Although we now know that the Great Recession ended in June of 2009, the felt effects of the recession continue to be seen in painfully slow economic growth and the public’s pessimism about the economic future. This sense of malaise also extends to philanthropy, of course. If the donors don’t feel prosperous, they have a hard time feeling generous.
Certainly there are bright spots such as the Gates/Buffett efforts to engage fellow billionaires in philanthropy. Gifts, large and small, are still being made. However, the economic optimism that characterized the middle of the last decade has receded significantly. “The new normal” is a phrase that has come to express the idea that this slow growth in both economic indicators and in philanthropy is expected to be with us for quite some time. Let’s consider how the playing field has changed from “the old normal.”
AFP released the results of its annual State of Fundraising survey for 2009 at its national meeting in April.[i] The survey showed that 43% of the participating charities raised more money in 2009 than they did in 2008. That sounds pretty good, but not in comparison to a typical pre-recession year where it was more common for 60% to report increased giving over the previous year. Of those that did see fundraising growth in 2009, two thirds had increases of 20% or less. Compare that to the performance of 2006 where one quarter of survey participants reported donation income growth of 50% or more.
The recession has had an even more dramatic effect on special event fundraising. Only 33% of those surveyed raised more money through special events in 2009 than in 2008. Three years ago, 74% of respondents raised more money than they did in the prior year through special events.
In fact, the AFP survey showed that overall, virtually every fundraising method, whether direct mail, telemarketing, major and planned gifts, online gifts, special events, or corporate and foundation grants, showed flat or declining results from 2008, which in itself saw declines from 2007. I hope you’re the exception, but if you aren’t you’re in good company.
Fundraisers are feeling more optimistic this year though. More than 60% of the survey respondents said they expect to raise more money in 2010 than they did in 2009. Last year the same group was much more pessimistic, with only 28% predicting a year over year increase. Another possible indicator of an improving fundraising environment is that the number of advertised job openings for fundraisers have returned to pre-recession levels.
At the beginning of this year, fundraisers said that the biggest challenges facing them in 2010 are:
- The economy (80.3%)
- Attracting new donors (46.4%)
- Declining support and sponsorships (35.9%)
- A reduction in foundation grants (30.4%)[ii]
It’s interesting to note that the challenge that looms largest in that list is the one that fundraisers have the least control over – none really. There are specific things that we can do to address the other challenges, though.
A second survey, this one of major gift donors and foundation officers published by Dini Partners in January[iii] provides an interesting – and hopeful – counterpoint to the AFP survey of charities. This was the second year for this survey and the difference between last year and this is remarkable. In 2009, 62% of these major donors anticipated reduced giving and only 5% expected to give more than the prior year. The most recent survey found that 23% would continue to reduce their giving, while 27% of donors said that their 2010 giving would return to 2008 or pre-recession levels, and another 17% say that their giving levels will at least be above 2009.
The Dini Partners report also had some useful insights into what motivates major gift prospects in these transitional times:
- Nonprofits need a clear, well-articulated, compelling, transformational, and durable strategic plan
- Quality and competent leadership is essential
- The organization should have a balanced operating budget
- The most influential factor in making gift decisions is an existing relationship with the asking organization
- There is a strong preference to make gifts that support annual operations
- The second most preferred gift designation is capital campaigns
One of the respondents to the Dini survey summed up the major gift donor sentiment like this: “The economy is like [falling to the bottom of] the Grand Canyon. The freefall is over, but there’s a river to be crossed before we climb up the other side.”[iv]
Let’s enjoy the positive side of that statement for a moment: “the freefall is over.” We’ve hit the bottom and are moving ever so slowly in a positive direction. The next few years of fundraising won’t be easy, but at least they probably won’t get any worse.
Where do we go from here? I have several suggestions.
- Keep communicating with your best prospects even if they have stopped or reduced giving
- Focus on your mission
- Know your donor population
- Prospect wisely
- Diversify your outreach
- Demonstrate good stewardship