By Todd Baylis, Qgiv CEO. Todd Baylis founded Qgiv in 2007, a digital fundraising platform that provides user-friendly fundraising software to more than 6,500 across North America.
It’s no secret the last few years have been challenging for the nonprofit sector. Nonprofit professionals face several challenges: declining donor numbers, dwindling donor retention rates, a consequent decline in revenue, and a shrinking nonprofit workforce. Research by Giving USA, the Fundraising Effectiveness Project (FEP), the National Council of Nonprofits, and others confirms that these challenges are widespread, and now is the time for nonprofits to adapt and innovate! In this blog, I will share strategies you can implement to overcome these challenging headwinds and ensure the sustainability of your organization.
Understanding the Challenges
- Declining Donor Numbers
The first challenge that nonprofit organizations face is a decline in donor numbers. According to the latest data shared from the FEP, the most significant drop is among micro (donors that give under $100) and small donors (donors that give between $101-$500 annually). However, it’s important to note that major donor support (donations of $5,000 and above) is declining as well, although not at the same rate.
In both 2021 and 2022, increases in major gifts helped raise overall fundraising dollars, and if anything, we saw an overreliance on major gifts (nearly three-fourths of all fundraising revenue comes from major donors). In 2023 we saw the stability of major donors erode. This group donated 10% less in Q1 2023 and their decline will amplify uncertainty for nonprofits this year. 
Source: Q3 2023 Quarterly Fundraising Report published by the Fundraising Effectiveness Project
Various factors contribute to these declining donor numbers, including economic uncertainty, changing donor demographics, and evolving donor expectations. As wealth is passed from the Baby Boomer Generation to Gen X and Millennials, fundraising professionals will need to reassess their outreach strategies to engage with different generations of donors.
- Declining Donor Retention Rates
The next big challenge nonprofits face is declining donor retention. Securing a donation is only the initial step in fundraising—retaining donors is equally crucial for an organization’s long-term sustainability. A decrease in donor retention indicates a failure to build meaningful relationships and communicate the impact of a donation. 
Source: Q3 2023 Quarterly Fundraising Report published by the Fundraising Effectiveness Project
The most severe drop-off in retention occurs among first-time donors. These donors are new to an organization’s mission and giving process, so engaging them and creating a defined donor journey for this group is especially important. Once a first-time donor makes a second gift, the probability that they’ll continue to support a nonprofit with consecutive donations increases.
- Declining Revenue
Declining donor numbers and retention rates ultimately reduce an organization’s overall revenue. Nonprofits heavily rely on consistent financial support to execute their missions, making it crucial for these challenges to be addressed head-on. According to the FEP’s Q3 2023 report, Fundraising dollars decreased by 7.6% in Q3, but after adjusting for delays in data reporting, FEP estimates dollars decreased by 1.1% in Q3 compared to 2022.
- Shortage of Nonprofit Staff
Of course, it is difficult for nonprofit teams to address the challenges they’re facing when they’re also experiencing staffing shortages. Data shared in the 2023 Nonprofit Workforce Survey shows that more than half of all nonprofits have more job vacancies now than before the pandemic. This shortage is felt by fundraising professionals and creates additional stress for small teams. Our research shows that 41% of fundraising professionals believe their department is only “occasionally” properly staffed and 31% believe their department is “never” properly staffed.
Strategies for Overcoming These Challenges
- Data-Driven Decision Making
It’s more important than ever for fundraisers to have accurate data to make more informed, strategic decisions. Resources are at a premium, and understanding the effectiveness of campaigns will show nonprofits where they need to spend those resources—including staff time and dollars. With a good donor management platform, nonprofits can store data securely and ensure members of their team can pull various reports with ease. Some important data points to track include:
- Total amount raised from all sources (offline, online, sponsorships, etc.)
- Total number of donations/registrations
- Total donors/event attendees
- New donors/recurring donors
- At-risk or lapsed donors
- Donor retention rates
- Donor churn rate
- Donor levels: small, mid-level, and major donors
- New event attendees/returning event attendees
- One-time vs. recurring donations
- Donors preferred restrictions
With this data readily available, you can begin to evaluate the performance of past campaigns, adjust current strategies, and tweak your messaging to be more personalized. You can use this data to improve the performance of your fundraising campaigns by:
- Segmenting appeals to different types of donors (one-time vs. recurring, peer-to-peer donors, etc.)
- Sending personalized thank yous, giving summaries, and impact letters to donors based on their giving history
- Identifying and re-engaging lapsed donors
- And more!
- Diversify Fundraising Channels
North America is experiencing the largest transfer of wealth in its history—from Baby Boomers to their children and younger counterparts (members of Gen X and Millennials). Relying solely on traditional fundraising channels is not sufficient in the current landscape, especially as donor demographics change.
Implement a multi-channel communications approach to accommodate changing donor preferences and embrace digital platforms to reach a wider audience. Qgiv’s Generational Giving Report shows just how varied the preferences of different generations are when it comes to giving!
Source: Qgiv’s Generational Giving Report
If you haven’t done so yet, add an online giving form to your nonprofit’s website and periodically post on social media about your organization’s fundraising needs with a link to your online giving form. I’d also encourage you to explore diverse funding channels. Donor expectations have changed after the pandemic and campaigns and events need to be more engaging and offer flexible options for participation. Digital auctions, peer-to-peer fundraising, and hybrid or virtual events encourage donors to participate from anywhere and fill the new donor pipeline.
- Strengthen Donor Relationships
Building and nurturing relationships with donors is how nonprofits can overcome the decline in donor retention rates. Regular communication, personalized updates, and genuine expressions of gratitude can go a long way in making donors feel connected to a mission. Implement donor stewardship programs to demonstrate the impact of contributions and help donors understand how they are making a difference.
Getting first-time donors to make a second gift is the biggest hurdle nonprofits face when it comes to donor retention. If you follow up a first-time donation with a thank-you call or email, the odds that the donor will give again increase. Download Qgiv’s sample Donor Communication and Stewardship Plan for a detailed list of actions you can take to strengthen your donor relationships.
- Implement Recurring Giving Programs
Encourage donors to commit to recurring contributions. Monthly or annual giving programs provide a stable and predictable source of income, addressing the challenge of fluctuating revenues. Highlight the convenience and impact of recurring donations, emphasizing the long-term difference donors can make.
For donors who are feeling the effects of inflation, recurring giving offers a way to break up a larger donation into smaller and more manageable chunks. In addition to being a more “affordable” method of giving, supporters who give to an organization on a scheduled basis prove to have the highest retention rates.
Example of an online donation form with monthly giving options and a recurring donation prompt
You can offer recurring giving options in your direct mail appeals (include recurring donation options on the mail-back form) and on your online donation form. Simply having these giving options available will help you begin to get donors into the habit of recurring giving. Additionally, organizing a campaign around recurring donations will draw awareness to the option and give your organization the opportunity to explain why it’s important and how donors will make a greater impact.
- Embrace Technology and Automation
Embrace technological advancements to streamline fundraising processes. Automation tools can handle routine tasks, giving you more time to focus on building relationships with donors and crafting compelling campaigns. Explore donor management platforms, online giving tools, and artificial intelligence applications to enhance efficiency and effectiveness.
One of the many impactful technological advancements that nonprofits should implement is digital wallets (Apple Pay, Venmo, PayPal, etc.). According to The Global Payments Report, digital wallets are expected to account for 53% of online transaction value by 2025. The simplicity of tap-to-pay functionality will soon become a common expectation among donors, so look for fundraising technology that enables the addition of leading digital wallets to your donation form.
- Prioritize Transparency
Prioritizing transparency in your communications with donors will help build trust in your organization and result in better fundraising outcomes. In Qgiv’s Sustainable Giving Report, we uncovered that over 80% of donors believe that the nonprofits they give to are trustworthy, but only 58% trust the sector overall. Some ways your organization can increase transparency include:
- Add impact images and statements to your online donation form to illustrate where donations go
- Create employee spotlights on social media or in your e-newsletter to provide an inside look at the work your team does
- Share success stories and impact metrics to demonstrate the tangible results of donors’ contributions
- Communicate how donor information is handled and protected and add trust indicators to your website (Candid seal of transparency, Charity Navigator rating, etc.)
- Empower Ambassadors
Mobilize your supporters to become ambassadors for your cause. Encourage them to advocate on behalf of the organization within their social circles. Word-of-mouth recommendations from passionate advocates can significantly influence potential donors and enhance the credibility of the organization.
This can easily translate to DIY, network, or peer-to-peer fundraising if your advocates have the tools needed to fundraise on your behalf. While there are many benefits of peer-to-peer fundraising, one of the most noteworthy is how effective this method is for finding new donors. According to data pulled from Qgiv’s platform, organizations recruit 300 new donors on average using peer-to-peer campaigns. And even if not everyone in your participants’ networks donates, you’re still raising more awareness for your cause and mission.
Some resources you can provide ambassadors to fundraise on your behalf or raise awareness of your mission, include:
- A social media toolkit with graphics and sample posts
- Fundraising email and phone call templates
- FAQ document that explains your organization’s mission and impact
Conclusion
The challenges our sector is facing seem daunting, but they also present opportunities for growth and innovation. Nonprofit fundraising professionals can navigate the changing landscape by adopting a proactive and strategic approach. From data-driven decision-making to embracing diverse fundraising channels and prioritizing donor relationships, there are numerous avenues to overcome these challenges. By implementing these strategies, nonprofits can not only weather these headwinds but also emerge stronger and more resilient in their mission to create positive change in the world.
