you promote your gift acceptance policy to your supporters, they’ll be more likely to contribute in-kind donations that will be useful for your mission. Plus, when you inevitably receive some contributions you can’t accept, you can cite your policy as your reason for rejecting the donation. This helps reassure donors that you recognize their good intentions, even if you have to tell them “thanks, but no thanks.”
3. Properly Value All In-Kind Donations
Along with your gift acceptance policy, a key consideration for in-kind donation management is properly valuing each contribution. An in-kind donation is worth its fair market value (FMV), which is the price you’d pay for that good or service if you purchased it on the open market.
The FMV of some items is more straightforward to determine than others. For example, if someone donated a brand-new iPad to your nonprofit, its FMV would be the full list price for that model, which you could easily find on Apple’s website. However, used items can depreciate in value over time, and donations of unique goods or custom services are often tricky to value.
Winspire’s in-kind donation guide recommends using the following resources to figure out the FMV of challenging contributions:
- Online research. If you can’t determine an item’s FMV from the manufacturer’s website, “comparison shop” and average the prices of several comparable products. For example, if your organization received a custom art piece as an auction item donation, see what similar works are going for on sites like eBay or Etsy to value it.
- Your nonprofit’s network. Consider reaching out to other nonprofits in your community to see if they’ve ever received a similar in-kind donation or if they’ve purchased a good or service that has been donated to you. For instance, if you receive a gift of free nonprofit web design services and you know another organization in your area recently paid to have their website redesigned, you could ask them what their designer charged for the project and base your service’s FMV off that price.
- The item’s provider. It can also be helpful to ask in-kind donors for a value estimate on their gifts. If a restaurant caters your annual gala for free, you could ask them about their going rate for catering services of that scale. For unique physical goods, take the provider’s estimate with a grain of salt, since it’s common for owners of items like signed celebrity memorabilia to overvalue them.
- Supporter conversations. Especially if you’re valuing auction items, contacting some loyal supporters to see what they’d be willing to pay for a prize (or what they actually paid for a similar item at a different auction) can help you determine a reasonable FMV and pricing strategy.
Besides helping with auction item pricing, properly valuing in-kind donations is important for donors to be able to claim their gifts as tax deductible. Plus, it allows you to keep more accurate records of your organization’s contributions, which is important for nonprofit compliance and for making data-driven decisions about the future of your in-kind donation strategy.
By following these tips, your nonprofit will be able to effectively solicit a wide variety of in-kind donations, from program and fundraising supplies to essential services to non-cash gifts like stocks and real estate. Incorporating these diversified contribution methods into your strategy will help you better engage your community and set your organization up for long-term sustainability.
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