Examining Strategic Solutions to the Decrease in Nonprofit Giving

In previous articles, Convergent principal and author of Asking Rights Tom Ralser examined the decline in charitable giving and the key factors contributing to this trend. To recap, the Giving USA Report 2024 revealed that total giving reached a record $557.16 billion in 2023, but after adjusted for inflation giving actually fell by 2.1%​. Key reasons for the decline include high inflation, shifting donor priorities, and reduced megadonations from wealthy individuals.

Nonprofits need to “step it up” with strategies to prevent and mitigate the impacts of these industry challenges. The strategies we discuss in greater depth below involve adopting a donor focused investment-driven approach, diversifying their donor base, and focusing on donor retention. Younger generations and corporate giving offer growth opportunities, but nonprofits must intentionally modify their messaging to attract these newer sources of funds​.

Adopt a Donor-Centered Strategy: The Investment-Driven Model™

To create sustainable funding, nonprofits must move away from a charity-driven approach and instead clearly demonstrate measurable outcomes resulting from the organization’s mission. Anticipating a change in the philanthropic landscape, Tom Ralser of Convergent Nonprofit Solutions pioneered the Investment-Driven Model™ (the IDM) nearly twenty years ago. This model appeals to today’s increasingly sophisticated nonprofit investors, who prefer transformative, rather than transactional, contributions. At its core, IDM emphasizes a strategic alignment between fundraising objectives, outcomes delivered, and the overall mission of the organization.  The Investment-Driven Model™ powerfully demonstrates long-term impact, which can re-engage donors and attract more support from the growing pool of foundation and corporate funds.

The IDM is underpinned by several key principles that differentiate it from conventional approaches:  

1. Impact-Focused Approach: Unlike traditional fundraising, which often relies on emotional appeals and the inherent goodwill of donors, Investment-Driven Model™ is grounded in demonstrating the economic value and/or impact delivered by the respective nonprofit involved in a fundraising campaign.  This involves drilling down to the outcomes expected to be delivered, quantifying their value, and demonstrating to potential investors how their funding impacts the community.   
2. Alignment of Mission and Investment: The IDM stresses the importance of aligning the organization’s mission with the interests of donors and investors. By identifying shared goals and outcomes, organizations can create more compelling cases for support, fostering stronger and more sustainable relationships with their stakeholders. This allows a fundraising campaign to highlight the outcomes that matter to their investors, allowing campaigns to raise more money in a shorter time period.  
3. Outcomes Matter: The IDM emphasizes results… the results that matter to their constituency.  This is the group that matters, since they are writing the checks, and without their support, positive change cannot occur.  At the end of the day, we have learned that people invest in nonprofits because of the outcomes they deliver.
4. Investor Relations: Organizations must articulate their value proposition clearly, highlighting how contributions directly contribute to achieving their mission. This involves crafting compelling narratives that resonate with donors’ and investors’ values and priorities. Nonprofits must learn to walk the walk, not just talk the talk.  In other words, they cannot just change their vocabulary to investment-like terms; they must deliver the outcomes expected by investors if they want the funding to continue. 

Diversify the Donor Base

Heavy reliance on high-net-worth donors and megagifts is unsustainable, particularly as megadonations decreased by 3% from 2022 to 2023. Engaging everyday donors, small businesses, and younger generations (Millennials and Gen Z) is crucial to fill the gaps. Nonprofits can capitalize on digital platforms to attract younger donors, who tend to prioritize causes that align with their values and are more likely to donate through online or mobile channels. Tailoring campaigns specifically to this tech-savvy demographic through personalized content, impact-driven narratives, and accessible giving options (e.g., micro-donations) will be crucial.

Step Up Donor Retention Efforts

Donor retention has become a major issue, with fewer people giving, and in smaller amounts. Nonprofits must focus on building long-term relationships with supporters. Implementing recognition programs, consistent communication, and transparent financial reporting can improve retention. Moreover, engaging donors beyond just monetary contributions can strengthen relationships. Creating opportunities for supporters to volunteer, advocate, or share expertise within the nonprofit allows donors to feel more personally connected to the mission.

Leverage Corporate Partnerships

Corporate giving, while still the smallest source of donations, is one of the fastest-growing. More businesses are integrating philanthropy into their operations, particularly through employee-driven programs.  Nonprofits can form mutually beneficial partnerships with companies, offering opportunities for employee volunteering, cause marketing campaigns, or corporate matching programs. By aligning their mission with corporate social responsibility (CSR) initiatives, nonprofits can unlock new funding streams and tap into the growing demand for businesses to give back.

Adapt to Shifting Donor Priorities

Donations to religious organizations have declined, while causes like public society benefit and human services have seen growth. Nonprofits should consider adjusting their messaging to emphasize their societal impact and align with these shifting donor priorities. Highlighting how their work contributes to issues such as human rights, education, or environmental sustainability can resonate more with modern donors.

Conclusion

While the decrease in giving presents unprecedented challenges, nonprofits can adapt by fully embracing  a donor centered fundraising strategy that emphasizes measurable outcomes tightly aligned with the organization’s mission.  The shift in focus will enable nonprofits to adapt to emerging priorities, diversify and retain the existing investor base, strengthen relationships with corporate players and targeting new generations of potential donors.

In difficult times, experts can guide the way. Convergent Nonprofit Solutions understands the importance of nonprofit organizations and their role in communities nationwide. Look to Convergent Nonprofit Solutions to help you navigate opportunities and challenges.