The Nightmare on Giving Street

We recently met a pair of nonprofit leaders who are losing sleep over their fundraising programs.

These executives serve very different communities. But each night they both lie awake worrying about whether they’ll be able to afford to open their doors in the near future.

Growth vs. stability

The reason? Both nonprofits are heavily dependent on grants from foundations and corporations. Like investing in the stock market, these fundraising tactics can cause rapid growth – but they’re also subject to sharp and uncontrollable downturns that can wipe out gains entirely.

At the same time, their individual fundraising programs are underdeveloped. Their databases are thick with cobwebs, they don’t communicate regularly with their donors and they’re paralyzed about how to start that conversation.

Every nonprofit should have an individual giving program in place because individuals provide nonprofits with stability. In a way, they play the role of bonds in the philanthropic world.

Bonds tend to grow a little each year and, unlike stocks, bonds do not take investors on an emotional rollercoaster ride. What’s more, individual dollars are largely unrestricted, so you can use those $25, $50 and $100 gifts where you need to. (Major gifts may be the exception here.)

Download our presentation: Optimizing Your Fundraising Portfolio.

Balancing your giving portfolio

A mature fundraising program needs both growth and stability. But how do you balance and mix these strategies? To steal a term from the investing world, how do you construct the best fundraising portfolio for your nonprofit?

Giving USA releases data each year about how Americans actually give to charitable causes. And while the data doesn’t change much year over year, some nonprofits may be surprised about who the big spenders are.

  • Corporations: Hear a lot in the media about corporate giving? Corporations gave just 5% of the $410 billion donated in 2017.

  • Foundations: Foundations have got to be way up there right? They’re a little more at 16% of total giving.

  • Bequest: Giving by bequest comes in at 9%. Arguably, this should be part of individual giving.

  • Individuals: 70% of all giving comes from individuals. You know these folks. They’re the ones who every year or every month, quietly write you checks and make online donations. No headlines, few demands and a lot of heart.

Given this information, we believe a good starting place for most nonprofits is to invest at least 70% of their time and resources in cultivating a strong individual giving program. That’s where the steady money is.

And nonprofits need every bit of that time for individual giving tactics, because behind them is the real work of relationship building.

If you’re not doing that, you’re trick-or-treating at Freddy Kruger’s house – moments away from things falling apart due to forces you can’t control.

After all, individuals run foundations and corporations, so you never know what your risk-averse relationship building will lead to (there are ways to find out through data overlays, but that’s a blog for a less scary time of year).

And when we say individual giving tactics, we’re not talking about fundraising on social media, or crowdfunding, or shopping programs like Amazon Smile. We’re talking about email, direct mail, web giving, monthly donors, phone calls – the basics that have established ROI. These tactics easily take 70% of your time when they’re done well.

That leaves 30% of your time and resources to invest in growth strategies. These can help you explore wonderful new programs and serve new communities, but at some point the money is probably going to disappear. And you’ll have to have strong individual giving in place to retain staff and keep these programs going.

Risk tolerance & time horizon

We should acknowledge that the Giving USA report is just a one data set. Just like investing, a nonprofit should consider its tolerance for risk and whether it needs the money now or in the future.

For example, a nonprofit with an endowment can afford to invest in riskier growth strategies, while one that is struggling and less established may be better served by investing in stability.

And very new organizations may absolutely need a grant to get going, so like an investment portfolio the mix should change over time.

Also, the Giving USA report isn’t perfect. For example, it doesn’t list money received from government sources (since that comes from taxes, isn’t that individual giving, too?) and it doesn’t have a category for the value of in-kind donations.

However, it does provide helpful insight on why nonprofits with unbalanced fundraising portfolios experience late-night panic attacks. All they want to do is run to safety and get away from the nightmare of not making payroll or not keeping the lights on.

But without a clear understanding of who really gives and how to balance their fundraising programs, they may run into a dark alley and come face-to-face with the monster they fear the most.

Terri Shoemaker is co-founder of Abeja Solutions, a fundraising marketing firm in Phoenix, Arizona. A professional fundraiser, Terri has raised millions of dollars for nonprofit and higher education institutions.

Laura Ingalls is CEO of Abeja Solutions and co-creator of Beezable, a tool that automates direct mail fundraising. She’s produced for CNN, served as a humanitarian spokesperson in Iraq and led award-winning nonprofit and corporate communications teams.