Reports of the Demise of the Annual Fund are Greatly Exaggerated

By Laurence A. Pagnoni, MPA

The annual fund is an internal phrase fundraisers use to refer to the drive(s) held during the 12-months of a calendar year to raise the revenue to cover your organization’s operating expenses.

Many readers of the LAPA blog have asked me if the annual fund is dead. Why are they concerned?

Well, they’re aware of the declining share of US households that make charitable gifts—a 10.7 percent drop since 2001, according to substantial research conducted by the Philanthropy Panel Study of Indiana University’s Lilly Family School of Philanthropy.

However, the fact is that charitable giving in aggregate has risen to record highs driven by major donors. In 2021, Americans gave $484.85 billion to charity, a 4.0% increase over 2020. Adjusted for inflation, total giving remained relatively flat, at -0.7% growth.

I recently spoke about these trends on a webinar: “Strategies for Nonprofits in a Changing Fundraising Landscape,” which you can listen to here.

Doubling Down Instead

In light of this data, it’s tempting to shift valuable resources away from traditional annual fund fundraising, but that won’t help you meet your revenue goals.

Instead, I urge you to embrace the key aspects of annual giving that have always been effective because they remain as powerful as ever.

Here are the top approaches to double down on:

  • Stellar fundraising messaging matters more than ever. I’m talking about the kind of copy that inspires readers, that motivates them to act and get involved. That kind of copy  is needed more than ever. It stands out and lets people know you’re real. In reply, naysayers will claim that “No one reads anymore.” I say that’s not true. We know from donor surveys that our best donors, the people who share our passion for our mission, read almost everything we send them! That’s why long copy still works in appeal letters. My average appeal letter is four pages long, with emotionally charged profile pictures and well-designed graphics that impress. I always close with a PS to reinforce the call to action. It’s usually always read. Make your copy unique and avoid the tropes and cliches that fill up most nonprofit appeal letters.
  • Be donor-centered and community focused: Donors give primarily because you ask thoughtfully. I wrote about that here. And while that’s true, you must also make the donor the “hero” of your materials, as fundraiser Tom Ahern describes in many of his books. This is what donor-centered fundraising is all about. Ideally, let the donors take center stage and share their stories about why they give. Furthermore, both the donor, the client, and the volunteers all exist within the community you serve, or at least identify with the community. Your donors are interested in making the community more vibrant. They want to hear what’s going on in your community. Explain it in lively ways. Above all, explain the impact of your work.
  • Plan ahead. Fundraisers have gotten better about writing development plans with measurable goals. But those with stewardship plans always raise more funds. An up-to-date calendar of the touchpoints ahead is the key to maintaining donor engagement, and the plan should integrate both email and postal mail.
  • Value-alignment matters most of all. Stop talking to the world and write for those who share your values, those who are as passionate about the agency’s mission and vision as you are. There’s no need to convince donors to give. Instead, you’re looking for people who are ready to “buy” what your nonprofit is “selling.” That’s value-based sales, which is what fundraising is about. It’s also why prospect research is essential to knowing all about your best and most carefully selected donors. The days when you could fundraise without prospect research are long gone. My white paper on this subject can be found here. The funds you’ll spend on quality research will be returned to you many times over.

One Big Action to Take

Always allow your donors to decide for themselves where their donation should go. To do otherwise is to be stuck in the past. Donor loyalty to your nonprofit is likely to increase exponentially if you take this empowerment step.

In the old days, we looked for donor loyalty and designed our annual funds to get increased gifts. That was the principle of moves management. While baby boomers may still respond to that approach, the big shift is to embrace episodic giving. Inspire the donor, close the gift.  I am still a big believer in moves management, but not for everyone as I used to be. Move’s management is passé for lower level donors who are often episodic givers, but it’s still viable for repeat givers.

Similarly, in the past we tended to want smaller donors to give unrestricted support.  We didn’t allow them to restrict or designate their gift. That day too is long gone. Unrestricted giving can be one of the options offered donors, but let the donors click off that box among other choices.  Be sure to give them a variety of choices and let them decide how to designate their gift.

What’s your annual fund strategy for these new times? Please share this post with a colleague who may be interested.

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