You may have seen this scenario play out before: you stretch yourself and your resources to raise enough funds to meet your organization’s current budget. Then, your board approves an increase in next year’s budget to meet the growing demand for your organization’s services. As demand for funding goes up, you feel like your time for donor development dwindles at an alarming rate.
Where will you continue to find additional funding and new donors?
This is an ongoing challenge for many Westfall Gold clients. Unfortunately, non-profits don’t have access to the same capital markets and venture funding available to companies in the for-profit sector. Attracting investors in exchange for a nice return isn’t an option. Adding to the pressure, your time is limited, so you must prioritize your tasks and focus on the most promising opportunities. Fortunately, Vilfredo Pareto discovered a principle in 1895 that can help busy people make the most of their time.
An engineer with a bent for economics and sociology, Pareto discovered that 80% of Italy’s land was owned by 20% of its citizens. Others found that his principle—commonly known as the “80/20 Rule” or the “Law of the Vital Few”—has a broad range of applications. In essence, it illustrates that significant results tend to come from a proportionally few causes.
In terms of fundraising, Pareto's principle suggests that a very large percentage of contributions come from a surprisingly small number of donors. This was proven true in a recent report by the Association of Fundraising Professionals which affirms that 89% of giving comes from the top 14% of donors.
The giving data was drawn from 7,015 small to mid-size organizations, which raised $6 billion from more than six million donors as recorded by Bloomerang, DonorPerfect, Neon, and eTapestry (Blackbaud). The data is sizable and diverse, and the results have remained relatively consistent for the past six years.
The big-picture message from the data is unmistakable: Your highest priorities for finding additional funding and new donors should be 1) cultivating deeper relationships with the small number of donors who are funding most of your impact (i.e. major donors—the vital few), and 2) establishing new relationships with prospects like them. Significantly moving the needle with your major donors will have a far greater impact than similar improvements in annual donor acquisition and/or telemarketing campaigns.
This is not to imply that these other strategies aren’t needed or important. In fact, your organization needs a complete portfolio of donor strategies in order to thrive. However, establishing and cultivating relationships with major donors should be priority number one in your portfolio of donor development strategies. The trick is to spend sufficient time and resources with the right individuals.
At Westfall Gold, we use a simple three-step plan for focusing on major donor development: Identify, Engage, and Inspire.
First, identify three categories of donors and prospects:
- Current major donors at or nearly full capacity (Raving Fans)
- Current major donors and other donors with untapped capacity (Potentials)
- Non-donors with capacity for major gifts (Prospects)
Hopefully, you’re actively engaging your Raving Fans, thanking them profusely while challenging them to give prayerful consideration to increasing their support each year. You can do this boldly, as long as you continue to show donors the positive impact of their giving, and communicate this information in new and creative ways. If you’re not able to do that, they will eventually grow weary and offer their support to organizations that nurture a close relationship.
Engaging your Potentials and Prospects is challenging. Donors sometimes give to an organization based on its mission and vision but, to give sacrificially, they need more. For donors to invest their resources at full capacity, they need to feel confident that your organization shares their values and has the ability to transform the lives of the people they feel motivated to help. This calls for a heart-to-heart connection. Literature and media can provide a good introduction, but engagement happens face-to-face. As you have already experienced, in-person meetings with Potentials and Prospects are difficult to arrange, but the reward is well worth the immense effort required.
Having established a good rapport with donors, inspire them with a compelling vision of transformation. Use every available resource to help them see the future impact of their investment, how the people they help will experience lasting positive change. Then, when donors have given, inspire them further with reports on the lives they helped transform.
As you continue to identify, engage, and inspire, something wonderful happens. Donors who feel gratified by their partnership with your organization will do two important things: they will provide increasing support, and they will tell their friends. By focusing the majority of your resources on the right 15% of donors and prospects, your growing revenue will fuel your organization’s mission and vision, and fund efforts to acquire new donors.
Insights for Westfall Gold Clients:
The insights revealed in the AFP’s Fundraising Effectiveness Project are why we believe strongly in the effectiveness of Major Donor Events. High net worth individuals and couples feel safe and comfortable, which helps them make heart-to-heart connections with one another and with your staff. This sense of community helps accelerate relationships with new major donors and deepens relationships with existing major donors. Typically, we recommend your guests be 25–50% Potentials, 25–50% Prospects, and 25–33% Raving Fans. Your Senior Consultant will guide you in setting the appropriate target mix and building an optimal invitation list.