Worried about a financial downturn drying up your donations?
Recession-proof fundraising means taking action during the good times and the bad times to protect your sources of revenue.
In this post, you’ll learn what steps you should take during growing and receding economies to build a sustainable future for your organization.
During a Good Economy
Make the Good Times Count
Economist Colin Camerer identified a phenomenon among taxi drivers known as “income targeting.” Drivers set an income goal for each day (say, $200) and quit once they reach their goal.
On rainy days, lots of people need rides, so drivers quit early. On sunny days, drivers work extra hours to reach their number.
Don’t be like taxi drivers.
Fundraisers, like taxi drivers, should work extra hours during the good times, not the bad times.
When a high percentage of the population feels generous, fundraisers enjoy a higher return on investment. It stands to reason that it’s precisely during the up economies when nonprofits should extend every effort (phone drives, events, etc…) to fill their coffers.
Make Philanthropic Appeals Over Transactional Appeals
Philanthropic appeals for support focus on impact-related messages. For example, “Your donation of $30 buys 25 meals for hungry children” is a philanthropic appeal.
Transactional appeals, by contrast, focus on what the donor receives by giving. “Become a member and enjoy free admission to the museum” is a transactional appeal.
Transactional appeals can be effective when they are easier to communicate than your philanthropic appeal.
But, be careful.
“Transactional” donors will be the first donors to leave once they have to make tough decisions about what stays in their budget.
Philanthropic donors are more durable. Because they understand the importance of your organization’s work, the money they donate to you is less discretionary.
Continually hone your philanthropic messaging. Make it as simple and quantifiable as possible so it is as easy to communicate as a transactional message. Your donor lead time may increase initially, but you’ll gain more recession-proof support in the long run.
Invest in Fundraising Technology
The goals of technology investments are two-fold:
- Lower your operating costs: It’s never a bad time to make your operations more efficient. But, budget directors may be more willing to approve a software implementation during an up time, so that’s the time to ask. Moving from spreadsheets to donor management software helps you work smarter and faster, efficiencies you’ll be grateful for if you’re forced to downsize your staff during a recession.
- Encourage recurring gifts: If your nonprofit does not have technology that supports auto-renewals, fix this now! Each time you have to mobilize your regular donors is an opportunity for the donor to ignore your email or side-button your call. Recessions will only exacerbate donor attrition, and you need to do everything you can to fight it. Start with auto-renewing donations.
Diversify Revenue Streams
Diversification is money management 101 for protecting against downturns.
You won’t know for certain which sectors will get hit worst by a recession, so diversify across donor sources (i.e., corporate vs. government vs. individuals) and within donor sources.
For the latter, consider building your base of corporate donors across companies with different exposures to macroeconomic forces.
For example, a company that already sells items to low income consumers may actually perform better in bad economies.
To diversify within individuals, nurture donors across generations, employment status (mainly, employed and retired), and geographies.
During a Downturn
Stay the Course
Just because the financial markets are going haywire doesn’t mean you should too. You should maintain consistency in your marketing spend, events and messaging.
Although your first instinct is to pull back marketing spend, that’s not necessarily the best approach during a recession.
When your competitors pull back on advertising, you have an opportunity to gain exposure to a broad audience at favorable advertising rates.
Take a note from the for-profit sector: brands that increase advertising during a recession improve market share at a lower cost than during economic expansion.
Perhaps this isn’t the year to throw the gala to end all galas. But, in uncertain times, people value normalcy.
If you have a gala that is traditionally well-attended, bringing everyone together for an uplifting evening appeals to supporters.
Stay on your core messaging about how donations further your mission. Never apologize for soliciting donations, and certainly avoid crisis messaging about your organization’s dire financial situation.
If you promote your nonprofit as thriving even during tough times, donors will appreciate knowing their money is going to the right place.
Target Donors Least Impacted by the Recession
The people and business most impacted by a recession will depend on the recession.
Among businesses, makers of luxury goods and services (e.g., fancy cars, nice restaurants) and durable goods (e.g., appliances) tend to get hit pretty hard. Among individuals, young families that already have plenty of non-discretionary spending are heavily impacted.
As a fundraiser, you should be strategic about your outreach efforts. Focus on businesses with less exposure to the whims of the economy. These include businesses that provide staple items (e.g., grocery stores), public-works services or critical repairs and maintenance.
Similarly, focus on individuals with the maximum amount of discretionary money. This is likely wealthy retirees who have fixed growth investments.
Emphasize Planned Giving
Planned giving is when a donor leaves part of their estate to charity.
Because the gift will happen at the time of the donor’s death, the donor will be less concerned about the current market uncertainty. Hence, requests for planned giving may be received better than appeals for immediate donations.
Although planned giving can be complicated, most planned gifts are straightforward bequests. Fundraisers simply need to implement donor education programs and ask for the gifts.
We know that recessions are scary times for fundraisers. The ones who make it out the other side are the ones who are never complacent.
Fight for a robust financial situation during the upswings so you can weather the storm. When the storm hits, make sound strategic choices and avoid the panic button.