Why Commission-Based Fundraising Is a Red Flag (and What New Nonprofits Should Do Instead)

Why Commission-Based Fundraising Is a Red Flag (and What New Nonprofits Should Do Instead)

Starting a nonprofit can feel like launching a rocket with duct tape and a dream. You’ve got passion, vision, and maybe a few donors – but not nearly enough resources. So when someone offers to help with fundraising in exchange for a cut of the money raised, it might feel like a godsend.

It’s not.

(Sorry, I didn’t do that justice. Let me try again.)

IT’S NOTTTTTT!!!!

Commission-based fundraising is one of the first ethical missteps many new nonprofits make – and not because they’re careless. It’s because they don’t know any better. Meanwhile, there are companies that do know better – and they prey on organizations still trying to find their footing.
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Let’s talk about why commission-based fundraising is a problem, the myths that keep it going, and what to do instead.

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What’s the Big Deal About Commission-Based Pay?

Commission-based pay structures – where fundraisers receive a percentage of what they raise – are widely considered unethical in the nonprofit sector.

Not because it’s illegal. It’s not. The IRS doesn’t prohibit it. But that’s not the bar you want to be setting for your organization.

Professional groups like the Association of Fundraising Professionals (AFP) have long held that this practice crosses ethical lines. Here’s why:

• It creates a conflict of interest. Tying compensation to gift size can push fundraisers to pressure donors or overpromise – damaging trust along the way.
• It hurts donor relationships. If a donor thinks your gift officer’s paycheck depends on their generosity, that can leave a bad taste and end future giving.
• It turns fundraising into a transaction. This work is about partnership, not procurement. Your mission isn’t for sale.

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This Is Happening More Than You Think

I see this come up all the time in social media groups for nonprofit founders. At least once a month, someone will ask, “Is commission-based fundraising okay?” They’re just trying to figure out how to move forward with no staff and limited funds.

And every time, like clockwork, commission-based fundraising companies show up in the comments to say, “It’s totally fine!” and there I am, in the replies, trying to explain why it’s not fine.
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I’m not trying to be the fun police. I’ve just seen how this plays out – and it’s never pretty. New nonprofits deserve better than shortcuts that backfire.

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Myths That Keep Commission Models Alive

Let’s tackle some of the most common counterpoints I hear – because these arguments pop up over and over again:

💬 “Isn’t salary technically paid from money raised? So what’s the difference?”
Yes, most nonprofit salaries come from donated funds. The difference is in structure. A salary pays for a fundraiser’s time, experience, and judgment. It’s not tied to the outcome of a specific gift. That distinction matters – because it keeps the motivation focused on relationships, not revenue.

💬 “There’s no law against it, so it must be fine.”
Ethics and legality aren’t the same thing. Just because something’s allowed doesn’t make it wise – or aligned with best practices. Commission-based fundraising can hurt your credibility with savvy donors who know the difference.
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💬 “We can’t afford a salary. Commission is all we can offer.”
This is the one that really pulls at the heart. I get it. But commission isn’t your only option. If you don’t have funds to hire someone, try this instead:

• Lean on your board. A strong fundraising board isn’t just for show. These folks should give and help you find new supporters.
• Recruit mission-aligned volunteers. People who believe in your work and have strong networks can be powerful early advocates.
• Learn the craft yourself. Fundraising is about building trust. You don’t need to know everything today – you just need to start showing up.

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The Trouble with Outsourcing Fundraising Entirely

Outsourcing might sound like a great fix, especially when you’re wearing every hat. And there are reputable consultants who can teach and guide. But outsourcing your entire fundraising operation – especially donor relationships – is risky business.

Here’s what you give up when you hand it all off:

• Authentic connection. Donors give to people, not platforms. If someone else is forming the relationship, they’re the one who earns the trust.
• Control of your message. You need to know what your donors are hearing and how they’re being treated.
• Your own learning curve. Early fundraising is messy. But that mess teaches you what works – and what doesn’t. You don’t want to miss those lessons.

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Fundraising isn’t something to delegate away. It’s a core part of your leadership role.

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So What Should You Do Instead?

If you’re building a nonprofit from scratch, start here:

✅ Build a fundraising board.
Don’t settle for warm bodies. Find people who will give, ask, and connect you with others who care.

✅ Invest your time in relationships.
Whether someone gives $10 or $10,000, treat them like a partner in your mission. Show up. Say thank you. Follow up. Every relationship counts.

✅ Start small and grow with purpose.
You don’t need a six-figure campaign to begin. Start where you are, stay consistent, and build momentum step by step.
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✅ Find a mentor – not a miracle.
Look for people who will teach you, not sell you. A good advisor will build your capacity – not just close deals.

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Final Thoughts

Commission-based fundraising isn’t just an ethics issue – it’s a growth issue. It can derail donor trust, distract you from mission work, and create headaches you don’t need.

Starting a nonprofit is brave work. And it takes guts to say no to the fast and easy path when you’re feeling the pressure to raise money quickly.

But there is a way to fundraise with integrity. It starts with doing the work yourself, building trust one conversation at a time, and keeping your eyes on the long game.

You don’t have to build your mission alone.

But you do have to build it right.

And you will.
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Cheers!

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