Donor Retention a Growing Problem for Small Organizations

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September 20, 2013; Urban Institute/Association of Fundraising Professionals

Working from a survey of 2,840 nonprofits, the Urban Institute published an analysis of 2011–2012 data that shows that over the last few years, nonprofits have been losing donors at a relatively fast rate. Between 2011 and 2012, for every 100 new and recovered donors recruited, 105 donors were lost through attrition. In the previous year, 107 were lost for every 100 new or recovered. This compares very unfavorably to pre-recession years, where the losses against gains produced a net positive.

But the news is actually worse for smaller organizations because the numbers are, as might be expected, sensitive to size. In short, organizations raising more than $500,000 had a 16.6 percent overall positive rate of growth, while those raising $100,000 to $500,000 had a net loss of -5.1 percent. Organizations raising less than $100,000 showed a net loss of -13.5 percent. The losses are correlated to losses of donors.

While these statistics are unsurprising, retaining donors takes a strong investment in development that may trail organizational size. It does indicate that the recovery, even amongst nonprofits, is favoring the rich. It also makes us want to revisit the “four futures” projections that Paul Light made at the start of the recession. One of his scenarios favored large organizations over small:

An arbitrary winnowing. This is the most likely scenario and would result in rebalancing the sector toward larger, richer, and fewer organizations. In this scenario, some nonprofits will fold, while others will prosper as contributions flow to the most visible and largest organizations as well as to those most connected to and influential with their donors. Marketing budgets and levels of community engagement may be the best predictors of survival. Well-known organizations will survive through more aggressive fundraising appeals, while some small nonprofits will survive through sheer will or because their communities are used to supporting them. Others will merge, be acquired, or simply melt away.”

—Ruth McCambridge

  • Terry Fernsler

    And the drive toward philanthrocapitalism and “moving to scale” accelerates this loss for small nonprofits. Nearly all nonprofits began as small, community-based organizations, and there is a real loss to communities when these local organizations cannot be sustained.

  • Gayle Gifford, ACFRE

    Small groups that fill so many critical community functions with very few to no development staff have to juggle their stewardship programs with all the other items on their menus. They have to be more efficient and creative, as their stewardship is being compared to the stewardship of universities and hospitals, who, as we say here in New England, have wicked more people devoted to the care and nurturing of their donors.

    With the skewering of revenue and wealth in the sector mirroring that of the larger society, and with those with significant resources becoming more and more isolated from the rest of us, we need a difficult dialogue within our sector on this gross inequality of resources. I keep asking – how much is enough for the biggest among us?

  • Pam McGrath

    I am a fundraiser in one of those small community organizations. We survived the recession barely and now are regrouping after celebrating 30 years as a local nonprofit. I can’t help but think that the next 30 years will be more centered on working as partners with other liked missioned organizations–we need to think more creatively about our business model. I worked in the banking industry at the advent of the bank holding company era – community banks partnering with one another gaining economies of scale in areas of finance, marketing and investments to help them compete with larger institutions.

  • Anne Eigeman

    Thanks for this interesting but very frustrating story. Maybe the financial challenges that many small organizations have faced with the recent government shutdown (and the related impact to local communities) will be a way to continue the dialog.

  • dana hutson, ARay

    I am on the board of a small US based board for a community in India. The trends reported will greatly impact those of us doing work outside the US as the wagons are circled. I agree with Pam that it will take creative and innovative thinking as well as sincere collaboration to advance the causes of these organizations in the next decade. More than ever these small organizations will need a clear vision/ mission so as to avoid hap-hazard strategy decisions and a clear picture of who their best partners may be moving forward.