“Things work until they don’t.”
I have no idea who first said that, but it might have been Captain Obvious. In the fundraising world, we have gone about our work as if there were an endless supply of both donors and donations. All we had to do was reach them. That worked pretty well until the end of last year. Then, very suddenly, it didn’t for most nonprofits.
According to a new analysis by the Fundraising Effectiveness Project, nonprofit fundraising dropped by nearly 2% in the 4th quarter of 2022 compared to the same period in 2021. That’s the first time total revenue has dropped since 2012. Worse, the number of donors fell by 10 percent. Here are a few of the other findings:
The drop in the number of donors follows another significant drop in 2021.
The number of donors dropped in every category, but 90% of the decrease was attributable to donors giving $500 or less.
Retention is way down, indicating that nonprofits have lost most of the new donors they attracted during the pandemic.
Although total revenue saw the biggest dip from smaller donors, total revenue from every size donor category was down. That is a big red flag. For the past few years, nonprofits have seen smaller donations decrease, but have shifted their efforts to major donors. At the end of last year, donors in the $5,000-50,000 range fell 3.6% and supersize donors ($50,000 and above) fell by 4.6%.
Revenue in the 4th quarter fell compared to the rest of the year. Think about the implications of that. End of year giving is what most nonprofits rely on to make their budgets for the year. In the past, 20-30% of nonprofit revenue has come in December alone. Not this year. That is a little scary and needs to prompt a grown-up conversation in philanthropy-land.
Is this the end of “so far so good?”
If you need an excuse, we’ve got plenty. Stock market. Pending recession. Post-pandemic return to normal. December cold snap.
But maybe we need more than excuses this time. There’s a funny line in the movie The Magnificent Seven. Someone asks Steve McQueen’s character how things are going. He says:
Reminds me of that fella back home who fell off a ten-story building. As he was falling, people on each floor kept hearing him say, "So far, so good."
There have been some seismic shifts in development, but our attitude has been, “So far, so good” even as the storm clouds have been gathering. The number of small and medium donors has been falling for some time and the drop-off in total revenue was inevitable. Trust in nonprofits is down. It’s harder and harder to find new donors. Most importantly, the way society relates to nonprofits is changing.
Instead Of Excuses, Maybe Nonprofits Need A Plan
If you were one of the nonprofits that experienced a revenue decline last year, what are you doing about it? Are you:
Telling your story in new, different and compelling ways?
Communicating and engaging with your donors?
Making a conscious stewardship effort to retain the new donors you brought in since the pandemic?
Having honest conversations with your board about your organization’s needs and how to fill them?
Using your website as the front door to your mission and inviting them inside for a look?
Taking a strategic and mindful approach to your grants program?
We need to remember that there are two kinds of pain when it comes to change. The first is the pain that comes from hardship. That’s the kind of pain we experienced in the 4th quarter of 2022. The second type of pain comes from finding a new direction. Martin Luther King summed it up best:
Rarely do we find men who willingly engage in hard, solid thinking. There is an almost universal quest for easy answers and half-baked solutions. Nothing pains some people more than having to think.
This is one of those moments when nonprofit organizations need to think about deep, meaningful change.