Nonprofit Annual Reports: 2 Truths & a Lie
Great Annual Reports Have Purpose & Put Donors First
Annual reports have a bad reputation at many nonprofits.
A time suck. A poor use of donor dollars. Something maybe the intern could work on.
But it doesn’t have to be this way. Your annual report can be a vital tool to retain and grow gifts from the donors you have. And even inspire the donors you don’t have.
That’s because annual reports, when done well, reinforce the donor’s decision to support you. They are exciting affirmations of their donations at work.
Notice that I didn’t say annual reports are a thorough accounting of your past activities. Nor are they an error-prone, tiny-font list of every life form that gave you a gift. BORING! And boring never works in marketing.
Truth #1: Your annual report should support a larger strategy.
I believe annual reports go astray when they’re one-offs, instead of part of a focused strategy. That strategy should look something like this: Meet donors on their terms, delivering the right message in the right format at the right time.
If your database is well maintained, you already know something about what your donors respond to. What kinds of stories get the highest responses from them?
Now pair that insight with your specific vision for the future. Annual reports should be a personal invitation to dream with you and invest further in the world you’re creating together. You may even need to get a little vulnerable about your ups and downs during the year. Not so boring, right?
Your database also will tell you what formats to send and when your donors will be most responsive. Do your donors react to longer appeals with more detail – or something like a newsletter – better than or equally as they do to “regular” appeals?
Recently, I’ve met some organizations that have “more is more” donors. These are folks who want all of the details about everything. That’s the perfect crowd for an annual report with lots of stories and information.
But if your donor crowd yawns at your newsletter and your response data shows they likely recycle your longer appeals, then reconsider sending the full treatment.
This isn’t to say that your “less is more” donors should miss out entirely, but maybe they prefer a double-sided one-pager with infographics instead. Thank you letters are a great delivery device for something like this.
Truth #2: The annual report isn’t about your organization.
This is a fundamental rule in fundraising. You get better results when you stop telling your donors how awesome your organization is – cue nifty program statistics – and show your donor several key things that she or he accomplished.
In fact, there’s 80 years of research that shows using the word “you” increases readership, while the word “we” decreases it.
It’s easier said than done. Who among us hasn’t written a first draft that said something like, “Thanks to your generous support, we were able to provide 500 bowls of food to cats in need”? The better version goes like, “Your generous support fed 500 cats in need like Fluffy. We couldn’t do that without you!”
It’s a subtle shift, but one that lets the donor know you’re truly grateful for their support.
The Lie: You’re required to do an annual report.
Almost all tax-exempt organizations are required to submit a Form 990 to the IRS. And most states require some kind of filing as well. Audited financials are a must for many organizations, too.
These documents check the box on accounting procedure and, for sophisticated donors, also provide proof that you’re above board and transparent about your financials.
But they don’t thank donors, make them feel proud, or give them new reasons to engage and grow their relationship with you.
If you already engage with your donors at least 12 times throughout the year with decent response rates, then maybe you don’t need an annual report at all.
I’m going to say that again: maybe you don’t need an annual report at all. Or maybe you need just a minimal one to meet the expectations of boards and other external audiences like grantors.
But do consider an annual report if you’re one of the many nonprofits that struggles to have a year-round consistent conversation with their supporters. Joan Garry rightly describes it as treating your donors like ATMs – only communicating when you want something.
For these nonprofits, a well-crafted annual report may be a vital tool to invite donors to change the world with you. In other words, the right piece for the right audience at the right time.
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Laura Ingalls is CEO of Abeja Solutions and co-creator of Beezable, a tool that makes direct mail as easy as sending an email. She’s produced for CNN, served as a humanitarian spokesperson in Iraq and led award-winning nonprofit and corporate communications teams. Read more from Laura.