You’ve probably seen the panic. Numerous sources, including Giving USA, The Nonprofit Times, and others have pointed out the steep drop in fundraising revenue between 2021 and 2022. Adjusted for inflation, revenue dropped 10.5% in the US.
We’ve only seen year-to-year drops four times in the last 40 years. Some countries, like Australia, have not seen a drop (according to the NAB/JBWere study and Benchmarking Project) but it is definitely getting tougher.
And while we don’t have 2022 to 2023 numbers yet, many organizations are having a rough year this year too.
But like good Halloween costumes, scary is in the eye of the beholder.
I’m going to make the case both for “scary” and for “not really scary,” because this unusual drop in income may or may not be something that gives you that feeling of icy fingers creeping up your spine.
What makes it scary
In the overwhelming number of years, fundraising revenue goes up. Year after year. Sometimes by not much, but the increase is pretty dependable.
At the same time, for many years now, the number of donors has dropped almost every year. Including in all those revenue-up years. That’s possible because the average gift has climbed, usually more than making up for the drop in donors. But the ongoing erosion of donor numbers is concerning. Maybe even scary.
It gets even more scary in those rare years where both donor numbers and average gift went down. Like in 2022. Is something fundamentally wrong that is often masked by increasing donation sizes? We don’t know. And because we don’t know, we can’t figure out how to fix it.
Another factor that makes the drop scary for some organizations is the common habit of setting the budget each year based on what happened the previous year. That can cause a lot of pain if you’ve had a couple of very good fundraising years…
… which a lot of us had. 2020 and 2021 were record-breaking years for many. The pandemic energized donors like never before to step up their giving for all types of organizations. Unprecedented numbers of new donors joined our causes. Current donors upgraded their giving.
And then things got somewhat normal again.
If you set your budget on the assumption that pandemic-level giving would continue forever, you may be hurting now, as not only has giving dropped, but it falls even farther behind budgets.
What might make it not so scary
It’s that pandemic giving that makes me feel not-so-afraid of the drop in giving lately.
I think it’s not really a drop in giving, but something more like a regression to the mean. Any time things get abnormal, they eventually tend back toward normal. I believe that’s what’s happening.
What you should really take a look at is 2022 and 2023 compared to 2019. Many organizations find that we’re returning to pre-pandemic levels – but with a pleasant twist: If you stayed active during the pandemic, you likely have a larger donor file now, with a large number of donors who upgraded during the crisis. Donors are returning to 2019 behavior, but you may have more of them, and their giving may have risen to a higher level.
If that’s the case, you have little to fear.
If your numbers now are dropping below 2019 levels, you might be facing harder times.
In fact, when the benchmarks look a little deeper than revenue, they find that donor retention has dropped – but not equally across the board. The biggest loss of donors has been first-year and second-year donors. That’s people who first gave in 2020 and 2021. Very normal.
During typical emergencies (like earthquakes), the event brings in a bumper-crop of first-time donors, people who were activated to give by the emergency. Retention of these one-time disaster-motivated donors is much lower than that of typical donors. Organizations experience a surge in donations, followed by a drop in giving.
Just like we’re seeing now, except this time, it has been playing out over the course of two-plus years, not the matter of weeks that we are used to with typical emergencies.
The other thing to note if you’re trying to decide just how scary the current drop in giving is your actual results. The news stories are about industry-wide numbers.
Not everyone’s numbers. There are some organizations that did better in 2022 than in 2021.
Many are still doing very well in 2023. It’s what specifically they’re doing, what’s going on in their communities and their sectors, and other specific factors. Those organizations read about the current situation and just scoff. They don’t understand the hand-wringing.
Then there are the organizations doing far worse than the benchmarks. I hope that’s not you!
It’s helpful to know what the big trends are; it can explain what’s happening to you. But it’s not the only truth.
So, is this a moment for fright or a time not to worry?
That’s a matter for you to decide!
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