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What Trends in Philanthropic Giving Could Mean for Nonprofit Revenue Strategy

By: Chris Fink

Conceptually, chemistry usually made sense to me. I’d always get stuck when it came to the actual calculations involved (which is why I now work at Spectrum Nonprofit Services and not Spectrum Chemical Co.). If you picked the wrong equation, chose the wrong constant, or plugged in different numbers, the conversation could totally change. And in chemistry, that might mean the difference between calm and crisis.

As I’ve been learning more about the dynamics of philanthropy, a similar situation seems to be true: depending on the numbers one considers, and what value one attributes to those numbers, different people can draw dramatically different conclusions about the state of philanthropic giving.

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On the one hand, there’s reason to believe that charitable giving has generally been increasing in absolute value. And while those in the nonprofit sector can celebrate this on its own, that sentiment is complicated by the fact that giving as a percentage of America’s Gross Domestic Product (GDP) has been stagnant for the last 60 or so years.

 

As these trends continue into 2018, the Chronicle of Philanthropy points out a parallel dynamic pertaining to who gives: the number of contributing households has declined, and in particular, the median number of small donors has dropped. This hasn’t happened overnight, but instead has been “a balloon with a slow leak” over the last 14 years. In a country founded on pluralism, the idea that all voices will be heard and considered equally in civic discourse, we certainly have to question the extent to which America’s giving habits embody that right now. Is this what income inequality looks like in philanthropy? And is this kind of giving necessarily a bad thing?

The response to these numbers shouldn’t be polarizing or paralyzing. Organizations don’t necessarily need to completely restructure with a new army of major gift officers in order to remain sustainable. After all, most first-time donors are not large donors, even if they have the capacity to give at a high level. Instead of transforming the personnel of your organization for this moment in time, take a more strategic approach by leading with organizational values. In other words, yes it would be great to land that multimillion-dollar donation, but it is also possible to remain financially viable while achieving exceptional impact by incorporating smaller donors and building a broad base. Many of the organizations featured in Fundraising Bright Spots led with their mission and the impact they are trying to achieve in order to build authentic relationships founded partly on financial resources, but also on a commitment to a shared vision for the communities in which they operate.

Moreover, this kind of relationship-focused philanthropy is consistent with what America’s new donor wants from organizations. Generous donors in 2018 are looking for more than a place to send their dollars, they’re looking for a place to give of their time. They’re demanding action and change, and expect that their collaboration with nonprofit organizations will yield some type of measurable impact.

The take away from all this: organizations need to find their “right revenue” and align the entire organization around that strategy. A “right revenue” mix will connect the way that your nonprofit brings in dollars to the unique impact that it has on the ones it serves. No matter the profile of your typical donor, fiscally prudent organizations will ask themselves:

  1. Do we have a reliable source of unrestricted support?
  2. To what extent are our largest income sources paying for work that allows us to accomplish our intended impact?
  3. How volatile are our major funding streams? Are they changing substantially, and in what way? Is this change beyond our control?

Before getting nervous about sector trends, wrestling with whether to feel calm or chaotic, recall that philanthropy isn’t chemistry, whereby a hard and fast set of rules is attributed across a field. Instead, financial leaders will devise a customized nonprofit revenue strategy that remains true to the organization’s mission impact. They’ll see all the tools in the toolkit and will pursue the ones that cultivate donors – large or small – who are invested financially and personally in the organization’s work.

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