Posted December 1st, 2008

Walking an Economic Tightrope

The events of this fall in our country’s financial markets have been unsettling for many Americans. For those responsible for nonprofit fund development, it has been particularly worrisome.

Even if the economy recovers its footing and resumes a healthy rate of growth over the coming months and years, the uncertainty experienced in the past weeks will not soon be forgotten.

Charitable giving during sluggish economic times is a classic example of the glass being half full. Over the last several decades, charitable giving has only dropped 1% on average in inflation-adjusted dollars during periods of economic downturn. Indications are that some charities actually see increases in giving during down times. (See the November 2008 issue of Give & Take.)

The good news is: history reveals it is possible to succeed in this environment. The bad news is: everyone won’t.

Connect with core donors

What will be the distinction between those who succeed and those who don’t? Three factors will be key to your success: the mission of your organization, the sum total of all your past fundraising efforts, and what you do now.

Now is the time to concentrate on the fundamentals, play a conservative game, and do what history shows us will work.

Recall the basic mix of motivations that underlies every gift to a greater or lesser extent: religion, social theory, political theory, emotions, and tax and financial considerations. Your best donors have never been and will never be motivated to support your organization or institution solely to save money on their taxes. They are motivated by the nature of your mission, the degree to which they feel connected to your cause, and their desire to be a part of the future you are helping ensure.

When times are tough, the process of managing your development efforts will require you to make the same deliberate decisions your own household will make: cut all nonessential spending, purchase basic goods and services thoughtfully and wisely, and continue to save for the future.

Your major and planned giving efforts are especially critical at this point. Acquiring new donors may be more challenging for the foreseeable future. Long-time donors can be encouraged to create planned gifts to help make up what may be lost in other fund development areas.

Make your mission relevant to these donors. Now more than ever, every story you tell and every request for funds you make must paint a compelling picture. Thankfully acknowledge every gift. Recognize donors for their longevity of giving. Thank donors based on the cumulative amount of their overall giving.

Beware of trendy marketing

Most organizations at this time can no more afford to expend precious resources marketing bequests to 45-year-olds than they can afford not to spend on targeted bequest mailings to 75-year-olds. Can a 45-year-old be motivated to include your organization in his/her estate plans? Absolutely. Can your organization ultimately receive a sizeable gift as a result of such marketing efforts? Absolutely—in approximately 40 years. Where were you in 1968? That’s how long 40 years is.

At the same time many are advocating “drilling down” into your donor file to market bequests to younger and younger donors, they are also encouraging nonprofits to make the switch to Internet-based fundraising. Will 80-year-olds be as comfortable with Internet marketing as 40-yearolds? Once again, absolutely—in approximately 20 years.

For organizations and institutions of all shapes and sizes, the profile of a typical bequest donor remains unchanged for the 21st century. This donor has been giving to your organization for three years or more, she completes the will that ultimately leaves a gift to charity at age 79 or older on average, and passes away three to five years later.

For those charged with supplying their organization with steady, reliable planned gift income over the coming years, the 70 and older donor group is where you need to concentrate your efforts. If you have few donors over the age of 70, then recognize the innate funding limitations of gifts that require donors to pass away and focus your marketing dollars and efforts in more productive ways.

Surveys of intentions of younger persons cannot be used to accurately predict bequests in the future. By definition it is impossible to survey donors who follow through and leave bequests.

The content of this article is based on experience derived from The Sharpe Group’s 45-year history of providing consulting services to America’s nonprofit community, including the detailed profiling of thousands of donors where bequests were actually received.

Other gift plans may get second look

Perhaps because of the economic conditions we are currently experiencing, many older donors may be particularly drawn to the certainty of a charitable gift annuity. Now may be an especially fruitful time to market these opportunities. According to the American Council on Gift Annuities surveys, the average age of a person at the time they enter into a gift annuity is 78, as is the median age. Few are under the age of 70, and many organizations have found more of their gift annuitants are over 80 than under 70.

Additionally, keep in mind that not all planned gifts are deferred. Gifts providing income to your organization in the near-term will be especially welcome at this time.

Gifts such as a charitable lead trust or a term-of-years charitable remainder trust may be prompted by various motivations. These are the types of gifts that should be presented to donors in the under 70 group—gift plans that don’t require them to pass away to yield benefits.

Some near-term planned gifts may be an acceleration of what would otherwise have been a bequest. Other near-term planned gifts may represent a replacement for what may have been an outright gift of cash during better economic times.

In other words, some donors may see urgent needs and decide to structure their gifts to help the nonprofit recipient sooner than originally planned. Other donors will find themselves in uncertain financial circumstances and need the flexibility in timing a planned gift can accomplish, rather than writing a check as they might have done in the past. The key is to match the right gift opportunities to the right donor at the right point in life.

Focus on moving ahead

The fundamentals of successful fund raising will not change. Today’s challenge is to continue running your program as before, but consider yourself operating on a tightrope, 1,000 feet in the air with no net below. It doesn’t help to stop to look down or turn to look back. Focus your eyes ahead on your goal and move forward carefully—one step at a time.

Planned gifts are not exclusively for the old, or for the young, or for the wealthy, nor are they gifts only for the not-so-rich. Planned gifts are timeless tools—often more broadly used during times of economic adversity—that help motivated donors make gifts in ways that are best for them as well as for their charitable interests.

If you are clear and compelling in communicating your mission to your donors, considerate of their time and attention, appreciative of their gifts, and prudent in the management of the resources they provide, you will succeed, even in the most turbulent of economic times.

Editor’s note: For a complete memorandum and report on giving during the Great Depression, please visit www.sharpenet.com/uncertaintimes/.

The publisher of Give & Take is not engaged in rendering legal or tax advisory service. For advice and assistance in specific cases, the services of your own counsel should be obtained. Articles in Give & Take may generally be reprinted for distribution to board members and staff of nonprofit institutions and other non-donor groups. Proper credit must be given. Call for details.

Give & Take

Site Search

Give & Take Archives

2017 Issues 2016 Issues 2015 Issues 2014 Issues 2013 Issues 2012 Issues 2011 Issues 2010 Issues 2009 Issues 2008 Issues 2007 Issues 2006 Issues 2005 Issues 2004 Issues 2003 Issues 2002 Issues 2001 Issues 2000 Issues 1999 Issues 1998 Issues 1997 Issues