Name: Everything We Know About Fundraising Is (Mostly) Wrong
Uploaded: 2026-04-28T17:31:12.110Z
Duration: 27 min
Description: Everything We Know About Fundraising Is (Mostly) Wrong

Transcript for "Everything We Know About Fundraising Is (Mostly) Wrong": Welcome everybody, and thank you for joining today's Fundraising Masterclass Series with Steve McLaughlin. I'm really excited for his presentation today, called Everything We Know About Fundraising is Mostly Wrong. If you have any questions, you can use the Q and A in the chat box there, and I'll be monitoring the chat as well as the q and a. So if you have any issues, please just, don't hesitate to reach out, and we'll, get to your questions at the end of the the presentation. And I'll just go ahead and hand it right over to Steve so he can, dive in and start, start the presentation. Great. Thanks, Michael, and, thanks to the folks at Blackbaud for inviting me, back to come speak. And thanks to all of you, for joining me. No taking an hour out of your day when there's a lot of things going on, is valuable time, and appreciate you, giving me the opportunity to to present, but also hopefully respond to lots of questions from all of you today. So, I'm Steve McLaughlin. I'm the senior vice president of product at Global. Global is the trusted partner for consulting and technology that's helping to transform health care philanthropy, and I'm very fortunate, to have worked in nonprofit technology for for over twenty five years now, including some time at Blackbaud and and most recently here with Global where a lot of our focus is on the health care philanthropy, part of the nonprofit sector. So the origins for today's talk, again, I've worked in nonprofit tech for over twenty five years and had an opportunity to spend a lot of time with with organizations of different sizes, missions, geographies, etcetera etcetera. And over time, you've just learned a lot about what works in the sector and then to a certain extent, what doesn't work as well. And so back in 2016 when I wrote data driven nonprofits, I spent really the most of the past decade since then really getting a sense for this notion that sometimes there are things in the sector that we think are true, but aren't always true or are maybe mostly true or sometimes just completely not true at all. And I wanted to explore some of those topics and areas with you, today. So the first thing that I want to hit is this, which I hear all the time. Right? The the nonprofit sector is really, really big. It is, and it isn't. So let's dive into this. So according to the US Internal Revenue Service, there are over 2,000,000 tax exempt organizations in The United States. And that's technically what organizations get classified as is tax exempt organizations, a little over 2,000,000. Now of those 2,000,000, 75% of them are classified as five zero one c three organizations, which is probably the vast majority of all of you on today's call. But there's also another 25% that are some other variety of five zero one c. But today, we'll gonna be primarily focused on, where you spend a lot of your time is being a five zero one c three organization. Right? So there's about 1,500,000 of you five zero one c three tax exempt organizations in The US. And of those, 92% of that 1,500,000 have revenue less than a million dollars per year, and that means that about 8% of the five zero one c threes have revenue greater than $1,000,000 a year. So, again, we talk about the nonprofit sector being really, really big, but in reality, it's not as big as you might think it is. In The US, there are just over a hundred and fifteen thousand five zero one c three organizations that have more than a million dollars in annual revenue. So we talk about there's 2,000,000 nonprofits. Yes. True. But only about a 115,000 have annual revenue that is greater than a million dollars per year. Nonprofits don't make a profit. Surprised I still hear this sometimes twenty five years in to working with organizations. Not exactly true or perhaps needs some better wording. So nonprofit doesn't mean there is no profit. It means, something a little bit different. Right? So if we look at the definition of nonprofit, and there's a couple of them here. Right? An organization where profits are reinvested to further the mission for the benefit of the community it serves or an organization operated exclusively for exempt purposes set forth in section five zero one c three, and none of its earnings may endure to any private shareholder or individual. Now nothing in there says that nonprofit organizations don't make a profit. It's more about where and how are the profits, managed by that organization. So not shareholders, but stakeholders. And, certainly, for the vast majority of organizations, any remaining profit, that's generated by the organization is further reinvested back in the organization for the mission or to build fundraising or build capacity or a number of things. But the idea that nonprofit means there is no profit simply isn't true. So let's break that down. Right? When we talk about this idea of profit, what we're really saying is a pretty simple economics formula. Revenue minus expense equals profit. Right? Revenue meaning, from a fundraising perspective, you may have restricted revenue, temporarily restricted revenue, or unrestricted revenue depending on the types of gifts, and other funding that you receive. And that's your revenue minus the expenses. Right? So wages, utilities, all of those things that that you do to operate and run, the organization. And what you have left over at the end of the day is profit. The difference being nonprofit organizations, reinvest that in the work that they're doing, the mission that they're doing, those kinds of things. But to be clear, if there isn't anything left over at the end of the day, it's very hard for organizations to continue to operate, thrive, and grow on an ongoing basis. And so when I think about, this whole idea around revenue, I tend to think that there are four main things that every nonprofit organization of every shape, size, mission do. You get revenue, you keep revenue, you grow revenue, and you try to reduce cost or at least manage cost as much as possible. And so when I'm thinking about things organizations may need to do strategically, programmatically, things that would help to drive revenue and improve the overall financial health of the organization. Just about anything you could think of is gonna fit into one of these four buckets, and that's pretty important. Now how we measure these things is important. So if I think purely of revenue from a fundraising context and certainly know that there's other types of revenue, but if I think about fundraising revenue, how would I track and measure some of these things? So keep revenue. Well and from from a fundraising perspective, that's all about how do I acquire donor revenue. When I wanna keep revenue, well, that is all about how do I retain donor revenue. If I want to grow revenue, well, that's all about how do I increase donor revenue? How do I not only retain the existing donors I have, but how do I continue to grow and increase the revenue revenue that's coming from those donors? And then reducing costs, another way to think about this too is how do I improve net revenue? Right? What's left over after I have been able to fund my operations, my programs, all the things I need to do to drive that revenue? What is left over? And, certainly, the more net revenue that's left over at the end of the day can be used to expand, to grow, all of those really positive things on behalf of the organization. And if I don't have that, then it creates challenges, for fundraising, but really for the entire organization as well. Giving comes from lots of places. Hear this a lot of the time as well. And it's mostly true, but, there's some nuance here for sure. So this is some data from Giving USA, through 2024. We'll have some new data for us in June, July of this year. But in 2024, Giving USA estimates that it was a little over 592,000,000,000 raised in The United States, and, certainly, that number does ebb and, flow. But, you know, over the if we look at a span of ten, twenty, thirty, forty years, it's continued to grow with some setbacks along the way, to be sure. Now how does that revenue breakdown? So this is some data from the National Center for Charitable Statistics, and by their estimates, about 49% of non total nonprofit revenue comes from fee for service, 32% from government grants and contracts, about 14% from contributions, also known as fundraising, and about 5% from investment income. And so a lot of, my talk today is gonna be about that contributions part. But keep in mind, the, you know, the vast majority of the revenue, in the sector, just over 80% comes from fee for service and government grants and contracts. But contributions through private support and contributions through fundraising can be a really powerful value add for organizations, and in many cases, allow them to grow and expand, the the work that they're doing, and it's very important. So of those 14% of revenue that comes from contributions, how does that break down? And, again, we've got some data here from, Giving USA. About 66% of that giving comes from individuals, 19% from foundations, 8% from requests, 7% from corporations. The 7% from corporations also includes gift in kind. And, also, worth noting, the bequests are things like, wills and trusts and things like that. And those are really coming from individuals as well for the most part. So, you know, again, the majority of giving still, comes from individuals. Now this has changed over the past twenty years. So take some GivingUSA data from 2003 compared to 2024, and you'll see there's a shift going on here, a shift, that would appear to be a decrease by individuals and an increase by foundations. So individuals going from 74% in 2003, 66% in 2024, and foundations increasing from 11% in 2003 to 19% in 2024. But this is a bit deceiving because included in that foundational giving are donor advised funds. And so it may be that the transaction, comes from, the Fidelity donor advised fund or the Schwab donor advised fund or the local community foundation donor advised fund. But, ultimately, that is coming from an individual. So you see a shift here, but it it's really just a shift in categories. Again, individual giving continues to drive the vast majority of giving in The US. Where does that giving go? Again, breakdown of this data from Giving USA, 23% to religion, 14% to human services, 14% to education, so on and so forth. But this has changed as well. So this is some comparative data over forty years. So we look at 1984 to 2024, and you'll see, obviously, a big shift here. Giving to religious organizations went from 62% to 23%. But giving has continued to grow. So what you've just seen is giving is starting to shift to other types of organizations over time, and, certainly, we continue to expect to see this over time as well. Fundraising is shaped like a pyramid. So, you know, if you if you give a talk about fundraising, you're supposed to show this fundraising pyramid. But my experience, has been that, I've never seen a perfectly formed, perfectly shaped fundraising pyramid. You see lots of different shapes and sizes. I see a lot of space needles, so narrow at the bottom, very narrow in the middle. And then if not for the generosity of some large donors at the top, you know, it kinda looks like a space needle. The ideal shape is probably more like, the Eiffel Tower in that there's a broad base of support. There is actually mid level giving, and then you have major and principal gifts at the top too. This is some data from the Blackbaud Institute. And a few years ago, we looked at this, and this doesn't look like a pyramid at all. So this is a breakdown of the percentage of donors compared to the percentage of revenue by size of gift. So this doesn't look like a pyramid. It actually looks more like a sphinx if you maybe turn your head sideways. But the point being here that while the vast majority of donors are in that base level of giving one to $1 to $999, it only makes up about 6% of revenue. And then on the flip side, principal level gifts, gifts of 225,000 and above, are point 1% of donors, but they drive 26% of revenue. And and perhaps one of the big things here is just to note that you're not able to achieve your results by either focusing completely at the base or completely at the top. What you need is a much more balanced scale of giving across the portfolio in order to be successful. And so, again, my point here is, you know, the donor pyramid is constructed doesn't always hold up, but, certainly, the principle and the idea that you have to be balanced across all these levels of giving is very, very important. Donor retention is very important. Hear this all the time, but let's double click into the numbers. So I'm gonna give everyone on the presentation today a 100 brand new donors. This is my Oprah moment, so you all get a 100 brand new donors. But let's see what happens a year from now. What happens to those a 100 new donors? So if those donors were acquired offline, so events, direct marketing, direct mail, etcetera, you only have about 29 of the 100 donors left, and that's because the first year offline acquired donor retention rate is 29%. And that's some data from our friends at Blackbaud's DonorCentrix. If those donors were acquired online through digital channels, it's actually even worse. So you'd only have 22 of the 100 donors left. Right? And that's because the first year online acquired donor retention rate is 22%. So 29%, 22%, not great. But I would challenge us to think about this a little bit differently, because perhaps, channel is not the thing that we should spend as much time thinking about. And perhaps if we dig into the data, we'd find some other insights that are also very valuable. So we're gonna start over and forget what just happened or try to forget what just happened. I'm gonna give each of you another, 100 brand new donors. But this time we're gonna do something a little bit different. So, if the donors made a single gift, a year later, you'll have 22 out of the 100 donors left. So that's because the first year single gift donor retention rate is only 22%. But if you've asked these donors to make a recurring gift, we see something very, very different, which is this. You see a retention rate of 73%. So I have 73 out of the 100 donors left, and that's because first year multiple gift donor retention rate is 73%. Now, hopefully, this is not a trick question, but which would you rather have, 22% or 73%? Hopefully, the answer to you is obvious that it's 73%, and that's why we could have a lot of discussions about channel and what channel works and doesn't work and multichannel works and doesn't work. But here, there's a significant measurable difference in donor retention. We're talking about single gifts compared to, recurring gifts. And so, two additional ways to think about this. Again, The donor retention rate for single gifts, 22%, recurring gifts, 73%. Very few things, if any, you could do to move the needle that much. It makes that much of a significant difference. And then you might also be wondering, well, yeah, but don't they give less? Turns out, no. If we look at revenue per donor, single gift revenue per donor in a year is a $108. For recurring gifts, it's $222. So, really, by any way you measure it, retention rate, revenue per donor, all these kinds of things, we continue to see how, a shift to more recurring gift programs, yields a better result and those kinds of things. So another thing wanted to talk about here, as I noted at the outset, I learned a lot after publishing, data driven nonprofits in 2016. And ten years later, I have a new book, called How to Raise Money, which is actually a re complete rewrite of a book from 1932, but there's some interesting parallels that I thought I would touch on, here as well. So if I think about data and how much has changed in the past couple of years and especially with so much happening with the letter a and the letter a AI, you know, data isn't just a nice to have. Right? It is an operational strategic imperative. It's not optional. And poor data quality directly translates to missed opportunity. So poor data quality in your system, poor data quality in terms of how it's managed, those kinds of things. And those gaps in the data become lost revenue. Right? The more you have gaps in the data, inconsistencies in the data, at the end of the day, it absolutely does translate into lost revenue for the organization. The other thing that we know is that metrics drive accountability. Right? Metrics and measurement have never been more important. Doesn't mean that we should measure everything, but, certainly, using metrics to drive accountability in the organization is super important. In part because what gets measured gets done. Right? When we have an assignment, when we're trying to measure something, those are the things that tend to get done. So we wanna make sure that we're focused there. Right? And that there has to be open accountability that drives performance. People know what results they are responsible for and accountable for delivering on, and that o that open accountability and everyone being aware of what they're accountable to deliver and drive, certainly helps boost overall performance within an organization. Now to be clear, data serves relationships. It does not replace them. So data isn't about replacing human judgment with algorithms. Not interested in that. Data should focus the limited time we have on our highest value activities. Right? We time is probably the most precious resource of the universe. We're not getting any more of it. So we should help, our team members by allowing data to help focus, that limited time on the highest value activities. And, And, certainly, I think it's certainly true that data can only help amplify human capability. Right? Fundraising is an art and a science. It's not a choice between either one, but data can certainly help our teams in all levels of the organization improve what they're doing for sometimes that work is art and sometimes that work is science, and in either case, data can help us. One more thing I thought I would touch on before we jump into some q and a. Again, gotta talk about AI and address it, and, we could spend a whole day probably talking about artificial intelligence. But I just call back to this, if anyone remembers, back to 1996. Clippy, and, you know, he didn't last very long. Microsoft eventually removed him from the products. But this was an early form of sort of agentic AI within the application. Hey, Steve. It looks like you're writing a letter. Hey, Steve. It looks like you're working on a spreadsheet. Now it was kinda clunky and goofy at the time, but the reality is, you know, Clippy is just the grandfather of, ChatGPT and Siri and Alexa and all the tools that we use today. And, certainly, I think a lot of the recommendations and things that I've covered today are true, but AI does absolutely up open up some brand new opportunities for organizations to scale, to drive growth. In some cases, it can, certainly help with the data, but it can also help with that task management, with the activities you're trying to get accomplished, those types of things. And I I'm not big on hyperbole, but I do believe that that AI will absolutely be significantly transformative to the sector. And and, certainly, you're seeing the work that Blackbaud's doing in this area and other companies as well. Massive opportunity, and I think it's it's gonna maybe do some things that could help bring the world of both data and the art and science of fundraising together. And with that, I'm happy to open up for questions. I'm gonna I'll take a quick look at the the q and a. But as you've got questions, feel free to throw them in. Okay. One question in here. So after so one of the questions is about make the the single gift versus, recurring gift. So a couple things with note. For organizations that run a very effective, recurring gift program, It doesn't mean that they don't sometimes go back and ask for an additional gift from recurring gift donors. So for example, it's very common someone who's, giving a a monthly giving program, the organization may also go back to them in December or in June or another time of the year and ask for an additional single gift on top of it. And that's very common, but the point is they've definitely made that switch to asking for, you know, starting and leading with a recurring gift, especially when we're talking about annual giving programs. And then they may ask for an additional one time gift as a part of that. Question about the retention rate with the recurring donor, seems obvious. So what's going on here? Seems obvious, but, in fact, how many organizations are still primarily operating around single gifts? Now, certainly, if we're having this conversation in Canada, The UK, Europe, Australia, New Zealand, they would be all in on recurring giving because that's the primary mechanism of fundraising in those countries. But in The US, we're still seeing this shift, take place here. And so, it seems obvious, but that's because it works. And so if it's obvious, you know, how are organizations making more of recurring giving? How is it a bigger part of what they do? K. Doesn't look like we've got any additional questions, but, certainly, again, knew this was about thirty minutes of your time today. Really appreciate the opportunity to, meet with you, talk with you, talk about some of the the trends and topics I'm seeing, and, look forward to seeing you guys on our future webinar. Thanks, everybody. Thanks again, Steve. We do have one last question here from, sure. which says, other than recurring gifts, what are effective strategies for retaining first time donors? I mean, the the biggest thing obviously is engagement and communication that follows up. Right? So when you are stewarding that gift beyond just the thank you and the tax receipt and all those kinds of things, the more that you can communicate back to donors about what was the impact that, that gift was able to help make. So for example, because of your gift, we were able to, fund an important program that you were interested in. Because of your gift, we were able to accomplish these goals and objectives. That all needs to be part of an ongoing stewardship communication program for sure. Well, thank you. So if there are no other questions, Steve, thanks again for your time, and thank you everybody who's joined today. And, be on the lookout for a recording to this webinar in your email the next day. And also, if you have not already, go ahead and sign up for our next fundraising master class with, Shana McCracken, and she's going to be covering, what she's called the trust imperative, strengthening public confidence in the nonprofit sector. And I'll go ahead and drop that link in the chat now if you wanna go ahead and sign up. And, otherwise, I hope you all have a great rest of your day, and we'll check-in, with each other soon. Great. Thanks, again, everyone. Steve.