Reversing Disastrous Fundraising Trends

Fundraising

As the Donors Churn, an article in the Winter 2016 issue of Advancing Philanthropy, caught my eye for several reasons. One was the use of the word churn, usually reserved for what stock brokers (remember them?) did to turn an easy commission. Another was the use of the word donor, long eschewed by myself and the other folks here at Convergent as a word that signals the wrong things for nonprofit financial sustainability: a charity mindset, low dollars raised, and a less than optimal fundraising strategy. We much prefer the word investor, which connotes a financial commitment to the outcomes delivered by the organization, and which we have found to be a much more effective way of approaching the difficult task of raising money.

The article contains highlights from the 2015 Fundraising Effectiveness Project (FEP) Survey Report, developed by AFP and the Urban Institute. The points in the article are extremely timely and very useful in a strategy context. Some of the more compelling nuggets:

  • Less than half (only 43 percent) of donors that gave to organizations in 2013 also gave to the same organization in 2014.
  • For every $95 lost from lapsed donors from 2013 to 2014, they gained $100 from new donors, for a net gain of $5.
  • For every 100 new donors gained, organizations lost 103 donors, for a net loss of three donors.

The study also points out that larger nonprofits are enjoying more success in fundraising than smaller organizations:

  • Organizations that raised more than $500,000 per year experienced a net gain of 10 percent in giving in 2014.
  • Organizations that raised between $100,000 and $500,000 experienced a net gain of 3 percent.
  • Organizations that raised less than $100,000 per year saw a net loss of 8 percent.

If you have noticed any of these trends within your own organization, it could spell disaster sooner than you think. As with most businesses, it’s much less expensive to retain an existing customer (donor) than it is to develop a new one, so it’s necessary to identify what is causing these fundraising trends within your organization so you can take the necessary steps to reverse them before they do any damage to your bottom line.

When trying to identify why donors are falling away, you can start by looking at the most likely suspects:

  • The donation was so small that a true commitment to the organization was not achieved.
  • The care and nurturing of the donors was not up to par.
  • The outcomes achieved by the funding were not what was expected and/or were not communicated well.

While it is dangerous to generalize too much about another organization’s research, we have found much higher retention rates, approaching 95 percent in some instances, when an investment approach, rather than a charity or donation context, is used. Dollar amounts committed are also much higher. The key difference is that when an investment is made in a nonprofit (which involves more than simply changing your vocabulary), it allows a host of new operational and fundraising influences to be initiated, and ultimately more dollars raised.

More on the concept of nonprofit investment can be found in the books ROI for Nonprofits and Asking Rights.