New Economic Data Suggest Continued Fundraising Challenges. What Can You Do?

Based on the latest economic data, nonprofit organizations in the USA should not expect significant growth in philanthropy through at least 2013. Fortunately, there are at least 10 things you can do to help your nonprofit weather the storm.

Historically, philanthropy in the USA has been approximately two percent of Gross Domestic Product. While this is not necessarily a cause-and-effect relationship, the correlation is consistent. Therefore, with slow economic growth, we will likely see slow philanthropic growth.

In 2011, the US experienced an annual GDP growth rate of 1.8 percent. That same year, overall giving rose by 4.0 percent in current dollars or 0.9 percent in inflation adjusted dollars, according to Giving USA 2012.

In the first quarter of 2012, the US economy grew at a rate of 2.0 percent. In the second quarter of 2012, US economic growth slowed to just 1.5 percent. Most economists agree that a growth rate of 2.0 percent or less is insufficient to lower the unemployment rate, now at 8.2 percent. Looking ahead to 2013, the Federal Reserve forecasts a growth rate of 2.5 percent, still modest.

For the nonprofit sector, the GDP numbers mean the sector can expect philanthropy to grow in 2012 at a similar rate to 2011. Growth in 2013 will likely not be much better.

Despite my lack luster predictions for the nonprofit sector, I do believe there are at least 10 things that individual organizations can do to stimulate increased giving. If you implement just some of these ideas, your organization will likely achieve above average fundraising results:

1. Hug your donors. Ok, maybe not literally. But, you do need to let your donors know you love and appreciate them, now more than ever. Do you quickly acknowledge gifts? You should do so within 48 hours. Do you effectively thank donors? You should do so in at least seven different ways. Your thank you letters should be reviewed to ensure they are heartfelt, meaningful, and effective. Have board members call donors to thank them.

2. Tell donors about the impact of their gift. Donors want to know that their giving is making a difference. If their giving isn’t making a difference or they aren’t sure, they’re more likely to give elsewhere. So, report to your donors. Tell them what their giving is achieving and that their support is being used efficiently.

3. Start a new recognition program. One small nonprofit organization I know has started a new, special corporate giving club. CEOs of the corporate members are placed on an advisory board, receive special recognition, and are provided with networking opportunities. This new recognition program has already generated over $50,000 and is expected to generate far more. While enhancing existing recognition efforts is beneficial, starting a new recognition program can yield significant results.

4. Ask. Some organizations have scaled back their fundraising campaigns. Sadly, they’re hurting themselves. Your organization is providing services. It needs money. Keep your fundraising efforts going. If your case for support is strong, you will secure gifts. In any case, don’t make the decision for your prospective donors. Let your prospects decide if they can give, if they want to give. Just make sure they have the opportunity to do so.

5. Ask more often. If your organization needs money, ask for it. I’m not suggesting that you send donors another bland, generic, non-specific appeal. Instead, I’m saying that you should contact your donors again for a specific purpose. The more specific the purpose and the more passionate the appeal, the more likely you will be to achieve success and minimize the risk of offense.

6. Ask more effectively. When was the last time you hired a direct mail consultant or a phone fundraising service provider? When was the last time you read a book about direct mail or phone fundraising? Consider contracting with an expert. At the very least, brush up your own skills. Read a book. Attend a workshop. Judging from the direct mail appeals and phone fundraising calls I receive, most nonprofit organizations can dramatically increase their fundraising results by doing a much better job with direct response appeals. Test different appeals at different times to see what works best for your organization.

7. Enroll donors in a monthly giving program. Way back in 1989, I wrote an article for Donor Developer that predicted that, within five years, every nonprofit in the US would have a monthly donor program. I was wrong. I was very, very wrong. Today, 23 years later, shockingly few nonprofit organizations have monthly giving programs. These programs are affordable. They reduce donor attrition rates. They turn modest donors into far more significant donors. They help identify great planned giving prospects. So, if you don’t have a monthly donor program, start one. If you do have one, consider ways to market it more effectively. If you do have a monthly donor program, look at ways to more effectively thank, renew, and upgrade your supporters.

8. Start or enhance a planned giving effort. While many planned gifts are deferred, not all are. Planned giving efforts today will provide needed funds and stability in years to come. And, some simple planned gifts will generate immediate revenue. Charitable Gift Annuities and gifts of appreciated securities generate immediate cash. Offer these giving options to donors. You should also look at how you promote planned giving. Do you use direct mail? Do you use a phone campaign? You should if you want more planned gifts. Only 22 percent of Americans over the age of 30 report that they have been asked for a planned gift (Stelter). However, 88.7 percent of people surveyed said that it is appropriate for nonprofits to ask for a planned gift (Sargeant and Jay). In other words, there is a massive disconnect between the percentage of people asked for a planned gift and the percentage of people that say it’s ok to be asked. If donors are in effect suggesting we should ask, perhaps we should listen to them.

9. Get creative. You need to think more creatively in tough times. While many nonprofit organizations continue to run their same old, tired, boring walk-a-thons, a for-profit company has generated millions of dollars for itself by organizing fun, zombie-oriented runs. Why haven’t more nonprofit organizations run equally fun, creative walk-a-thons or runs? Be creative and you just might raise more money.

10. Be more engaging. Donors who are more involved with your organization are more likely to stay involved and more likely to give and give more. So, think of ways to engage your donors. Ask for their advice. Invite them for a tour. Encourage them to volunteer. Even if they choose not to participate, they’ll appreciate that you asked.

How are you doing during this economically challenging time? Are your fundraising results above average? If so, please share your ideas for what others can do to enhance their results. I’ve provided a list of 10 ideas. Now, it’s your turn. What are your ideas?

That’s what Michael Rosen says… What do you say?

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12 Comments to “New Economic Data Suggest Continued Fundraising Challenges. What Can You Do?”

  1. Michael – I think it really depends on the relationship you have with your donors. If you know them well, they understand that these are challenging times. They face the same challenges. What you want them to do is to continue to support you at whatever level they can. It certainly helps to map out all the “ways of giving” I do not think giving is a pyramid effect. I believe it is a constant circle of stewardship, ask, give, thank… A well seasoned gift officer can go a long way for a charity.

    • Patrick, thank you for sharing your thoughts. So much of what we do in development really does come down to the relationships we build. This is particularly true during tough economic times. I found your last line interesting and true. Sadly, the high-turnover rates among development professionals often means that nonprofits will not have a “well seasoned gift officer” in place, at least not well experienced with the particular institution.

  2. Michael, your ten things to do are important, and every organization should adopt them, but I believe it is important for organization leadership, boards of directors and EDs, to view the philanthropic marketplace with realistic expectations. A recent research report noted that giving is tied not just to the GDP, but also to consumer confidence and consumer spending. Consumer spending was up in 2011, especially for big-dollar purchases such as automobiles. Consumer spending is flat this year. It will be interesting to see how real giving changes this year. When I say real giving, I mean actual dollars contributed to nonprofits, not gifts to donor advised trusts or pharmaceuticals contributed as patents or use dates run out.

    • Jerold, thank you for commenting. Giving USA breaks out individual and corporate giving. So, we’ll be able to look at individual philanthropy numbers without mixing in corporate/pharmaceutical/patent figures. However, contributions to create DAFs will continue to be included in the individual giving numbers. By the way, individual giving most closely correlates with personal income; individual giving is typically two percent of personal income. So, be sure to keep an eye on that indicator as well.

  3. Michael,

    I agree with you that organizations need to do more to continue their efforts to maintain and strengthen their relationships with donors. They also need to continue to bring in new blood so they can build more relationships.

    Whether in good times or bad, if organizations want to grow, they need to continually reach out to more people and businesses. However, the methods NPOs use to do this must be wise and cost effective. Relying on expensive events like gala dinners or walk/run/ride events can heavily tax an organization’s finances and time, it employees, and its volunteers. Smaller more cost effective methods using fewer participants can bring in funding, new donors, and help get their message out to the public. (Shameless plug for my business, I know)

  4. Michael,

    Thanks for this great post. Amazing how in tough times, the fundamentals of fundraising continue to be just as important. These are things that if you have in place before tough times hit, you’re more likely to come through in a stronger place – sometimes it just takes challenging market conditions to make us do what we should have been doing all along. Better now than never!

    I think creativity is extra important right now when everyone’s appeals are starting to look the same. When there are so many distractions for people given their own financial circumstances or perception of the economy, standing out and providing some creative, fun energy is critical.

    Rickesh

    • Rickesh, thank you for your comments. These challenging economic times will weed out some weak nonprofit organizations. However, those that are particularly savvy will not only survive, they will thrive and be well poised to reap the rewards of the economic recovery. You’re quite right about the importance of creativity. Not only do we need to be creative when communicating with prospects and donors, nonprofit professeionals need to be more creative with internal communications as well. A little creativity in nonprofit management will go a long way. Those interested should check-out the following book:

      A Whack on the Side of the Head (http://astore.amazon.com/mlinn-20/detail/0446404667)

      The book is in the “Favorites” section of The Nonprofit Bookstore (Amazon). Visitors will be able to explore other favorites as well as Reader Recommended books.

      • Thanks for the recommendation! It’s going on my purchase list. Sometimes a whack on the head can work wonders.

      • Rickesh, I’m glad you liked the book recommendation. A few weeks ago, I might have recommended the book Imagine by Jonah Lehrer. But, a couple of weeks ago, the news broke that he falsified some Bob Dylan quotes in the book. The book has since been recalled by the publisher. I’m keeping my copy as an example that, sometimes, you can be too creative. 🙂 Striking the right balance is important.

  5. Michael, good list, particularly 1-3 and 8. I’ve been saying exactly the same things since I started with this organization in January, and finally they are starting to pay attention. Bureaucracy sometimes muddies the waters in institutional fundraising, and one must build a case internally to leverage support before changes can occur–even when the need to make changes is obvious.

    • Amy, thank you for sharing your insights. Some development professionals think the job only involves building external relationships. However, as you know well, a good portion of the job also involves internal selling. In my book, Donor-Centered Planned Gift Marketing, I devote an entire chapter to the subject of internal selling. In his book Breakthrough Thinking for Nonprofit Organizations, Bernard Ross shares a great number of tips for how to manage organizational change. Change may not always happen as quickly as we might like but, ultimately, we will be more successful, more often if we learn how to manage up.

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