Filling the gas tank won't help

Earlier this week a well-known and reputable fundraising agency leader acknowledged the concern around individual giving rates and the fact that fewer donors are giving today than have in the past. That rate of individual giving is in multi-year decline, for a multitude of reasons.

However, what gave me pause was the proposed solution to this problem.

The solution that this agency head recommended is not surprising. It's also not novel. Or innovative. The solution was "...we must adopt an investment mentality and lean harder into new donor acquisition."

Here's the problem with that...

Using an automobile analogy...the engine is leaking fuel nearly as fast as that fuel is being put into the car. The car is breaking down. And instead of focusing on fixing what is wrong with the car so that it no longer leaks fuel, or at least so it leaks at a slower rate, the proposed solution is just to go pay more money to pump more gas into an engine that's going to leak it out the back nearly immediately.

If your organization isn't retaining donors (and we know from national data and trending that most organizations aren't retaining donors at acceptable rates), and most organizations also aren't engaging donors in meaningful ways that allow those supporters to maximize their investment in the charity's mission (again, we know from the data that most organizations aren't doing this), it makes zero sense to just continually fill your engine with new donors when you know you're just going to let them quickly leak out of the organization (with 50%+ never even giving a second gift).

This is both fiscally irresponsible and doesn't allow organizations to actually achieve mission impact.

But I understand why traditional fundraising agencies see this as the fix to retention problems. They're stuck in a business model that has very few solutions to complex problems, and their focus is on transaction volume, not relationship quality.

But there's a better way.

That better way requires that we start with the end in mind. And if the end in mind is developing high value relationships with supporters, then that demands we begin to think and act differently. It doesn't mean we stop new donor acquisition. But it absolutely means that we adjust our investment strategies to focus more on donor stewardship, impact reporting, and inviting donors into personal relationship so that we can actually begin to change the way donors experience our mission and put us on a path to align with donors' priorities and beliefs instead of just focusing on sucking transactions out of our most committed supporters.

This better way requires that we stop prioritizing the size of our donor files and we start prioritizing the quality of connection we have with our donors. It requires that we put less emphasis on growth in gross revenue and we aggressively pursue net revenue optimization. And I don't just mean cutting cost (although that might be part of the solution). The way we maximize net revenue is by focusing on relationships and uncovering opportunities to invite our supporters to give transformational gifts to advance our mission.

Another key change in our thinking that will improve our net revenue is to stop chasing cash gifts. Only 10% of all wealth in the U.S. is held in cash. Yet nonprofits focus all of their direct marketing on checkbook and credit card giving rather than encouraging donors to give from their wealth (assets). If 90% of all wealth in the U.S. sits in Donor Advised Fund (DAF) accounts, IRA's, stock portfolios and real estate holdings, why are we not taking every opportunity to talk with donors about how they can make a bigger impact by giving from these assets?

Oh, that's right. It's because we're too focused on investing more of our time, effort and limited budgets on acquiring new donors.

Filling the gas tank while the car is breaking down is not the answer.

Hit me up if you want to explore a better way to fundraise.