Blinding Revelation of the Obvious

Nonprofits are very different… in how they raise money and where they get it. And yet, there is a persistent effort to compare to national or sector averages. For example, the American Cancer Society and Mayo Clinic are both considered health charities. But they are very different in how they raise money and where their gifts come from.

One is funded primarily from millions of small gifts that come from millions of individual donors who give through special events, direct mail, and online giving. That organization also gets a significant percentage of its revenue from bequests. It gets a larger than average share of its gifts from corporations but almost nothing from foundation grants and major gifts from individuals.

The other has a nice base of annual support but really benefits from major gifts, foundation grants, and bequests. Its average individual donor has a very different profile from the average contributor in the other organization.

This difference is vitally important in understanding why some nonprofits are thriving in 2011 and others are struggling.
Unemployment is, and has been high. High unemployment dramatically constricts the flow of small gifts from working class and middle class individuals. People who are unemployed, underemployed, or fear becoming unemployed generally curtail or suspend their giving, while some cease giving entirely. This has a profoundly negative impact on an organization that relies on small transactional gifts.

Consumer Confidence is also important to individuals who make small gifts through events, direct mail, and electronic giving. These individuals make contributions out of their discretionary income. High prices on necessities like gas and food take a bite out of their budgets and damper their confidence making spending decisions on things they want but don’t necessarily need – this includes their desire to make charitable gifts.

The stock market is currently enjoying a good run. Corporate earnings are soaring. The positive impact on net worth for wealthy individuals, grant making foundations, estates, donor advised funds and corporations is significant. These donors and funds feel flush with value and are making game-changing contributions to charities, churches, donor advised funds, and private foundations. In a relative sense, these “prospering affluents” are not affected much by high unemployment and consumer confidence.

A growing economy is also good for bigger gifts. And, believe it or not, the US economy is growing. It is a very slow growth but the recession is over and has been over for months. Fragile? Yes of course, but it is growing.

So, the lesson here is that nonprofit fundraising is a function of the donor mix and fundraising portfolio of a charity and the components of the economy that affect the donor types and fundraising techniques employed by the nonprofit.

If you are fortunate enough to be in an organization that is weighted heavily toward major gifts, grants, corporate support and bequests you are enjoying wonderful growth in giving in 2011. Make hay while the sun shines. Take advantage of the current environment. Step up your solicitation efforts. Ask, ask, ask!

If however, your nonprofit is focused on grassroots support from lots of small individual contributions, you are not feeling too flush. Now might be a good time for you to invest in diversification of your fundraising portfolio so that you can begin to share in the largesse of major gifts, corporate support, foundation grants, and bequests.

But, don’t forget to keep your finger on the pulse of American philanthropy at Conditions can and do change – sometimes quickly.