It's the Economy, Stupid

Fundraising in Tough Times

The declining stock market causes foundation endowments to suffer (with a corresponding impact on the availability of grant funds) and individual contributions to decrease due to the financial uncertainties. At the same time, federal belt-tightening causes government support to drop.

The Road Ahead

If your organization relies on foundation income, the troubled financial markets might have a real impact. Private foundations are required to disburse 5 percent of their assets annually. But when foundation assets shrink, their giving shrinks.

Unfortunately, it takes hard times such as these for some organizations to realize just how dependent they are on government and foundation funding, both of which are deeply affected by recessions. With this in mind, it might be smart to focus your fundraising on cultivating individual donors during this economic cycle.

Focus on Effective Fundraising

In a down economy, the key to effective fundraising is to employ a flexible, donor-focused approach and develop a highly functioning fundraising team.

Make it clear. Clearly communicate (and stress) your organization's mission objectives and the importance and impact of the programs being offered.

Go high-touch. Now is the time to acknowledge your contributors, build stronger relationships and clearly communicate how your organization is making a difference. Research conclusively shows that donors give to organizations they believe are doing a good job, because they feel good about helping out.

Make sure you communicate your organization’s needs and successes as personally as possible. Instead of an impersonal mass mailing, consider a more high-touch approach, such as a houseparty program or personal letters from board members. These are certainly more labor intensive, but they traditionally generate a much larger response.

Remember renewal and retention. You can’t afford to lose any supporters right now. Consider a renewal campaign focused on keeping donors and bringing back lapsed supporters. If your organization has already done a good job of keeping donors, focus on asking those donors to give more.

Be bold. Don’t apologize when asking for money during tough times. Let donors know that recessions are particularly hard on nonprofits, and that it is especially important that they continue giving during an economic downturn to enable your organization to continue to fund its programs and achieve its mission.

Convert to monthly donors. The lifetime value of monthly donors is much higher than those who make only single gifts. Monthly donors tend to give more per year and have higher retention rates. Present monthly giving as an option to new donors and encourage your single-gift supporters to switch to monthly.

Tap the Web. With the phenomenal increase in giving over the Internet, it’s critical to make online giving convenient. Prospective donors making traditional donations (e.g., by mail) are likely to visit your site before making a gift, so ensure that it makes a good first impression. And be sure to collect e-mail addresses of current donors so that you can regularly communicate with them online. As an added benefit during these tight economic times, when done right, online fundraising can be more cost-effective than traditional methods.

Focus on flexibility. Be sensitive to higher-end donors, who might be looking for ways to restructure their gifts because their investments have suffered in the recent market decline. You might need to work with these major donors to reshape gifts or extend payment deadlines. For example, talk with them about working with their accountant, financial planner or tax expert to use estate planning tools, like certain types of charitable trusts that might be beneficial in the current economic environment.

Treat ‘em like gold. When the economy sours, individual donors might feel that they have fewer resources to give. It’s important to convey to them how much they are appreciated. Remind them of the very real impact that their philanthropic dollars are having.

Step up your relationships with major donors by making frequent personal phone calls and, when necessary, face-to-face meetings. Remember, it’s always easier to keep an existing donor than to cultivate a new one. Donors who are respectfully recognized are more likely to continue their tradition of giving.

Involve everyone. Fundraising in tough times requires a team. Involve your board as well as your volunteers — board members can write personal letters and make thank-you calls, or even ask for large gifts in person. If your fundraising efforts have lagged, form a fundraising team that includes one or two people from your board as well as committed volunteers, program staff and community members who believe in your organization.

Is There Light Ahead?

Wise nonprofits will approach the current economic downturn with a long-range view. Following the country’s last economic shock after the terrorist attacks of 9/11, it took nonprofits three years to stabilize, according to the Nonprofit Finance Fund. During that time, more than 40 percent of the 6,500 midsize organizations that the Fund tracked reported a deficit.

However, organizations that take a long-range view and use these tough times to make fundraising an organizational priority might just come out stronger in the end.

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