If you work in the nonprofit sector, you know that low donor retention is a problem that’s been plaguing the sector for years.
Every year, nonprofits lose more donors than they gain. Even though new donors are coming in, previous donors are not giving again.
This low donor retention is terrible for nonprofits. Organizations have to work harder to get new donors, but the revenue stays the same or decreases. A little improvement would do a lot of good. Some estimates have suggested that improving donor retention rates by 10% can yield up to a 200% increase in projected value.
Luckily, the answer to improved retention rates (and fundraising success!) is simpler than you might think. It’s not about the newest fads, the newest technology or the newest strategies.
It’s all about the annual fund.
Yes, the annual fund. It’s a classic fundraising strategy, but it still functions as a foundation of fundraising. As the overarching framework of your organization’s fundraising initiatives, the annual fund is one of the most important revenue streams your nonprofit has. While it doesn’t have the flash of a fancy gala or the concrete goals of a capital campaign, it’s a consistent reminder of the importance of your mission.
Your annual fund can help with donor retention
Developing a well thought out and multi-year approach to your fund will mean more donors and greater flexibility in your day-to-day work.
And taking the time to develop an effective annual fund strategy creates results too:
- Organizations with an annual fund have higher donor retention numbers than those without. Nearly two thirds of organizations with an annual fund reported that 60% or more of their donors renewed their gift in the most recent fiscal year. According to the 2015 Fundraising Effectiveness Project Survey Report, sector-wide donor retention is only 43% — that means organizations with an annual fund retain nearly 40% more donors than the average nonprofit.
- Organizations with an annual fund are more likely to meet their fundraising goals than those without. 77% of organizations with a fund are meeting their goals, compared to only 57% of organizations that do not have one.
The numbers speak for themselves. And what’s more, smaller organizations are less likely to have an annual fund. Nonprofits with less resources are hurt the most by not having this valuable fundraising strategy, even though they are poised to gain the most from it.
The fund is not just a revenue stream — it’s a roadmap for fundraising success. Better funds create better results for nonprofits, all around.
As we all know, donor retention and hitting fundraising goals are problems for our sector. An effective annual fund might not totally solve the problem, but it certainly can help.
For more on planning, implementing and managing a successful annual fund, check out our new eBook: The Fundraiser’s Guide to the Annual Fund. It’s a step-by-step guide to help you plan and manage an efficient annual fund. Whether you’re an annual fund newbie or fundraising expert, we’ll provide tips and strategies to take your annual fund to the next level.
The sector can do better. And starting with better annual funds will help us get there.