Coronavirus, election, recession—oh my! Fundraising through uncertainty
If you’re like me, your head is spinning. Every day, the headlines proclaim a new crisis. Analysts and pundits have much to say on the impact of all this uncertainty on business, politics, and society…but what about nonprofits?
Nonprofit leaders have gotten used to fundraising in election years. We’ve brainstormed how to prepare our organization for a recession. We’ve navigated global health scares before.
But all three? At the same time?
Fundraising sure looks daunting!
Never fear, the fundraising community is here for you. Below are observations, insights, and ideas we’ve gathered from our conversations with leaders in our field, as well as our own experiences.
The bottom line? Stay calm and stay focused—distraction from what matters is the biggest risk ahead.
Who’s most affected in the short term
All organizations should be planning ahead and, most importantly, putting in place safety policies and procedures for staff. But in the coming months, there are three types of organizations who are most vulnerable from a revenue perspective:
Organizations that depend on fundraising events. As fear of contagion escalates and Americans choose to stay home, events across the country—from conferences to corporate meetings—are being cancelled. Nonprofits are facing pressure to cancel their fundraising events. Those not yet cancelled face the risk of low attendance.
Organizations that depend on corporate giving. Major corporations have signaled significant revenue risk this year, which in turn creates revenue risk for the nonprofits they support. Companies most affected by the coronavirus spread including those dependent on travel (e.g., airlines, credit card companies), business operations in China (e.g., cinemas), products and supplies from China (e.g., retail, fashion, construction), and easy credit in recent years that is now rapidly tightening. Corporate foundations are unlikely to pull projected gift renewals, but new or upgraded gifts may face headwinds as belt-tightening spills over into corporate philanthropy.
Organizations that depend on travel for large gifts. Like many companies, some nonprofits are pausing employee travel for safety reasons. For organizations whose top donors are spread out across the country (or even globe), relationship-based fundraising progress will undoubtedly slow. While there are many ways to advance a relationship, there is no substitute for face time.
The “big R” that affects us all
Analysts and pundits have been discussing the possibility of impending recession for months. The spread of coronavirus across the globe has catapulted it back into the headlines. The fear is that the combination of supply chain disruptions, lost productivity from people staying home from work, lost consumer spending from people staying home from stores, and tightening credit will spiral into a drag on economies around the world. A recession touches all our lives, but nonprofits should be prepared for three major risks:
The major gifts risk. Major gifts are among the first affected by economic downturn—especially when it’s kicked off by the kind of volatility we are seeing now. Individuals can pivot philanthropic plans quickly and become reticent to make new large commitments when the future of their holdings is unclear. In addition, economic troubles may be compounded by the diversion of philanthropy to the election and coronavirus response. Some donors are already pulling back on typical giving in order to concentrate funds on key campaigns. A similar diversion could occur if the coronavirus spread escalates and costs more lives; The Bill & Melinda Gates Foundation, for example, has already committed $110 million to the response.
The cause marketing risk. According to Engage for Good, cause sponsorships generated more than $2.2 billion last year, a 4.6% increase over 2018. A recession driven in part by products not reaching the U.S. or consumers staying home could impact the potential of this increasingly important revenue source. Organizations with cause relationships heavily concentrated in one sector (e.g., retail, fashion, restaurants, etc.) are most at risk. Weak contracts—including those with no minimum guaranteed amount that the company makes up if consumers don’t reach it—are another risk.
The self-fulfilling prophecy risk. Most importantly, if the threat of economic downturn overwhelms us, we could create our own recession. As Marc A. Pitman points out, fundraisers are most effective when they are optimistic and project a hopeful vision for the future. When fundraisers grow pessimistic and apologetic, donors are less likely to give—much less transformationally. When we fundraise from a place of fear, we ask for smaller gifts, and we ask less boldly.
Learning from past mistakes
Recent decades have by no means been free of economic challenges and global shocks. And yet we’ve fundraised through it all. What can we learn from past missteps?
Don’t panic: Our brains are wired to make decisions differently in times of crisis. We act quickly and decisively with one goal: our own survival. Fear limits our ability to think. In today’s complex environment—with long-term goals for many of our organizations—knee-jerk reactions can lead to poor decision-making and unintended consequences. In times of fear, therefore, it’s incumbent on nonprofit leaders and fundraisers to actively and intentionally create space for calm, strategic thinking. We must choose forward-looking, big-picture planning over reactive, short-term decision-making—our brains won’t do it for us.
Communicate early and often. At the moment, speculation is easier to find than facts—but it’s not too early to start addressing potential headwinds for your organization. Bring fears out into the open in order to address them with calm leadership and concrete risk mitigation and contingency plans. Communicate your plans to your board and reassure them. Reinforce your focus on your mission, fundraising, and the investments that drive them forward.
Don’t slow investment in fundraising. The most common knee-jerk response to impending financial uncertainty is to cut spending. While rational, this reaction can speed the self-fulfilling prophecy of revenue decline during a recession. Spending at nonprofits is not just spending, it’s investment. It simply isn’t possible to make money without investing money—in talent (most importantly), communications, and experiences. Rather than cut spending, evaluate the returns you are seeing in each channel. Be honest—and factor in all staff time. What are the channels with the highest returns? Highest growth rates? Counterintuitively, how could you increase investment in fundraising in order to generate more revenue in successful channels to offset potential risk in others?
Beware the shiny objects. When headwinds appear, boards and leadership crave clear solutions. Be sure this desire doesn’t lead to distracting new initiatives and quick fixes. Ultimately, successful fundraising is about essentials and honing them more and more over time. When new ideas and seeming silver bullets appear, evaluate them against your core fundraising purpose: Does this bring donors closer to our mission? Inspire loyalty? Deepen engagement?
Fundraising effectively through uncertainty
Learning from our past mistakes it’s clear: fundraising effectively through uncertainty doesn’t require a special magic bullet, it requires doubling down on the essentials. There’s no better time to begin treating the “nice-to-have” improvements to your program into “must-haves.” It will take investment, but that investment will pay off in both revenue and sustainability through today’s crises and beyond.
Focus on the why. Why does it matter if your revenue keeps up? What is the problem you are trying to solve? How is its importance the same—even heightened—in this uncertainty? Tell that story to your community of supporters. Stay focused on the heart of what you’re trying to accomplish, and donors will be inspired to join you. Cancelled event? Ask sponsors to support your mission directly; offer publicity and employee engagement benefits in lieu of event benefits.
Build up your ‘portfolio’ of loyal donors. Dependent on one major revenue channel? A small handful of large donors? Now is the time to invest in diversification. Just as you wouldn’t invest your entire retirement fund in one stock, it’s risky to stake an organization’s future on one donor or one channel. Avoid the temptation to double down on high cost / low return channels (such as events). Instead, invest in beefing up low cost / low return channels such as:
Individual giving – Monthly/annual sustainer donors are exceptionally resilient in times of crisis. These donors give directly to your mission, typically with little fanfare and low cost to your organization. Invest in building this channel—whether through online giving platforms, monthly giving promotions, expanded direct response, or refreshed messaging that drives deeper engagement. And, most importantly, demonstrate impact in a way that brings people closer to the mission—make thank you calls, host a mission update conference call, send thank you postcards from your clients, etc.
Large donor portfolio – If your organization depends on a handful of large donors (individuals, foundations, and/or companies) for 80%+ of revenue, you’re like most organizations—and now is the time to invest heavily in expanding that pool of strategic partnerships. Look through your donor lists, identify similar philanthropists in your community, and build out a list of at least 5x the number of donors with the capacity to give at leadership levels. Carve out as much leadership and staff time as you can to work the list: research the donors, meet with them, thank them for their support, learn about their passions, and inspire them to be part of your future—though this period of uncertainty and beyond.
Invest in your relationships. Resist the urge to slim down staff and saddle frontline fundraisers with logistical, administrative, and other non-fundraising tasks. The surest path to a sustainable future is through your organization’s leadership and fundraising talent getting out of the office and face-to-face with your community of supporters. Show donors why their impact, specifically, matters and how their continued giving will not only fulfill the organization’s mission—but the donor’s personal philanthropic vision as well. Have a donor who says they can’t give because they’re funding the election or coronavirus response instead? Meet with them anyway; there’s no better time to better understand their philanthropic goals—and you never know when a “not now” will turn into a “yes.”
Most importantly, stay positive. Just as pessimism becomes a self-fulfilling prophecy, so does optimism. Your mission is important. Your vision is worth funding. And the donors who stand shoulder-to-shoulder with you as you work to change the world will stick with you through ups and downs.