How Can the Nonprofit Sector Reverse the Donor Decline?

The nonprofit sector depends upon revenue to support its mission of providing programs and services to constituencies engaged in its universe. With additional funding support, programs can be enhanced and a greater number of people can reap the benefits on an annual basis. In fact, just to stay ahead of inflation, fundraising revenue needs to increase each year. Ways to accomplish this include retaining more donors and reducing the attrition of donors.

It is also important that donors increase their giving amounts over time. It is also a necessity to employ continuous efforts to attract new prospects. The donor cycle of identification, cultivation, solicitation and stewardship must be functioning on all cylinders constantly to maintain progress. Why is this important? Each year, the number of donors to nonprofits has been declining.

In 2023, U.S. nonprofits received $557 billion in donations — an increase in the amount contributed annually when adjusted for inflation. On a negative note, the share of Americans who give to charity continued to fall, with a drop from 66.2% of all U.S. adults donating in 2000 to 45.8% in 2020.

Why Are There Fewer Donors?

Research has found numerous factors that could affect an individual’s desire to contribute to nonprofits. Those could include downturns in the economy, declining interest in religion, and delays in adult milestones such as marriage, home ownership and parenthood. Additionally, younger donors often give directly to individuals and causes, bypassing nonprofits. Though the giving is still taking place, it’s harder to measure and compare.

Tax Deduction

A major example of a change that affected donor quantity was a government-structured tax law. Millions of taxpayers stopped itemizing and took advantage of the standard deduction after President Donald J. Trump signed the Tax Cuts and Jobs Act into law in late 2017.

This tax change affected the number of donors making annual donations to nonprofits in the United States. A recent study found that, in 2018, Americans donated $20 billion less to charity. Though Congress is aware of the issue, they have yet to successfully pass a bill to allow charitable donations to be tax deductible for those who take the standard deduction.

Impact

Donors’ backgrounds, passions, tastes and preferences influence their giving. A donor’s first gift to your nonprofit is based on their perception of how you will use their money to make a personal impact on a cause of importance to them. Donors stop giving for a variety of reasons, but, ultimately, they want to feel good about their donations and know that their donations make an impact. One of the most common reasons a donor stops giving to charity is the belief that the charity did not need their donation in the first place.

Appreciation

Regardless of impact, if your fundraising program has been transactional in nature, donors may feel used and disengaged. After all, you must immerse donors in the transformational process of their gifts for them to understand how their gifts are assisting the organization. As a result, donors will begin to feel unappreciated.

How to Reverse Donor Decline

How can we reverse the nonprofit donor decline? The answer is not simple. You will need to evaluate your total fundraising process. The Giving Institute suggests implementing data-driven decision-making models to evaluate the donor reduction problem; diversifying fundraising channels to accommodate changing donor preferences and reach a broader audience; prioritizing transparency to help build organizational trust; and empowering ambassadors to share impact.

It is vital to focus on retaining your donors and generating new donors. Your fundraising team needs to have portfolios and build strong relationships with each donor over time. Re-engage lapsed donors with solid communications and incorporate new ways to retain these donors. Stewardship must be a priority.

Related story: Donor Retention: Why It's Decreasing and 5 Things You Can Do About It

Make sure your organization’s priorities are in alignment with your donors’ passions and interests. Soliciting and stewardship of donors are of paramount importance. Constantly seek to increase their giving amounts. This process will take time. Therefore, a focused strategic and operational fundraising plan is necessary. Classify and segment your donors to determine their potential. Then track and analyze results and continually adjust your strategies to evaluate and refine donor retention programs.

Remember that it is important to increase funds raised and number of donors annually for your nonprofit to grow and succeed in its mission over time. Evaluate your results constantly, examine your data and seek to make adaptations to your fundraising program.

The preceding content was provided by a contributor unaffiliated with NonProfit PRO. The views expressed within may not directly reflect the thoughts or opinions of the staff of NonProfit PRO.