Friday, September 9, 2011

Pyramid of Giving

Ah, the one key principle that all development professionals learned either at their first AFP meeting or within their first week on the job.

The Pyramid of Giving…the idea that a small number of donors contribute the vast majority of your revenues. And, that a large group of donors contribute the rest.

The industry standard is that 20% of your donors give 80% of revenues and 80% of your donors give 20% of your revenue. Your top 20% are Major Donors and your bottom 80% are Annual Fund Donors:

In this sample, 72 donors give $251,903 and 288 donors give $62,976 of the organization’s total revenues.

This pyramid has been skewed somewhat in recent years – as average gifts among all donor levels have shrunk, thanks to the Great Recession – but the principle remains.

This somewhat lumpy proportion is how most healthy companies and nonprofits operate. A few large clients/donors provide the bulk of revenue, yet are balanced with smaller clients who provide valuable and necessary revenue.

It’s important to focus on both giving buckets equally, but differently. At Arrowhead Management, we spend a lot of time working with small and emerging nonprofits to help them maximize their time and resources with annual fund donors, because sometimes, it’s easy to dismiss this group.

In our next blog, we’ll discuss why Annual Fund donors are so important.