Thursday, May 14, 2009

A Hunch about Fundraising Success

I have a hunch about why some fundraising organizations are faring better than others during the recession.

We have a client that has unfortunately been just about decimated. This is an organization that depends on fundraising for about 90% of its operating income and has lost 60-75% of that revenue. The result is not difficult to predict. Programs have been curtailed, staff has been laid off and the organization is being forced to accept new standards of success.

On the other hand, we have client organizations that are coping far better. Donations may be down from last year but they are maintaining sufficient revenue streams to be effective and in some cases, to even launch new initiatives.

So, what’s the difference? I'm sure detailed analysis would reveal several factors but here's my hunch. From the organizations that I am familiar with, the more broad based their fundraising was going into the recession, the better they are doing. Organizations that depended on a small number of large donors (like our client above) find themselves with no revenue and nowhere to turn. All they know how to do are large gifts but the lead time to cultivate new five or six figure donors makes it a futile response to the current situation. And where do you find the new prospects to cultivate?

Organizations with strong annual campaigns or some other form of broad based giving have a pool of revenue and more importantly, a pool of donors to cultivate. As those donors who have been harder hit step back, there are others that are in fact increasing their support. But it’s the base of small to mid size gifts that is allowing these organizations to sustain themselves.

A recently released study in the U.S. indicates that 2008 4th quarter fundraising revenue was down about 5% on average and the number of donors was down about 7%. While disappointing, the results are not catastrophic. The organizations whose results form the basis of the survey are for the most part ones with a large donor base and developed annual giving.

When working with fundraising organizations we always advocate for the establishment and/or development of annual giving. While this may seem to be so simple that it's trite, you'd be amazed at how many organizations resist. If my hunch is correct, the recession will provide another argument in favour of broad based giving.

By the way, if you know of any studies that can corroborate (or contradict for that matter) my hunch, I'd love know about them.

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