Homelessness to increase as much as 49%. Is your nonprofit ready for this increase?

All indicators point to an impending massive increase in homelessness, hunger, and economic difficulty for individuals and families who are already struggling to make ends meet throughout the COVID-19 crisis.

The Economic Roundtable is projecting that homelessness could increase as much as 49% across the U.S. Places like Los Angeles may see even worse escalation, with increases in homelessness projected to be closer to 90% due to the pandemic.

Those most at risk of facing homelessness, job loss, and economic devastation are those already struggling on the margins, like restaurant employees, retail workers, those working in the hospitality, travel, and event industries, and even education. These areas of the economy are already the largest employers of low-wage workers across the U.S. The COVID crisis has only made things worse for workers in these industries, as many states have fully shut or significantly limited these industries due to the pandemic.

If your organization is involved in supporting those who are homeless, hungry, or struggling to overcome the impact of domestic poverty, you can't afford to rest on the successes of 2020's fundraising results. It would be very easy to assume that because donors stepped up significantly in 2020 you'll see the same thing in 2021 and beyond. But that's a dangerous assumption. What we saw in the last major economic crisis (2008 - 2010) is that generous donors stepped up to meet the need. But that increase in giving only sustained for a time. Eventually (about 2 years) we saw giving dip back down to pre-recession levels. We fully expect that dip in giving to happen again. There's no way to tell exactly when giving will drop back to pre-COVID levels, but most fundraisers know the time is coming. Unfortunately, that leveling of charitable support is likely to collide with skyrocketing need, causing many nonprofit organizations to make difficult decisions about who to help, what programs are important but maybe not immediately necessary, etc. This means that just as the needs are increasing, organizational ability to meet those needs may in fact be decreasing.

This is why nonprofit organizations need to be moving quickly to make sure that they are building to meet future needs, not resting on the successes that were experienced in 2020.

The key questions that organizations need to think through are:

1. Are your donor retention practices optimized so that you can hold onto more of the new donors that supported you in 2020? This will be a difficult challenge because these donors behave differently (at least that's what our data is showing) than "typical" mission-based donors that were acquired pre-COVID. This isn't just about your gift acknowledgement process. It's also about the stories you tell donors about the impact they're making. It's about the ongoing engagement you have with donors, whether you're communicating with them in ways they desire, and what the overall donor journey looks like for your supporters. If you want to know more about how to retain the donors you've just acquired, join me and the team from Virtuous for a candid conversation about retention on Jan 27.
2. Are you maximizing new donor acquisition while performance is strongest? Fall 2020 acquisition results look pretty amazing for many organizations. Based on these numbers, there's a strong argument to be made that nonprofits - especially social service organizations - ought to be doubling down on acquisition this Spring to bring on more new donors while there is still a "COVID bump" taking place. The more high value new donors (hint: if you're not leveraging data co-ops to maximize new donor value, you're really missing out -- the differences between co-op and rental list performance is significant) you can bring on at lower cost (which is what most of our clients are seeing right now), the better off your organization will be as you enter into any downturns in overall giving.
3. Have you launched and/or enhanced your monthly giving program? One of the greatest ways you can increase retention, annual revenue, and long-term value is by ensuring that more of your supporters transition from giving you a single gift from time-to-time to a pattern of sustained monthly giving. If you haven't made the shift to embrace monthly giving in a meaningful way, now is absolutely the time (ok, two years ago was the time -- but now is the next best opportunity!). Not every supporter is ready or interested in becoming an ongoing monthly supporter, so it's important that you have the data and modeling capability necessary to do this well. You also need to think through how to structure your monthly gift offer, and how to deploy that offer across the channels that are most likely to convert single gift supporters to monthly giving, and to help you bring in brand new monthly supporters.
4. What's your plan for deeply engaging Mid-level and Major donors? Now is exactly the right time for you to double down on engagement with Mid-level and Major donors. We saw in 2020 that the top 1% of donors in the U.S. were giving more than 40% of all charitable revenue. There's a high likelihood that this will increase in 2021 and beyond, simply due to the economic realities across the country. That means that your top donors will be critically important to your long-term growth. AND...they are also likely the top donors to 4-6 other charities in your community. So if you want to capture a larger share of their support in the coming year(s), you need to provide an experience that surprises and delights them, and communicates how valuable these supporters are to your organization. Now is not the time to skimp on donor experience or push off your relationship development calls and meetings...especially not with these donors who could make a transformational impact on those you serve.
5. How are you identifying and cultivating Donor Advised Fund (DAF) account holders? Donor Advised Fund accounts continue to grow in popularity with high net worth individuals across the U.S. According to the National Philanthropic Trust, grants from Donor Advised Funds exceeded $23 Billion in 2019 (the 2020 DAF report isn't available yet). Charitable assets on deposit in DAF accounts exceeded $112 Billion in 2019, and is growing by the day. If your organization isn't tapping into this massive asset base with current and potential donors, you're missing out on significant opportunity to increase revenue. Our clients are seeing great results with our proprietary Donor Advised Fund modeling that is helping to identify current donors who have DAF accounts, but who haven't given to them yet through those accounts. We've seen significant increases in giving once donors are made aware that giving through their DAF could make a bigger impact. In fact, we've seen average giving increase 5X - 10X from those donors! Even better...this has now been tested in new donor acquisition, using a look-alike DAF model (based on an organization's existing DAF donors), allowing nonprofits to acquire DAF donors and start off with those supporters in higher-level relationships than could ever be achieved if they were to be asked for $20 like you might typically request in acquisition.
6. Are you actually speaking to your donor like you know her? Relevance is key to retaining donors and growing their support for your organization, especially in difficult times like this. If you aren't speaking to your donors like you know who they are as individuals -- not just that you know their giving history -- but that you know what motivates and excites them, you know how they spend their free time, what they desire in a relationship with the charities they support, and where else they give -- you're likely not building deep and lasting relationships with them. Getting to this truly 1-to-1 level of communication requires a different mindset. It requires a willingness to invest in data and technology, in working differently, and in developing conversations and relationships in advance of making asks. That can all be a challenge when there's a massive rush to generate revenue. But when you approach philanthropy this way instead of simply focusing on the transaction, donors will respond at higher levels and see your organization as worthy of investment instead of simply being worthy of her charity.
7. Do you have access to the data necessary to accomplish all of this, and the expertise to know how to translate data into strategy, and strategy into action? More than ever before, nonprofits need a strong orientation to data and strategic thinking, must be prepared to leverage sophisticated modeling capabilities to drive meaningful improvements across all aspects of their business (this isn't just about fundraising -- it applies to program and business operations too!), and need to have the talent around the table who can turn all of that complex data into action that drives results.

The pace of change during this pandemic is insanely fast. If your organization is to succeed and have the capacity to serve more people in the coming weeks, months, and years, you need to think and act differently in your fundraising, marketing, and business decision-making. I hope these recommendations bring value to you in your work. I welcome your feedback and questions.