Nonprofits that depend on major donors are in the big-game-hunting business; they will succeed only if they capture big donations from a small number of supporters.
In recent years, wealth has become increasingly concentrated within the top one percent to 0.1 percent of the U.S. population, which equates roughly to one million and 100,000 people, respectively.
In the world I grew up in, the 80/20 rule generally influenced support for a cause or a product: 80 percent of your sales or donations came from 20 percent of your customers or donors. But as wealth became more concentrated, the 80/20 rule began to break down.
Now, many organizations acknowledge a 99/10 rule: 99 percent of donations come from 10 percent of donors. In today’s environment, you need laser focus.
Sample Donor Groups
Let’s look at a fictional charity with 20,000 donors. Here’s how its donor pool breaks down:
The top 200 donors — the top one percent — give 90 percent of the revenue earned from individual donors. Nine percent (1,800) of donors give 9 percent of contributions. The remaining 90 percent of donors provide one percent of contributions.
Top donors: If the nonprofit raised $50 million per year and the 99/10 rule applies, its top 200 donors would contribute $45 million. Individual donors in that top slot would probably make gifts of at least $25,000 to $50,000.
Mid-tier donors: About 1,800 donors would give gifts in the $500 to $25,000 range, representing 9 percent of contributions.
Small gifts: The remaining 18,000 donors would make contributions from $25 to $200.
In this scenario and at many real-world nonprofits, midlevel donors are vital because most future top donors will emerge from this group. And those who give small gifts are the most fertile ground in which to cultivate new midlevel supporters.
How to Inspire Larger Gifts
The goal, of course, is to keep adding new donors to the ranks of the top and midlevel tiers. To do that, savvy fundraisers know you must identify those people with the greatest potential for gift contibutions and then give them meaningful experiences.
Using a flow chart or spreadsheet, you can map out a potential route for converting small donors to midlevel contributors. For example, track behaviors such as how often the targeted donors attended events, whether they gave consistently, whether contributions increased over the years, and whether they spent time on your website. Then list new meaningful experiences you could provide to deepen their ties to your work, while you keep track of their responses to those opportunities.
The real payoff comes from doing small but time-intensive things, such as asking donors to serve on advisory boards or to mentor the nonprofit’s executives or its beneficiaries.
Inspiring bigger gifts involves building meaningful personal relationships with donors ― asking for the donors’ hearts instead of their wallets. When you do that, over the course of 10 or 20 years, a donor may move from attending a lecture and giving $100 to serving on a committee to making a million-dollar gift.
Beware a Transactional Approach
By contrast, fundraising in its crudest form does not focus on relationship building; it resorts instead to shaming.
A charity may urge a donor to buy a table at an event to support a friend. In such cases, people with no interest in the cause attend because they felt guilty saying no. And too often, charities fail to educate those guests about the organization’s impact. For example, at a recent event, an audience member asked the organizers: What would you like us to do next? The request was met with silence instead of a call to get involved in an emotionally rewarding way.
Poorly executed transactional techniques are very high risk. If you pressure a potential million-dollar donor to attend a $5,000 dinner, you may never get a chance for a deeper relationship with him or her.
Make the Investment
If a charity spends about 10 percent of the dollars it raises on development, it’s reasonable to expect that the cost of bringing in a large donation will be about 4 to 6 percent of the gift amount. So, a gift of $100 million would cost $4 to $6 million dollars to obtain. This ballpark estimate includes frontline fundraisers’ time, research to identify the donor, making initial contacts, hosting special events, and executives’ time with potential donors. If you are serious about pursuing big gifts, you must invest heavily in high-touch interactions.
To succeed in a world of concentrated wealth, charities must make larger investments in donor discovery, one-on-one interactions, and building relationship-based processes into their development operations.
Bill Davidow, a former corporate marketing executive, serves on several nonprofit boards, and his new book, “The Autonomous Civilization: Reclaiming the Future We’ve Sold to Machines” will be published in 2020.