Do you hear the sound of engines revving in the distance? That’s the sound of hundreds – thousands – of development shops gearing up as the pandemic wanes. Fundraisers hitting the road. In-person visits. Special events being scheduled.
In a few months that distant sound will be a roar.
Organizations across the nonprofit landscape will look to recover from the havoc of the last year, and even those that have seen record gift income during the pandemic will challenge fundraisers to grow the Annual Fund.
The generosity of donors has been shocking. Time after time, Fiscal 2020 results exceeded goals that were set before the virus hit, and December 31 responses were been similarly robust. With renewed confidence in Washington, with widespread vaccinations and a stronger economy, all signs point to new heights of philanthropy ahead.
But beware. As we enjoy a return to normalcy and eye audacious goals, danger lurks.
There is a beast in our midst. A beast with an insatiable appetite. And the beast demands to be fed.
A reckoning is coming.
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A friend and I were talking the other day.
“You know,” I said, “When we both started out in this business we met our Annual Fund goal with grants, events and mail.”
“You’re right,” my friend concurred. “That was it.”
“Then,” I continued, “Special annual gifts came along. The $1,000 donors. The President’s Club. We needed higher level annual gift to make our goals, to meet the organization’s income budget each year. We couldn’t depend on direct mail to bring in that level of gift. We needed to ask for them in person. Most major gift officers ‘cut their teeth’ asking for $1,000 gifts. It was great experience because you’d be out making lots of asks.”
We smiled. We both had asked for a lot of $1,000 gifts.
My friend nodded. “But thinking back, did anyone really notice that grants, events and mail weren’t enough for the Annual Fund anymore?”
“I don’t think so,” I said. “Making the goal was the important thing. The only thing. We just did it.
“Then a few years later, more annual gift income was needed. So we turned to major gifts. We started asking donors to make $10,000, $25,000 and even larger gifts every year to the Annual Fund. We needed those big gifts to make the goals we were given to raise.”
“And pretty much like the rise of the $1,000 donors,” my friend offered, “did we ever stop and think about the impact of needing major gifts every year just to balance the budget?”
The answer is, no. Not really. The vast majority of organizations build the expense side of the budget before building the income side. The Budget Beast grows and grows year after year. To feed the Beast, we’ve seen the increasing dependence on larger and larger gifts described above.
Problem is, for most donors, a major gift is not an annual gift. Fundraisers cannot depend on donors to repeat “major gifts for the Annual Fund” year after year. We need to leave those donors alone for a while. Do we have enough major gift prospects to take their place?
If we need to wait 2-3 years to ask that donor for another major gift, do we have 2-3 times that number of major gift donors?
Do you?
There is yet another trend beginning now. And it will be our reckoning.
I asked my friend, “Go back again to when we started out. What did campaigns raise money for?”
“Only two things. Capital and endowment.”
“Exactly. Those were the only two things campaigns did. Grow the endowment or build a building. Now, more and more, we see campaigns to support program operations wholly supported in the past by the Annual Fund.”
When the campaign ends and the goal is reached, when new or enhanced programs are funded, there are smiles all around.
When the campaign pledges are finished and campaign income dries up, do those programs go away? No, they don’t. Where will the money come from to sustain those programs?
The Annual Fund.
As the pandemic wanes and normalcy returns there are hundreds of Campaigns in planning whose internal goal is to “take the Annual Fund to the next level.” Why?
Because the organization’s budget demands it.
A Campaign can be a very effective way of growing the Annual Fund. We raise donor’s sights, focus giving on projects not money, make more visits, shine the spotlight on generous giving.
What’s not to like?
Only one thing. A Campaign succeeds because of major gifts, which by definition do not occur each year from the same donor. When the Campaign is over, the organization needs a major gift donor pipeline wide enough for the number of major gifts needed each year for the programs they will support. Perhaps 5% of nonprofit organizations have a major gift pipeline that wide.
Yes, a Campaign raises the sights of our donors and yes, a Campaign raises up the Annual Fund. But for how long?
And to the level the Budget Beast demands?
What’s left when Campaigns aren’t enough to meet Annual Fund goals?
The Reckoning.