A 4% decline in total donors and 1.6% increase in total giving reported in 2018 underscores a nonprofit funding reality with fewer donors who give a little more. Surprisingly, individual donors still make up the majority of charitable donations, not corporations or foundations. But like their institutional counterparts, these individual funders are beginning to approach giving with an investor mindset. And they expect more from nonprofits for it.
On the surface, the decrease in donors underline a discomforting trend for the non-profit world. A 6% drop in donor retention adds pressure for organizations to pursue fundraising strategies that focus on securing bigger donations and finding new donors, instead of cultivating returners. The risk of large donor dependency and high turnover further exacerbates unsustainable funding models.
Nonprofits must reckon with this new landscape and rally together to encourage a donor base across a wider and more diverse economic spectrum. But that base isn’t made up of the same donor attitudes of the last few decades. Donors from all over are beginning to look more like investors, ready to get involved and take stake in a cause to get a return on real progress. This calls for organizations to evaluate not only their models and methods, but the story they tell to attract and engage with the new normal of donor investors.
Lead with a clear goal
Like the for-profit world, nonprofit support and engagement with stakeholders depends on telling a compelling story of growth and impact. Communicating the impact an organization can make means first establishing a clear goal. For organizations, it’s a good time to reflect on their purpose and what success looks like, or why they’re doing what they’re doing in the first place.
If an organization isn’t clear on the its desired outcomes, donors certainly won’t have a better idea and will look to give their funds a more defined role elsewhere.
Just as institutional and retail investors make decisions about where they place their money based on ROI, donors with an investment mindset will hold the same standard to the money they put behind a cause. They’ll want to know and be shown how much of an effect their donation will have. For some organizations, there’s a straightforward way to quantify that impact. For others, like those who aim to achieve qualitative social impact, this can be difficult. But not impossible.
More socially impactful or broader organizations (like United Way) reveal the scope and scale of an issue, its causes, and the organization’s role in the chain (e.g., education, prevention, intervention) to prove results. Whether the impact made is local and immediate or global and long-term, it needs to be measurable (and therefore capable of being improved), building a solid case for what an investment can do.
Speak the language
An investor mindset challenges the language of traditional “giving”, a term in itself that doesn’t imply reciprocity, active engagement or involvement. Language often precedes behavior, so finding ways to emphasize active partnership rather than passive contribution can help to clarify the cause on both sides of the donate button.
Kiva, for example, uses “lend” instead of “donate” for its direct call-to-action. It turns conversion from something that is transactional to relational, rethinking the industry standard and inviting donors to continually support the mission in exchange for demonstrable impact.
Speaking like investors also means talking about how you do it along with what you do. Investors want to know how organizations use their structure, capabilities, and resources to ultimately succeed. It’s no longer enough for nonprofits to tout impact and mission — they have to prove the way they organize is led by their mission, being thoughtful and potentially disruptive in approaching an issue in the most effective way.
Modern donors are thinking about charity differently. They want to get invested, see progress, and are willing to go past one-time gifts to support causes in the long-term. There’s an opportunity for organizations to foster better engagement, build more sustainability into their funding, and sharpen their focus on the impact they aim to achieve by recruiting donors that want to be stakeholders in their mission’s success. Beyond the trend, in the long run, that’s a better outcome for everyone.