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.
Now that you’re convinced a major gift program is the cornerstone to an effective fundraising strategy, let’s share some ideas for what your program could look like:
1. Launch a (removable) donor wall in your lobby to recognize annual giving above a pre-designated amount. For instance, if your average gift is $50 and the top 20% of your donors give $500 and higher, make $500 the minimum for listing.
Quick case study: We had one client that employed this like gangbusters; during Q4 of their fiscal year, they sent an appeal to all donors the past year who gave at least $500, sharing that the donor wall printing was coming up and they hoped to include that donor. It was a terrific solution to sluggish summer giving.
2. Or, adjust your donor wall upward based on cumulative giving.
3. Create specific ‘benefits’ for major donors. Customize based on your resources and assets, but good ones we’ve seen include: website listing, (e-)newsletter listing, naming this group, donor wall, freebie invitation to signature events for the highest giving levels and a major gifts-only reception/event/activity/engagement (exclusive lunch with the founder/visible and popular Board Member).
4. Make sure to let higher level annual fund donors know about your major gifts program. If your major gift program begins at $500, share your major gift program with your $250-$499 donors.
5. Further stratify and re-think qualifications annually. For instance, $500 may start your major gifts program, but if your single largest donor contributes $7,500, you’ll need additional recognition opportunities for that donor and others near that level.
Additionally, re-run your 20% donors/80% revenue analysis each year; you may find your top 20% of donors shifts to $750 and you’ll need to adjust accordingly.
You may want to wait until that trend occurs for two years – and, secure buy-in from Board and Major Donor Solicitors before simply changing.
But, be proactive and aware of such changes, as you succeed with major gift fundraising!
We’re often asked by clients and prospective clients why should they start a major gifts program? Typically, we hear this from small, start-up nonprofits.
Many cannot spare the human capital needed to prepare, meet and follow up with individual donors.
We understand the importance of effectively allocating human capital assets to maximize an organization’s impact on its mission and other fundraising activities.
However, we also believe to achieve growth and sustainability goals, major gifts from individual donors are the cornerstone of any effective fundraising plan:
1. Your philanthropic sources should be aligned with industry trends: approximately 80% of giving in the U.S. is from individuals (grants– 12%, corporations – 5% and government grants – 3%). To achieve this balance – even with a modest $250,000 budget – fundraising professionals will spend hours upon hours chasing after their average gift donors ($35) or, worse yet, will seek grant funding, which is ultimately unsustainable.
2. Without a major gift program, you’re signaling to your community that $35 is a mission-critical gift. If you truly wish to expand your impact, $35 can’t remain mission-critical. To change your organization’s culture of small giving and grow beyond a grassroots movement, you must lead the way among your donors by launching a major gifts program.
3. It’s an expectations game and some donors in your community will absolutely ‘step up’ to this challenge of giving more than your average of $35 because your mission has special significance to them. Fundraising is an opportunity for donors to express their values; give your donors a vast array of opportunities.
4. Introducing and maintaining a successful major gifts program entails one of our favorite themes: segmentation. You will undoubtedly communicate with a major donor differently from a $35/annual fund donor. Such effective communication ultimately makes all donors happy.
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