Foolproof Fundraising – Major Gift Donors Have Money (Even in a Recession!) is Hall Powell’s take on working with generous donors during an economic downturn. Let’s hear what this celebrated fundraising veteran has to share:
Warren Buffett was once asked by a TV news reporter, what he looked for in a nonprofit organization that would qualify them for consideration as to whether or not they would be a recipient of his largesse. Mr. Buffett replied, I look to see whether or not they have an endowment. When asked why that was so, he explained that an organization that has endowment indicates (to him) that they were prepared for financial uncertainties, thus a sign of responsible management of their funds.
So many nonprofit organizations are not prepared for the financial uncertainties of our economy which could greatly affect charitable giving, especially in times of economic recession. As a fundraising consultant, and as a fundraising executive, I was always an advocate of the need for nonprofit organizations, large and small, to create a reserve fund (endowment) for the primary purpose of creating a hedge against the financial economic uncertainties. Let’s examine some ways that you can compensate for the effects of a national economic recession:
- Create a Recession Plan that Focusses on Donor Satisfaction. During a recession, major gift donors still have the financial capacity to give, while annual gift donors might not. Whereas a recession might impact a major gift donor’s level of giving, his or her frequency of giving, or the number of major gifts actually given, those who are philanthropic will continue giving (selectively) to those organizations that offer the donor the opportunity to satisfy their need to give. The need to give may be motivated by actual passion and/or conviction as to the impact of the gift, or just knowing that unless they gift certain amounts of their wealth to charities, the IRS will collect more income tax from them- money that could be helping someone or some cause. Build a recession plan around strategies and steps to reduce spending, but one that does not deny funding for programs or plans for meeting a unique human or societal need. Economize without compromise. Save where you can so that you can still fund the most important needs your organization offers. For example: Analyze special events fundraising costs and results (return on investment), and determine whether not postponing or terminating a special event(s), and devoting more time to cultivation and solicitation of major gifts would, in fact, result in a much larger ROI.
Here is where I will mention that this entire topic of operating during a recession and hedging against, and being prepared for financial uncertainties, makes a solid case for the need for nonprofit organizations to have a comprehensive fundraising program, not dependent on any one source of funding. Organizations that spend all of their human and financial resource on special event fundraising, and/or annual fund fundraising, or grant seeking, without having a flow of connected strategies e.g., annual fund, major gifts, and endowment gifts, are foolish and vulnerable to whims and wiles of the economy and human choice. Grants can dry up, events can lose popularity, and monthly giving is fickle.
Foolproof Fundraising – Major Gift Donors Have Money (Even in a Recession!)
Do you remember what the notorious bank robber Willy Sutton supposedly said as to why he robbed banks? His answer was, because that’s where the money was! Where is the philanthropic money today? According to Giving USA, the bulk of philanthropic giving every year in America comes from individual giving, not from businesses and foundations. In 2021, 76% of all charitable gifts came from individuals, while foundations gave 19%, and corporations gave 4% of the total of $484.85 billion. While we want the charitable giving of businesses and grants (government or private foundations), our focus for maximum return on our efforts, time and money should be primarily directed to strategies of obtaining gifts from individuals, especially major gifts.
I discovered in 2010, attending a training conference I did not want to attend, a model of major gifts fundraising that focused on the need of the donor to give, not the institution ‘s desire for philanthropic support. Called Major Gifts Ramp-Up, the model focused on earning the right to make the ask of a qualified major donor prospect, while building a comprehensive fundraising plan as a basis for long-term major donor relationships for the nonprofit organization. The principles in the model so impressed me, and so harmonized with the principles of fundraising I had implemented and lived, both as a nonprofit fundraising executive and as a nonprofit fundraising consultant, that I came out of retirement to introduce them to nonprofits who were serious about donor-entered fundraising – to introduce them to free-market enterprise principles that work for the nonprofit sector.
- Develop a Case for Support that Inspires Loyalty and Sacrifice from your Donors. Demonstrate strategies to reduce spending, and focus on priorities for philanthropic support. Make a case for the need of a cash reserve (endowment) and for the immediate need for funding programs and/or capital, while always stressing the uniqueness of your organization. Show-short term and long-term visions for your organization.
Please remember that a Case for Support document is meant to be more than just a printed booklet/flyer; it is meant to be your written strategic plan for fundraising, one that is compelling and easy to comprehend for the potential donor and the one who “makes the ask.” Your donors are your lifeline. Without their loyalty your organization won’t last in the good times, much less during an economic recession. Demonstrate how their loyalty will save lives.
- What ever you do, try your best not to eliminate staff. You are going to need them, and maybe even more staff, after the recession. Think about this: your fundraising staff, whether one person, or more, has spent hours, days, years (in some cases) developing relationships with donors. Don’t jeopardize those relationships with a knee-jerk reaction to the recession. Your faithful donors don’t want to lose them either. I will share with you a true, real-life story where sacrificing staff because of financial stress became a terrible mistake for a major nonprofit organization:
Years ago, I was the CEO of a major medical center’s foundation. We were the fundraising arm of the nonprofit medical center system. In my last year with them the medical center system entered into a financial doldrum due to financial mismanagement within the system. The medical center’s CEO, to whom I reported, began laying off medical center employees to offset the financial loss. He next called me and demanded that I reduce my staff. Philanthropic revenue generated for the for the medical center system, through our foundation, was in excess of $7 million per year because of the hard work of seven staff members of the Foundation who had developed personal relationships with major donors and other donors in our greater service area. To lay off one of them, saving perhaps $45,000-75,000 in annual compensation, jeopardized almost $1 million in annual philanthropic revenue to the medical center! Crazy! I argued my case with the medical centerer’s CEO and Board Chair to no avail. They were more concerned with “optics” of how it would look good to the public that they were cutting back on expenses than they were about the actual impact, not only on the financial picture for the medical center system, but also on donor relationships and advocation.
I was instructed to layoff two of my team members. I resigned from the foundation within six months and took an early retirement. I found out later that what I feared for the organization came true. Many of the major donors withdrew their charitable support, more foundation staff members left for “greener pastures,” and the annual charitable revenue for the medical center system, through the efforts of the remaining foundation fundraising team, dropped to less that $2 million per year. The unnecessary, “knee-jerk” reaction to the economic predicament came at a great price. Don’t you make the same mistake. A temporary fix could jeopardize a profitable future. By the way, I left for “greener pastures” also. I went back into nonprofit fundraising consulting, and was able to help many nonprofits build successful, comprehensive major gifts fundraising programs by implanting the Major Gifts Ramp-Up model.
Don’t forget what Willie Sutton said: Major gifts donors. “That is where the money was.” Well, he didn’t refer to major donors, as such, and the banks he robbed weren’t “donors,” but you get the idea. Go where the (big) money is for philanthropic gifts: individuals.
Foolproof Fundraising – Major Gift Donors Have Money (Even in a Recession!) was first posted at National Development Institute
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About The Author:
Hall Powell has served as Senior Vice President of Development Systems International (DSI) for more than a decade and has over 40 years of fundraising experience, including 19 as a fundraising consultant. He has provided campaign and development counsel to a wide variety of institutions throughout the country, with special emphasis in the healthcare field. Prior to joining DSI, Hall was senior consultant with the fundraising consulting firm Alexander Hass of Atlanta, Georgia. Previously, Hall served as the Executive Vice President of the Memorial Health Foundation, Inc. in Savannah, Georgia, and the founding Executive Director of the New Hanover Regional Medical Center Foundation, Inc., in Wilmington, North Carolina. He spent more than four years as the founding Director of the Amethyst Foundation in Charlotte where he played a significant role in the development of a nonprofit management seminar for Winthrop University. He also served as Director of Graduate Administration at Winthrop and was responsible for directing the Executive MBA Program as an Associate Professor in the Management Department. A seasoned lecturer in the nonprofit sector, Hall has also been an instructor with the Duke University Nonprofit Management Seminar. A Certified fundraising Executive, Hall Powell has served on the national board of directors of the National Society of Fundraising Executives, now known as the Association of Fundraising Professionals (AFP). He has also been instrumental in forming two AFP chapters. He holds an undergraduate degree from Guilford College and an MBA from Winthrop University. Hall Powell also engaged in graduate studies at Columbia International University. In his role as a fundraising counselor, Hall Powell is a strong advocate of the underlying philosophy of “donor-centered fundraising,” meeting the need of the donor to give, not putting the needs of the nonprofit organization as the primary motive for the donor/institution relationship. With this underlying philosophy for building comprehensive fundraising programs for institutions he served as Chief Development Officer, and for those he serves as fundraising counsel, he supports the Major Gifts Ramp Up Model. The model, accurately presented in 13 chapters built upon tried and proven best practices for successful major gifts fundraising, emphasizes building capacity for the nonprofit organization and long-term donor relationships. Finally Hall, is the author of The Missing Link: A Guide to Spiritual Reality
