The recent GivingUSA Giving Report generated many disturbing headlines. The most significant of which is the steep decline in giving by individuals.
The decline in charitable giving in 2022 was worse than during the great recession in 2008, even though we are at near full employment.
Let’s look at the environment that has likely led to this decline and what to do about it. Many commentaries have singled out nonprofits for their failures — I will not blame the victim.
It is important to understand changes in the broader environment and economy to understand how to plan for raising funds from major donors.
1. The Cost of Fundraising is Skyrocketing
- Building a small dollar annual giving donor base is hurt by the increasingly high cost of direct mail, postage, and declining ROI.
- Web fundraising is cheaper to execute and attracts a higher average gift, but it is one-tenth as effective for donor acquisition and produces lower donor loyalty and renewed giving.
- Affording, finding, and retaining talented staff is at a crisis level.
- Breaking through the noise to get the public’s attention requires great investment.
2. The Donor Pool is Shrinking
- 20 years ago, two-thirds of households contributed to nonprofits; now, less than half contribute.
- Individual giving as a percentage of disposable income is at a 20-year low of 1.77%.
- Ever-increasing competition for disposable income.
- More nonprofits seeking contributions.
- The pull of Amazon and online shopping generally.
- Cost of healthcare and insurance.
- Cost of housing and borrowing.
- High level of credit card debt and payment costs.
- Student loan debt, with 13% of all Americans or 43.5 million people carrying this burden.
- The wealthy increasingly give to donor-advised funds or private foundations, which divert direct contributions to nonprofits.
What To Do
Plan, Plan, Plan. Be clear and realistic about your objectives. Make sure they are time and financially specific, and you have the staff talent (or can get them) and bandwidth to execute and manage the plan. In times with so many headwinds, you must make hard and sobering decisions to succeed. And, if you do not have the in-house expertise to construct a solid plan, then hire the necessary expertise to help you.
For all of these reasons and more, nonprofits need to focus their efforts on finding, engaging, and asking for gifts from people of means to support their mission. Getting the major donor Ask right has never been more important.