Uncertainty abounds. The entire world has been affected by COVID-19, and no one can say for sure how long the pandemic will last or what will come next.
Like many fundraisers, you’re probably reexamining your fundraising strategies. As part of that process, you may be wondering, “Is now the time to invest in fundraising planning and donor/funder prospect research?”
Let’s consider both sides: invest, or not?
What is Fundraising Planning?
Fundraising planning includes revising your development plan, evaluating and improving your donor data hygiene processes, researching new institutional or governmental funders, and/or expanding your private donor pipeline. It may also include desk studies (assessments) to test the philanthropic market regarding what revenue is possible; feasibility studies to actively talk with prospective donors about a particular initiative; establishing or advancing a “Friends of” society; starting or expanding your donor survey methods; or social media planning, to name a few. It could also mean revising your approach to service delivery or your use of volunteers. The answers vary for different nonprofits.
Determining which fundraising plan is the most lucrative for your agency takes experience, skill, and research.
The Case for Not Investing
There is a fair amount of fear among nonprofit leaders that donors who have been reliable and loyal may stop giving. The longer the pandemic disrupts our lives and the global economy, the more people will feel the impact on their finances, which may lead donors to reduce or pause their charitable giving.
If that’s the case, then any kind of spending—on planning, research, or otherwise—should be minimal in anticipation of lower revenues. Furthermore, you simply may not have the budget for it right now, especially if your fee-for-service revenues have been reduced or halted all together.
If you already had cash reserves (different from restricted endowment funds) as a defense against calamity and decide to use those funds solely to keep your operations open, that may preclude spending on fundraising.
We’re sure there are many versions of these scenarios but suffice it to say these are the core reasons for not investing in fundraising.
The Case for Investing
The development plan you were using before COVID-19 now exists in a completely different environment. It is necessary to take a fresh look at that plan. Identifying new funding opportunities and reexamining your online fundraising is essential in order to adapt to these changes.
If your steady donors find themselves unable to give to your organization, do you know of other potential donors who are also excited about your mission? Examining your universe of value-aligned individual donors, as well as identifying potential foundation supporters that may be newly available because of COVID-19, will allow you to engage a new group of funders. This approach would diversify your revenue sources and, ultimately, make your organization more sustainable because you are not overly reliant on one particular stream of funding.
Overall, this is a time to shed the old plans if they are not working and try new approaches. We asked our esteemed colleague, Roger Craver, a legendary fundraiser, to share his views on the case for investing. Here’s what he said:
“In facing an uncertain future it’s helpful to understand that the default position for most of our sector is to resist experimenting with innovative tools and processes because we insist that ‘it’— the ‘it’ being a predictive model, a new online tool, a new multi-channel process, changing the composition of a board, seeking donor feedback, improving donor services, you name it — be 100% correct, 100% of the time. Otherwise, forget it; we’ll just stick with the same-old-same-old, thank you.”
“Of course, we arrive at such a silly belief without the foggiest idea of what the ‘failure rates’ are on the techniques and technologies we’ve been using — without questioning — for years. The examples are nearly infinite.”
Here are a few:
- “We reject the use of predictive models because they only work 80% of the time, not realizing, of course, that our old RFM segmentation processes [recency, frequency, monetary value, a marketing analysis tool used to identify an organization’s best donors] may work only 50% or 60% of the time — if we only knew.”
- “We reject the use of telemarketing for securing monthly donors because ‘it costs more’ and ‘upsets donors at dinner time,’ not realizing or bothering to calculate that our ‘failure rate’ for acquiring sustainers by mail is five times higher than over the phone.”
- “We resist firing and replacing a lousy board because we don’t want to rock the boat or feel we don’t have power, without calculating the ‘failure rate’ of a board that doesn’t give, get, or often doesn’t even bother to attend. (And it’s surely not difficult to calculate the failure rate of boards who forbid fundraising in the pandemic as ‘not in good taste.’)”
A Powerful Case in Point
Our colleague Steven Nardizzi, CEO of the Wounded Warriors Project during the 2008 recession, gives us a model for what we propose:
“If you follow only one recommendation, it should be this one. In times of fear, when you see less revenue coming in, it’s an easy first instinct to start cutting budgets. Avoid cutting your fundraising budget or you’ll start a self-fulfilling prophecy and doom-cycle. You will fundraise less, and you will raise even less revenue, further diminishing your organization’s impact. The better strategy is to target other areas for budget cuts so you can maintain your fundraising budget and not make the recession’s effect worse than it must be in the long run. The conventional wisdom among nonprofit managers during the Great 2008 Recession, fueled by expert advice, was that a decline in charitable giving was inevitable. They were counseled to accept that reality, pull back on their fundraising efforts, and batten down the hatches to wait out the coming storm.”
“Many nonprofit leaders followed that advice and saw a sharp decline in their fundraising revenue. Facing the same economic challenges at Wounded Warriors Project, we made the opposite decision and re-positioned funds to increase our fundraising budgets during 2008 and 2009. As total charitable giving in the U.S. dropped an estimated 11 percent during those two years our revenue increased 41 percent.”
You have a decision to make.
Our Counsel
At this juncture, trying to track and interpret the effects of the pandemic on fundraising is an exercise fraught with guesses; but there are a few key truths to bank on:
- Major foundations are increasing giving and even taking on billions in debt to meet the needs of nonprofits in trouble.
- COVID-19 relief funds are still interested in your funding needs for recovery, survival, and readiness for the economic woes ahead.
- Nonprofits with a strong culture of philanthropy have done better at raising revenue since COVID-19 began. There are many success stories showcasing how well it is going for those who are actually asking for money.
- Individual donations in the USA under $240 were up six percent so far in 2020, according to the Fundraising Effectiveness Quarterly Report. That is significant particularly because recent tax changes (the CARES Act) allow all US taxpayers — including those who do not itemize — the ability to deduct their donations this year.
- Giving Tuesday 2020 and year-end giving ahead are likely to be good opportunities if you’re engaged on social media and have built the right online giving strategies.
We counsel that investing in your future fundraising now will not only position your organization to weather the current storm, but will equip you for the economic challenges ahead, and prime you for growing your revenue program.
What we do know is that the vast majority of nonprofits underfund their development programs and that is a tragic mistake because it prevents you from seizing opportunities. Fundraising budgets must be better understood as a profit center, instead of as just an expense.
If you’re ready to make that investment in your fundraising planning, we would love to help you. Contact us to start a conversation about how planning and prospect research can carry your fundraising into the future.
We welcome your comments about this post on the LAPA blog.
