Fundraisers are nervously watching the economic indicators and stakeholders’ reactions to the ups and downs of the stock market. Do we batten down the hatches? Do we ride it out, hoping for the best? What is the right move at this time?
The good news is that, historically, giving during a downturn has dropped by only 0.5%. Even during the great recession of 2006, the S&P 500 dipped significantly more than giving.
Two big questions remain to be answered:
- Will we swing into recessionary territory?
- Is the economy in good enough shape to weather the storm without affecting our efforts to sustain and grow funding?
The economy is in significantly better shape going into the second half of 2022 than in other recessionary periods. Unemployment remains low, the stock market has enjoyed a 42% gain over the past 5 years, wages and earnings are up and, generally, people saved money during the pandemic. These are all positives for fundraising. In addition, foundations typically use a 3-5 year lookback of gains/losses when determining their annual funding dollars. The year 2021 was the most profitable year for American corporations since 1950, surging 35% (U.S. Dept. of Commerce).
We are advising our clients to hope for the best, but prepare for donors to get edgy. It is important to segment your donor population. Hyperinflation affects the middle class and poor much more than it affects the wealthy, but it DOES affect everyone and everything, just in different degrees.
For example, older donors are not as affected by fuel prices and mortgage rates. They have invested over the long-term and still enjoy significant gains. Wills and planned giving are still on the table every single day of every week. Mortality is still a reality, so ensure your giving options around DAFS, stock and all planned giving options are readily available to donors.
Nonprofits must continue to tell their story. It’s better and more effective to all programming efforts to raise revenue than to cut costs. However, your funders don’t know what they don’t know. Be specific about your needs and inflationary pressures on your organization and how it affects your mission. “Will you give $2,000 to allow 20 more women access to quality pre and post-natal care” sounds better than “will you give $2,000 today to fund our programming?” In times like these donors will prioritize what is important to them.
Despite recessions, there have not been significant shifts in the percent of income spent on charitable giving. Average income donated to charities ranges from 3-5% of annual gross income. Wages and earning are up. All this being said, this does not mean it will be easy to get the gift. The psychology of a donor is affected in times like these. The headlines are scary. Spell out the tax-smart gift options like qualified charitable donations, workplace deductions and various assets. As long as people are earning an income, there is opportunity for giving.
Be respectful with the ask, but don’t quit asking. There will be more competition for your donor dollars, but if we 1) focus on expanding gifts from the donor community by telling your story and 2) educate them on smarter ways to give, perhaps we can move through what lies ahead without the bruises and scars that a downturn in the economy can place on our industry.