Warning Signs You Need to Know About

While the nonprofit sector continues to raise massive amounts of money, danger lies ahead for fundraising professionals as the coronavirus health crisis leads us further into an economic calamity.

As the COVID-19 pandemic gained traction, individuals, corporations, and foundations have responded with robust giving. For example, individual giving revenue through direct mail, processed by Merkle RMG, has increased 5.8 percent year-over-year even while the volume of donations dropped by 15.5 percent, according to Merkle RMG’s Impact Report, COVID-19: How the Coronavirus Pandemic is Impacting Direct Mail Fundraising (transactions through April 19, 2020).

The initial philanthropic response to the pandemic is not surprising for those who have experienced major challenges in the past. Giving lags changes in economic conditions. For instance, during the Great Recession (2007-09), we also saw a similar philanthropic pattern with revenue initially increasing while the number of donors declined. The following graph from Target Analytics, a Blackbaud company, illustrates the point:

Now, let me just mention that no one has a crystal ball or time machine. Therefore, no one, including me, can precisely predict what will happen and when it will happen. Nevertheless, we do know that during past crises, we saw that charitable giving fell after an initial surge.

The overall economy has a profound effect on philanthropic giving. We know that overall philanthropy correlates with Gross Domestic Product at the rate of about two percent. Furthermore, historical data shows that individual giving correlates with personal income at the rate of roughly two percent. In other words, when the economy is strong, giving will be strong; when the economy falters, giving will slow.

Because the coronavirus pandemic has caused a major global economic disruption, we can anticipate that this will eventually have a negative effect on philanthropic giving. Consider these warning signs:

As corporations see profits eroded, as foundations see investments decimated, as individuals see personal income slashed, charitable giving will likely decrease. However, there are some mitigating factors in play:

  • Some corporations (e.g., Amazon, Instacart, Peloton, and more) are generating strong profits during the pandemic.
  • Many foundations have committed to robust giving despite a drop in investment income. While this could have long-term giving implications, giving by many foundations will remain stable or even increase during the pandemic.
  • For many individuals, work conditions have changed but work and, therefore, income continues. With an increased demand for essential services, some workers are seeing an increase in personal income as they receive incentives, extra pay, and overtime.
  • Many unemployed individuals are earning more money while unemployed than while working because of federal relief.
  • With the CARES Act, the federal government adopted a number of charitable-giving tax incentives to encourage greater giving in 2020.
  • When the stay-at-home period is lifted, certain sectors of the economy may see a swift rebound.

While I believe it is reasonable to expect and prepare for a negative hit to philanthropy in the near future, the likely decrease will not be as severe as it could be due to the mitigating factors.

So, what should you do right now? Here are just six ideas:

  1. Create a fresh fundraising plan. Then, plan to revise your plan soon as circumstances change.
  2. Develop contingency plans for fundraising and operations. Remain nimble.
  3. Engage your organization’s supporters in meaningful ways (i.e., provide remote services, call to check-in, etc.). Maintain and grow relationships.
  4. If your organization needs philanthropic support, ask for it while remaining sensitive. Ask sooner rather than later.
  5. Thank your donors profusely and sincerely. Let them know the positive impact they are having.
  6. Be creative.

Nonprofits that continue to fundraise during the crisis will achieve more than charities that suspend fundraising efforts. Furthermore, these organizations will be far better positioned when the pandemic and economic recession pass.

For example, even in the current environment, you can still successfully promote legacy giving. Download the free white paper that philanthropy researcher Russell N. James III, JD, PhD, CFP® and I co-authored: Legacy Fundraising: The Best of Times or the Worst of Times?

Yes, fundraising is challenging. It’s always challenging. It’s especially difficult now. As we move forward, it’s likely to become even tougher. So, plan now. Remain nimble. And take good care of yourself so you can continue to be there for others, both personally and professionally. The work you do is important now. It will continue to be vitally important to the nation’s recovery. Thank you for what you do. Stay strong!

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

4 Comments to “Warning Signs You Need to Know About”

  1. Great post, Michael!! Be safe and well! And the good news is that it may be a great way for donors to consider giving monthly as this works better for their budget and it helps you/the organization plan. I’m seeing great results, right now.

    • Erica, thank you for your kind message. I’m glad to hear that monthly-giving programs are doing well now, though I’m not surprised. They were always a good idea and, now, make even more sense for organizations and donors, as you’ve said. I hope more charities are encouraged to create or expand a monthly-giving program. I appreciate your insight. Stay well!

  2. This is the best overview and forecasting message I’ve read. As always, excellent advice.

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