Would You Donate To A Soft Drink Company?

October 27, 2015       Paul Clolery      

Something became quite obvious while sipping a Diet Dr. Pepper and reading through the 1,800 statistical cells for this year’s NPT 100 in the soon to be released November 1 issue of The NonProfit Times. The numbers are improving but donors have very little to do with the enhancement.

That’s troubling on a number of levels and begs the exploration of the hypothesis of when nonprofit leaders might believe donors won’t be needed at all.

Every nonprofit executive talks about the need for donors and storytelling for fundraising. But when you do a deep dive into The NPT 100 numbers, and marry it with data from other studies, you see what’s filling coffers has little resemblance to revenue generation of just a decade ago. Many donors need a disaster to wake them from their long recession’s nap.

Data from the National Center for Charitable Statistics at The Urban Institute shows the number of public charities declined by 56,566 organizations between 2007 and 2012. Granted, much of that was Internal Revenue Service (IRS) housecleaning of dead organizations. Even with fewer organizations on the rolls, total revenue and assets increased during the period despite the worldwide recession.

The revenue spike was not from donors. Data from software vendor Blackbaud shows the number of donors declining month after month after month. Blackbaud has a direct marketing index for 75 of the nation’s largest fundraising organizations. The median change in donors from 2007 to 2014 was a 13.1 percent decline with just 35 percent or organizations showing donor growth during the period.

The Blackbaud index showed a corresponding revenue growth of 1.7 percent that plummeted 8.9 percent when adjusted for inflation.

A study released just a few weeks ago by the Association of Fundraising Professionals shows charities are losing three more donors each year than new and returning donors are giving to organizations. Fewer than half of donors supported the same charity two years in a row.

Just 43 percent of donors in the 2015 Fundraising Effectiveness Project (FEP) Survey Report who gave to participating survey organizations during 2013 gave to those same groups last year. Average donor retention during the past nine years was 44 percent, with a high of 46 percent in 2005. For every $100 a charity gained during the 2013-14 year, it lost $95 from lapsed donors and donors who reduced giving from the previous year.

Fee for service, investment income and, yes, grants from various government agencies make up the bulk of the revenue for The NPT 100 organizations. To qualify for the list an organization must receive at least 10 percent of income from those pesky, elusive donors. There are exceptions, such as Doctors Without Borders and Scholarship America where the vast majority of income is public support. By and large, it isn’t donors fueling revenue expansion for the broader sector.

Hospital systems have always had grateful patient programs but are only now starting to depend on philanthropy as a budget element. Who knows how long that will last as the nation’s healthcare system continues its evolution?

College and university endowments are more hedge fund than philanthropic activity. There will always be wealthy donors who want their names on structures. And there will be $1 billion football stadiums and science labs to build. But the low dollar alumni gifts just are not there.

Soon you won’t be able to interchange the phrases nonprofit and charitable.

Donors of larger organizations are starting to become the goldfish of the nonprofit sector. They swim in a tank with just one, made two other fish and make the people looking at them smile. They’ll get fed occasionally but won’t really have input on operations and certainly won’t be doing the heavily lifting of funding.

That’s when everything changes. If there isn’t grassroots support, there’s no sector, no exemption, no reason to fundraise. It will be all fee for service. What will then separate the sector for the manufacturer of Diet Dr. Pepper? After all, corporate social responsibility is the rage. The answer is virtually nothing.

Social entrepreneurs won’t be the answer because solving a problem is much different than service delivery and community service.

There are more than 300 college and university programs with some form of nonprofit management and fundraising curriculum, from certificate to degrees, and yet the number of donors continues to slide. Fundraisers must find a way to bring donors back. It starts one donor at a time, by telling your story.