Raise Funds, Not Red Flags

Psst: before we get started, we want to be clear that this article is not legal advice. It’s general info, but doesn’t specifically refer to any particular shops or situations. If you’re not sure how to proceed, talk to someone who’s familiar with the laws around fundraising, tax, or any other relevant issues in your area.

So you’ve found a cause that is meaningful to you, and you want to leverage your skills as a person-who-makes-cool-stuff to raise more funds for your favorite non-profit. Maybe you’re thinking about doing a raffle where the winner gets something from your shop? We love where your heart is at! But there’s one little problem: because raffles are sometimes considered a form of gambling, they’re illegal in some states. It gets tricky to keep it all above board, so to keep your shop out of hot water, Big Cartel does not allow raffles.

We hate to rain on parades (we prefer to show up on the sidelines and clap til our hands hurt), so we’ve got some ideas for how you can still encourage donations. Now remember, we don’t know everything about donations or giveaways in your specific area, so it’s worth checking with a legal or tax expert, especially if you’re making them a core component of your brand. Take these ideas as a casual jumping-off point:

Sell a physical item

The trouble with raffles is that everyone (except the winner) is paying money for the chance to get something. If you instead give them a product in exchange for that money, you’re probably in the clear. Lawyers call this arrangement where you promise to make a donation in connection with the sale of a product a “commercial co-venture.” While this isn’t as tricky to get right as a raffle or lottery, many states still regulate this type of thing, so be sure you consult with legal counsel about the rules and any registrations that may be required.

The simplest way to do this is to charge enough for a product you’ve made to cover your costs, plus a cushion or profit that you can donate to a cause. Folks will buy the item, you’ll ship it out, and periodically donate the specified amount as promised.

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If you’re excited about the idea of a single supporter getting a bigger prize, that’s definitely possible! Maybe you mark up your product a little higher, and promote a little friendly competition. You could say something like “I’ll randomly choose one customer who purchases Super Cool Item in the month of August and send you an Even Cooler Item, along with making a donation to [insert your cause here] in your name.”

Donations come first

So you want more funds to go to the organization of your choice, rather towards physical goods? We hear you! Here’s an idea: instead of collecting the funds yourself, encourage folks to donate on their own and send you proof of their donation.

This keeps you from being the middle person in the donation process, empowers people to make charitable donations part of their own life, and still gets those dollars to the people doing the work. And if you’re looking to incentivize, you can still randomly select a prize recipient from among the crowd who sent proof of donations. Remember to clearly state the rules so there’s no gray area for you or your supporters.

Recurring donations

Do the previous ideas seem too temporary? Subscriptions can be used to make donations an ongoing part of your business. Switch on subscriptions, enable “donations only” mode to make them free of sales tax, and folks will be able to sign up to send you a set amount per month, for you to donate to a specific cause (or causes). Just be sure that you donate the money exactly as you represented that you would, and also let your subscribers know that their payments are not tax deductible as charitable contributions.

Because these subscriptions don’t require you to ship anything, the record of payment will go right alongside your completed orders in the Shipped section of your Orders tab. Might we recommend that you set a day each month/quarter/etc. to check your orders and calculate the appropriate amount to donate? Downloading a CSV file of your orders may help you get all of the info in one place.

Keep it clear

While it used to be fine to make a statement like “a portion of the proceeds will be donated to climate-saving initiatives,” we find that customers have changed. Sure, it’s still okay to have vague but good intentions. But people who specifically seek out small brands trying to make a big difference like transparency. If someone gets a prize, consider sharing how a winner was chosen randomly: Did you assign everyone a number and use an online random number generator? Did your precocious toddler choose a slip of paper from a bowl? Was a 20-sided die involved?

If you made a donation, think about sharing specifics like how much you donated, the specific organization you chose, or perhaps what percentage of each sale was donated. Whatever you promise you will spend the money on, be sure that you do exactly that, and be prepared to keep track of how you used the money. You may be required to provide those details to your state if they regulate commercial co-venturers. It can feel vulnerable and you may question if the numbers feel too small or too big, but it fosters trust and confidence among your followers, and that’s pretty valuable too.

Sarah Anderson

Marketing at Big Cartel. Loud talker, maker at City of Industry. Semi-professional aunt. Pretty psyched about all of it.

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