Income Inequality
My sister sent me an article from the NYTimes about How Women are Changing the Philanthropy Game.
But the women they were talking about were the less than 1% who can give away more than most of us will earn in a lifetime, and not change their standard of living one iota. In fact, many of them have so much money invested that before the next tax year, they will have earned back as much if not more, than they gave away.
I don’t knock these women (or the equally wealthy men who are also philanthropic) but the sad truth is that for people at this level of wealth, 90% of the nonprofits out there doing important work are simply invisible. In fact, 90% of the nonprofits in this country have operating budgets that are far less than any single gift some of these women made.
Income inequality is not just for employees.
More to the point, most large donors give to education—generally higher education—and healthcare. I’m a fan of both of these, but how much money does Harvard or Yale or Stanford need? And make no mistake, the biggest donations to education go to the universities and schools that are considered “elite.” And the hospitals tend to be the well-known ones with superstar physicians on staff.
Other places the wealthy tend to give are focused on the arts and sports teams. Again, not necessarily a complaint, but by the arts we are not talking about that fabulous small nonprofit that uses music to teach kids from low-income families about studying, persistence, leadership. Or the arts programs that help those who have severe disabilities. They are giving to the big organizations whose audiences are mainly older and very white.
And while not everyone gives charitably to gain a tax benefit, the truth of the matter is that tax benefits do accrue to those who itemize on their income taxes. OK, 2020 was a strange and different year. But in 2019, only around 10% of taxpayers itemized. Most of us simply take the standard deduction. In that case, in most years (again, last year is odd), the money you donated to charitable causes does not trigger a tax deduction. If you do itemize, you can deduct—typically up to 60% of your adjusted gross income (for 2020, it will be 100%). Charitable giving for the very wealthy lowers their taxes; for the rest of us, charitable giving primarily makes us feel good.
An excellent article in the Guardian explains all this better than I can.
Okay. You are a small nonprofit. These wealthy people are not giving to you. Your wonderful donors—and they are wonderful—aren’t able to make transformative gifts (or if they are able to, they are not going to give that to you. Not because you aren’t doing great work—you are, you know you are. But, rather, because you actually don’t have the infrastructure to be able to deal with a sudden large infusion of money). So what are you to do?
For starters, be realistic. The notion that 80 or 90% of your charitable revenue will come from 10-20% of your donors and that is who you must focus on is simply not true for most nonprofits. Figure out how to keep all those $100-a-year donors, and slowly move them to higher giving. Like maybe to $150-a-year. Yes. Do consider if there is a donor or two (or ten) who could give at a much higher level and do spend time getting to understand what would make them make that gift. But by and large, focus on getting more personal with your typical donors and considering how to bring back those who gave in the recent past but haven’t given recently. You know this—donor retention is low. And the smaller the organization, the lower your retention rates. Focus on increasing that and you will (not-so-magically) increase your revenue.
That typically means learning to segment your donor lists and speaking directly to those within the segment. Recognize that most donors fall into several segments—that’s great. Your outreach should cover all the bases. Make sure you are thanking those who have given and showing them—in words or video or still pictures or all of the above—how important they are to your mission and your clients. And figure out ways that they can talk back to you and tell you what they are thinking.
Tell those who have yet to give why they should join with those who have. Again, show them how much their support matters and how much they will accomplish by partnering with you.
When I started in fundraising, my boss told me that as a fundraiser I should always be asking. I agree wholeheartedly with this advice, but the asking should not always be for money. Ask what they like, or don’t like, about the organization, their experience as a donor, what they want to achieve with their support. Ask for advice and really listen to what they say.
And mainly, don’t wait for those big donors to make you prostrate with gratitude over their huge gift. Instead, show every donor how much they matter and give them great opportunities to matter even more.