Recession or not a recession? That is the question.
Every CEO and Board member is worried about this. An economic downturn. High inflation.
All of it could be problematic for your nonprofit. I say ‘could’ because it doesn’t have to be that way!
Even in a recession, your organization doesn’t have to bunker down and go into survival mode. As it is, most charities live in poverty mindset to begin with and are choosing to live day to day.
Now? They’ll go into ultra plus extreme poverty mode! 🙄🙄🙄
I’m telling you your organization can go from survival to thrival. You can GROW in 2023, even if all around you is doom and gloom.
How do I know? I’ve been there.
Lessons From Last Time
During the last major economic downturn (2008 and on), I was CEO of a nonprofit. The organization had a small budget, with around 40 employees and another 10-20 outside suppliers and consultants.
I had some successes but also made mistakes. That’s why I’m writing this post.
I want to share with you the lessons I learned. There is a roadmap to success in 2023. Some of it, in fact, is doing the opposite of what you and the Board are considering.
Here are lessons and insights for succeeding during a recession.
Keep the Conversation Alive
Fundraising is a two-way street. It’s an ongoing conversation between your organization and your supporters.
The advice? Don’t go dark!
For starters, odds are some (many?) of your donors will also be going through a rough time economically. But stopping to ask for donations means you’re making decisions for your donors. Don’t do that!
Additionally, simply not conversing with them is the OPPOSITE of what you should be doing. Even if they can’t give, you should still communicate with your donors. Keep them in the loop. Update them on what’s going on in their community.
If you shut them out because this year they can’t give, you’re gonna have a hell of a time getting them back as donors when they are able to start giving again.
This is why, when I discuss fundraising and marketing, I stress that both are about building relationships. Empathize with what your donors are dealing with on a personal level. Be there for them if they need help.
From experience I can tell you that supporters who felt the love during a tough time will be there for your organization over the long-term. But if your thought process is
- only focused on “what have you done for me lately”
- money centric
they’re gonna leave you.
The Tip: Now is NOT the time to stop communicating with donors! Why is that important? Because they’re going through hard times just like you and your organization. Now is an excellent time to strengthen relationships and build trust. It will bear fruit in the future.
Know What We’re Heading Into
There’s a good chance corporate giving will go down. Same is possible with foundations.
After all, if the economy isn’t doing well and the stock market isn’t booming, they will cut their nonprofit giving. And that sucks.
But if you already know what’s coming, it means your organization can start looking into other fundraising avenues. Do you have a monthly giving program? Are you using text to connect with supporters? Do you offer help for those who want to do a peer-to-peer fundraiser?
Your fundraising portfolio should be diversified. That was one of the biggest lessons coming from corona, especially for charity’s who relied heavily on income from in-person gala events.
If corporate partnerships take a hit, if foundations distribute less money, your job is to find other ways to cover the shortfall. There are plenty of ways to raise money. Find them.
The Tip: Don’t put all your fundraising eggs in one basket. Diversify!
Downsizing Staff Solves Nothing
When tough times are on the horizon, many organizations go into panic mode. One of their first moves is letting staff go.
As a former CEO, please read this: Firing staff to reduce costs is pointless. You end up limiting your ability to fundraise which has a negative effect both in the short and long-term.
Remaining staff members have to wear even more hats than before. More pressure, more stress. Even more fires to put out.
How does any of that help you???!!!
It doesn’t. And it’s not just your staff who suffer. It’s the people your organization is helping. When your staff is stretched too thin, they can’t provide the assistance people in the community need.
Which means your overall mission takes a hit.
The Tip: Looking at the 2023 budget and just slashing salaries as a cost-cutting move will end up costing you a LOT more today and down the road.
A bunch of years ago my friend Perry taught me the term “coopetition.” It means cooperating with your competitor’s.
When I worked for a global family foundation, the program officers were always happy to receive applications where more than one organization was involved. Partnerships were definitely looked upon favorably.
Why? The chance to help even more people at once.
Find local partners in your space and team up for corporate partnerships, fundraising campaigns, foundation applications. You stand a better chance of receiving the funding.
The Tip: Partnerships allow you to learn from others, share knowledge and find ways to make your community better for even more people. Yup, even if that partner is a competitor.
Small Donors Are Your Best Friend
Know who doesn’t stop giving in tough economic times? Small givers.
And yet so many organizations disregard them and concentrate on midsize and large donors.
Can I let ya in on a little secret? You’re doing it wrong.
Let’s take a $10 monthly giver. You might look at that and decide they’re not worth paying attention to.
Until you find out that monthly givers have a retention rate around 90%. Your other donors? If your organization is like the average, 45%.
Monthly givers have double the average donor retention rate and they have a higher lifetime value than many of your annual or one-time givers.
Your small donors are some of your most loyal givers. And if they’re monthly givers, they can be some of your best planned giving prospects.
But if you only concentrate on MacKenzie Scott type gifts, you’re leaving a TON of money on the table. And I’m pretty sure that’s a big mistake, especially in tough economic times.
The Tip: Treat a $10 donor like a $10,000 donor. If you build the relationship correctly, you can move that small giver into a major donor over time.
Don’t Cut Corners
With potential budget cuts, the mandate will be to get as much done for free as possible. If you have to pay for something, go with the cheapest quote. Saving every dollar is critical.
Until you realize that “saving” costs you a lot more than you realized.
Free is not free. There’s a cost to it.
Does that mean throw money around nilly willy? Nope. But it does mean that completely stopping to spend is a good way to prevent your organization from moving forward.
I’m a former CEO. I understand your budgetary constraints. I’m aware of the pressure from the Board and your largest donors to slash, slash, slash.
Resist the pressure! That type of thinking is short-term with negative long-term consequences the result. With everyone else in bunker mode, now is a great time for your organization to buck the trend and move to growth mode.
Work on your overall fundraising and marketing strategy and find the opportunities for growth. Invest in them today. Watch how you thrive tomorrow.
The Tip: Slash and burn is not a sound financial plan. It’s a panic plan.
Donations are down. You’re having trouble meeting payroll. You can’t continue to provide all the services your beneficiaries need.
Be honest and forthcoming with your donors when facing financial challenges.
Just like in your personal life, not everything at your nonprofit is going to be sunshine, Care Bears and chocolate cake. There are down times.
If you’ve been spending your time building relationships with your supporters, you should have no problem communicating with them that you’re facing a shortfall. Tell them why, share what’s going on and explain how you’re working to meet the challenge while continuing to operate your services and programs.
If you think that by being honest people will stop giving (“my donation will just be used to cover up their deficit”), think again.
The Tip: As I mentioned earlier, fundraising is a two-way street. Part of relationship building is being honest. Don’t shy way from the tough conversations. Have them out in the open.
I have declared 2023 as the year of Gratitude and Retention. I’m tired of crappy thank you’s to donors and of a donor retention rate that doesn’t even hit 50%.
Worried about surviving 2023? Work on your retention!
Let’s look at three data points:
- The average donor retention rate in the nonprofit sector is an abysmal 45%. You had 100 donors in 2022? Only 45 of them will give in 2023. Now you have to find 55 new donors to make up for that shortfall.
- The average first-time donor retention rate is only 20%. You worked hard and found 100 new donors in 2022? Only 20 will give again in 2023. What about the other 80? You didn’t retain them and now you have to spend time and money finding more new donors… most of whom will sadly not be givers again in 2024.
- Acquisition costs 5 times more than retention. (I’ve even seen data which says 10). That mean you SPEND a lot more money to find new donors, when it’s more economically sensible to retain current donors.
All of the above means your job in 2023 is to work on retaining the maximum number of donors from last year.
One of the best ways to do that is through gratitude. Time to show donors real love after a donation. Keep them updated throughout the year about how they’re helping solve a problem in their community. Share stories and data and demonstrate impact.
All of that will help you retain more donors this year. That means you will have spent less money (acquisition costs more) and you’ll be building more relationships which will help your organization grow today and in the future.
The Tip: “The thank you is the single most important piece of communication that your donors get. They have a higher recall of it than the appeal that generated the gift.” – Dr. Adrian Sargeant, Co-Director, Institute for Sustainable Philanthropy
When your thank you is memorable, heartfelt, warm and full of love, donors will remember that the next time you ask to give. And that will boost your retention numbers. Plain and simple.
A recession is NOT the end of the world. Your organization can thrive amidst the economic chaos. Know what to do and what to avoid and 2023 will be a fantastic year for you!
Ready to go from survival to thrival? Looking to stabilize revenue and provide sustainability for your programs? Want to experience growth, raise more money and build more relationships? I’ve got what you need! I’ll work with you to make 2023 and beyond wildly successful for your organization!