2021 Nonprofit Fundraising Predictions

On February 26, 2020 I was sitting in a hotel room in San Francisco having just met with one of my key client partners – an international ministry organization. News was just beginning to break about a new virus, and states were starting to talk for the first time about “locking down”. It wouldn’t be long before the entire country faced the COVID-19 pandemic and the resulting physical, mental, emotional, and economic distress it would cause.

Nonprofit organizations were hit particularly hard by the pandemic, as the needs of people across the nation have increased exponentially. Thankfully, for many organizations and causes, their most generous donors have stepped up in significant and generous ways to help offset the economic impact of the COVID crisis. While giving has increased over the last 10 months, the one question that I continue to get from fundraisers, executive directors and board members is, “What will 2021 bring?”

That’s a fair question, and one we should all be thinking about.

Here are my 2021 nonprofit fundraising predictions, based on two decades of experience, an assessment of market trends, and some strong gut feelings…

Constant Disruption Will Be the Norm

Those who have predicted a “return to normalcy” don’t quite understand that the fundraising landscape hasn’t simply changed this year. The actual ground underneath us – the foundation of our nation and our economy have been fundamentally changed by this pandemic. Because of that we’ll be in a state of ongoing disruption for years to come. Organizations that adopt a mentality of pilot, pivot, and scale have a good chance at success. But organizations that choose to “stay the course” (whatever that means at this point) will likely see their impact diminished – and some may even cease to exist because of this.

Fundraiser Turnover Will Accelerate

2020 was an incredibly difficult year for a lot of fundraisers. Many have worked 12-15 hour days for a full 9-10 months, while also teaching their children from home, and being separated from loved ones for extended periods of time, all while trying to hit unrealistically difficult fundraising goals so that their organizations could hopefully keep pace with rising levels of need during the pandemic. Calling this stressful is a clear understatement. Even for those who have navigated all of this with a high level of success, exhaustion has likely gotten the better of them. While many may have achieved their organization’s financial targets (let’s face it – some have blown by their goals thanks to generous supporters), those same fundraisers are likely hungry for a change. Maybe it’s a change of pace. Maybe it’s a change of perspective. Whatever it is, organizations that aren’t highly aware of this and focused on retaining their best people will discover that top fundraisers (and maybe even C-level executives) will be lured away more easily in 2021.

Diversity is Table Stakes

2020 wasn’t just the year of COVID. It was also the year of George Floyd. The year of BLM. The year of having difficult national conversations about racial equity, police brutality, and the need for increased diversity in organizations.

The nonprofit sector wasn’t immune to these tough conversations, and in many ways, our sector is leading the market in exploring truly meaningful ways to increase the levels of diversity, equity, and inclusion. We’ve started to see a shift in the way institutional funders think about providing funding to organizations led by people of color and those serving communities of color. The solutions to-date haven’t been perfect, but we’ve seen considerable shifts in both thought and behavior over the last 10 months. This will continue in 2021, and DEI initiatives will become a baseline expectation of many funding conversations.

But that’s not where it’s going to stop. There will be a continuing call for more diverse representation at leadership levels across organizations. It will no longer be acceptable for organizations to be majority white, majority male-led at both the C-level and board-levels. Organizations that are focused on identifying, recruiting, and developing a diverse talent pool will be rewarded with significant support at the grassroots level, with new corporate partners eager to embrace community-led solutions to our biggest challenges, and from institutional funders seeking to reverse decades of under-investment in communities of color across the nation.

One other key area impacted by DEI in 2021 might surprise you. It’s an area that most nonprofit organizations probably aren’t even thinking about, but it’s critical for the future success of organizations. And that’s the diversity of individual donor fundraising programs. In traditional individual fundraising programs, successful organizations build “look-alike” models based on their “best” donors, and then use those models to go out and find more donors who look like their best existing donors. The difficulty with that approach is that most of those models are more white, more male, and more advanced in age than our actual population across the country. Nonprofits that want to advance their causes, maximize revenue today, and build for the future of their organizations need to think differently as they approach building models of “best donor” audiences. They’ll need to think differently about the kind of data they gather on their supporters, how they build new models, and how elements like age, gender, ethnicity, etc,. impact those models for the future. Nonprofits that adopt this line of thinking and approach audience building from the perspective of building a donor base that truly reflects their community are likely to continue to grow and outpace those that focus simply on their typical “best” donor audiences, which are shrinking in size by the day.

Digital Will Become a Channel of First Choice

Digital marketing and fundraising have continued to grow in prominence and impact over the last few years. But even up through February of 2020 (and for some orgs, even today), digital is an afterthought. It’s a channel that is seen as “supporting” other channels like direct mail and events. Maybe you went heavy in digital for Giving Tuesday and Year-End, but that was it. Otherwise, you “added” digital to your other channel activities throughout the year.

What many fundraisers, marketers, Executive Directors and boards have learned in 2020 (which many of us already knew, for sure) is that digital can and should have a place of prominence unto itself in our fundraising mix.

Many of our clients responded early on to the COVID crisis by doubling down on their direct mail efforts. Some increased the number of mailings they were sending. Others changed up their strategy and messaging. And still others launched emergency response campaigns. These were all super smart changes that these organizations made. And if you look at their revenue trends today, you’ll see that many of these nonprofits have achieved 25% – 100% increases in revenue year-over-year.

But there’s  an entirely other category of nonprofits that have achieved upwards of 500% year-over-year revenue growth in 2020. Those are the organizations that assessed the situation as COVID reached pandemic levels in March(ish), and leaned heavily into digital for all the things that digital does best. They launched emergency campaigns that were urgent and timely. They provided donors, volunteers, and the general community with real-time updates on their work, the impact of giving, and how supporters could volunteer virtually to continue advancing the cause. They shared emerging information about how they were changing program delivery to accommodate health guidelines. From a fundraising perspective, they also led with digital – allowing the real-time communication capability of this channel to drive the donor experience. And when they did, donors responded in overwhelmingly positive ways.

In 2021, due in large part to the experience nonprofits had with digital in 2020, I expect to see digital marketers taking a much larger role in shaping development strategy, and garnering a larger share of organizational marketing spend than they’ve likely ever had before. I also expect more organizations will begin adopting a digital-first campaign approach instead of simply relegating digital to a supporting role in their fundraising and marketing efforts.

Sustainer, Mid-Level, and Major Gifts Will Fuel Revenue Growth

Fundraising results for many nonprofits in 2020 have been off-the-charts strong. Donors have stepped up in ways that we haven’t seen since the 2008 financial crisis, and in some cases, organizations met their annual budgets in the first 90 days of the COVID crisis – and some nonprofits have exceeded their annual budget goals by as much as 500% – 1,000% due to the generosity of current and new donors.

At the same time, I think we are all too aware that this level of generosity can’t last forever. Especially as the economy continues to be impacted by the erratic nature of business closures across the country, it’s become clear that the long-term needs across the nation will far outpace giving in 2021. In some communities (Los Angeles, New York, etc.), homelessness is predicted to increase by as much as 50% in 2021. Meeting that need would require exponentially increased giving to be sustained over multiple years, which no one expects.

As those donors who stepped up early in the COVID crisis begin to level out their giving, organizations that have invested in building monthly sustainer, Mid-level, and Major Gift programs will be in the bets position to weather downturns in giving. Those who have relied heavily on annual fund, special events, and other highly transactional giving programs will be the most negatively impacted. Even organizations that start building sustainer, Mid-level, and Major Gift programs today will be in a better position come December 2021 than those who hesitate.

COVID Donors Will Present Unique New Opportunities AND Challenges

One of the big questions I get all the time through 2020 is, “are COVID donors just disaster donors?” The answer is…sort of. What we’re seeing in the data is that donors who came on file to organizations from March – December 2020 are behaving differently than traditional donors, and differently than those that the same organizations acquired pre-COVID (i.e., Jan/Feb 2020). However, we are NOT seeing these donors fall off the file as rapidly as organizations have seen with true disaster donors (i.e., the donors that gave in response to the Haiti earthquake or Hurricane Katrina). COVID donors, in my experience, are retaining better than disaster donors and are giving gifts at a higher frequency than the typical disaster donor. This gives me hope for the future of these donor relationships.

However, it’s not all good news in this area. These donors, while behaving more like traditional donors than disaster donors, aren’t entirely behaving like traditional mission-based donors. This means that nonprofits will need to focus more effort, time, and investment dollars on ensuring their new donor welcome and onboarding processes are aligned to support these “hybrid” donors. And…even if you’re tired of talking about COVID in your messaging, these donors will likely still want and need to hear about how COVID has changed your organization, how you’ve adapted to the pandemic, and how their gifts are allowing you to carry out your essential mission even in the midst of the COVID crisis. If you’re not willing to do that, you’ll likely lose more of these donors than you’re able to retain.

Event Fundraising Won’t Return to Pre-COVID Levels

This is a tough one for me. I absolutely HATE event fundraising. It is one of the most financially inefficient fundraising channels in our industry, and the opportunity cost of managing and executing events often keeps organizations from focusing on building lasting relationships with donors who can give transformational gifts to advance their work. So I’m likely not the best person to offer a perspective on event fundraising…but I believe strongly that the COVID crisis has changed event fundraising forever. And I think that’s a very good thing.

2021 will see organizations continue to struggle to figure out how to “get back” into events, even though many donors continue to tell us that they won’t be comfortable in a large gathering with other people until the nation has aggressively adopted a COVID vaccine. Those organizations that spend more time trying to get back to pre-COVID event levels instead of taking this opportunity to focus on building individual donor relationships in meaningful (albeit virtual) ways will be left collecting the philanthropic table scraps, while those who have leaned heavily into virtual donor meetings or gone back to the basics of things like telephone engagement will see exponential increases in donor engagement and revenue in 2021.

Relevance Will Rule the Day

2020 taught us all that in the midst of chaos, the only way to garner attention is to become more relevant. Nowhere in our business is this more visible than in the difference in response we see to generic, one-size-fits-all communications vs highly personalized, localized communications. The former is cheap and easy to mass produce. And because of that, many nonprofits gravitate to it. The latter is more expensive (upfront), and requires a more thoughtful, strategic approach to planning, gathering, and deploying data. However, in a distracted, worn out world, the only way your nonprofit is going to capture the attention of current supporters, let alone new potential supporters, is by increasing the relevance of your communications. And when I say relevance, I 100% mean that with respect to the donor. The more relevant you can be to her – in showing her that you understand who she is uniquely as a person, and that you understand what drives her emotionally and philanthropically, the more likely you’ll be to capture her attention and eventually her philanthropy.

In 2021, organizations that focus on relevance in donor communications, and who invest in the people, technology, and strategies that drive increases in relevance (even though they are more expensive upfront), will be significantly more successful in new donor acquisition, donor retention, and in maximizing both short-and-long-term revenue.