Darwinism and Fundraising – an Observation.

“In the long history of humankind (and animal kind, too) those who learned to collaborate and improvise most effectively have prevailed.” – Charles Darwin

Most industries, whether it be financial services, telecommunication carriers, sportswear brands, or whatever other commercial entity you can think of, go through a general business cycle as they evolve. A period of initial expansion, where many new “players” enter into an industry to capitalize on an opportunity, is then followed by a period of contraction or consolidation, where the strongest “players” acquire, overrun, or otherwise defeat their rivals to take hold of the marketplace. This is considered to be the healthy and natural way of things in the world of business and economics.

Now consider for a moment what has been happening in the fundraising industry.

· In 1998 there were 1,158,031 Non-Profit organizations in the United States, and by 2008 there were 1,536,134. That is a growth rate of 33% over a short 10-year span of time.

· The U.S. population underwent an annual rate of growth that hovered around 1%. So the population in 2008 is approximately 10% greater than it was in 1998.

· Median Household Income over that same 10-year window of time grew at a slightly higher rate of 15%.

· In 2007, public charities reported over $1.4 trillion in total revenues and nearly $1.3 trillion in total expenses.

(Statistics from U.S. Census Bureau and Charity Dynamics)

We begin to see the problem.

The nonprofit industry is growing at a far more rapid rate than is the population or our median income, and fundraising itself suffers from an increasingly higher cost to raise a dollar. Even despite the migration of the massive Baby Boomers population into that fundraising sweet spot of age 60+ and the fact that since 1998 charitable giving has steadily increased year-over-year, there just isn’t enough economic fuel to burn for this continuous sustained growth for all of the charities in the ever expanding nonprofit sector of the future.

The newly-created nonprofits that spring up across the years all believe they have a viable chance at sustainability, and who can blame them? Their causes are no doubt worthy and urgent, and as we know many needs go unmet even despite such a large universe of nonprofit organizations. But that just isn’t a fair or realistic expectation.

The pot of charitable dollars that the U.S. population is willing to contribute annually is rapidly approaching its threshold, which means that either charities need to redefine what a successful year means – where growth from one year to the next might not be possible – or larger organizations may need to begin to consider acquiring or absorbing smaller organizations of similar mission to eliminate the competition for charitable dollars. At the very least small organizations will soon need to band together to leverage the “strength in numbers” approach, in order to manage an ever-increasing cost to market to their donors. If not just for the benefit of the industry, for the good of the donors across the United States who are being flooded with donation requests.

A good donor for your organization is likely a good donor for another organization, and as a single donor spreads his or her charitable dollars around, he or she quickly becomes a multi-buyer in the world of list rentals – which leads to a massive load of impressions. The donor’s mailbox quickly fills with appeals and prospect pieces from local, regional, and national charities. The donor’s online inboxes overflow with an endless stream of emails. And not too far in the distance, the donor’s cell phone will be buzzing with text message after text message. All of these contacts vying for the same pot of charitable dollars.

My point is that it is unfair to the donors who are now bombarded with requests for support from every direction, when all they did “wrong” was make a generous gift to a cause they deemed worthwhile to them. For the good of the donors the time to start considering consolidation, cooperation, partnerships, and co-branding between nonprofit organizations is upon us – and we need to decide if we embrace this new reality, or if we ignore it – risking further alienation of the donor population and ultimately leading us as fundraisers to a future not unlike that of the dinosaurs.

Because as Charles Darwin would no doubt tell us, "In the struggle for survival, the fittest win out at the expense of their rivals because they succeed at adapting themselves best to their environment."

-Stephen Ferrando

Stephen is a Strategy Director at Merkle with a combined 12-years of expertise in both commercial and nonprofit marketing, strategy, and analytics. In his free time Stephen is working on becoming a ninja, as well as focusing on his life-long dream of completing the last side on his Rubix Cube.

Comments

There is not a huge set of data points for mergers within the Non Profit sector, mostly smaller local and regional organizations when you do some research.

Posted by: Chanel 2.55 handbags | 20 July 2010 at 07:36

I would suggest there is another possible answer to the problem than simply consolidation. What about changing the way we connect donors to charities? Currently, we spend far too much on "advertising" in order to gain donations. How about sites like HopeVault.org and Jumo (I think?) that are trying to get to know the web surfer on a more intimate level and then direct people to efforts they will be more passionate about? This would open the door to smaller charities being found more easily by people that are looking for them. Many people don't give because they desire a smaller organization and not a huge charity, but they can't find them and don't want to make the effort to look hard for them. In comes these newer site concepts.

Posted by: Gsgriffin | 09 July 2010 at 16:27

Spend time offering assistance to those who are less fortunate than you, so that you may gain perspective.

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Posted by: Vitaliy Syromyatnikov | 26 June 2010 at 16:25

I saw an article recently about a nonprofit downturn in the Wall Street Journal. http://tinyurl.com/yzv36mk

A part of me, quite honestly, says good riddance. For-Profit Businesses that are not run well go under. Period. Why should the nonprofit business be any different? Having worked under some seriously bad bosses in the nonprofit field, I have to say that when a nonprofit is poorly run, and the board isn't willing to step in and admit that, then there's not much a fundraiser can do to stop its decline. And perhaps the nonprofit SHOULD fail, just like a business SHOULD fail if it's poorly run. There's no such thing as too big to fail with nonprofits, and frankly, I think the same should be true for the big banks.

A lot of nonprofits talk a big game but when it comes to actually helping numbers of people, they can't back it up with hard data. And if they can't do that, then they're not going to succeed.

I think that if the majority of nonprofits in America disappeared tomorrow, a few people would be out of a job, but otherwise, it wouldn't really matter to most.

http://wildwomanfundraising.com

Posted by: Mazarine | 17 February 2010 at 18:54

Interesting article in the WSJ from February 1, 2010 that I stumbled upon the other day titled, "Mergers, Closings Plague Charities" by Banjo and Kalita.

http://online.wsj.com/article/SB10001424052748704586504574654404227641232.html?mod=rss_whats_news_us&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+wsj%2Fxml%2Frss%2F3_7011+%28WSJ.com%3A+What%27s+News+US%29

Posted by: SF | 16 February 2010 at 14:35

You know, I really thought this post was going to be about
Mergers
Collaborations
and possibly tying in a cute finch beak with nonprofit variation.

not
statistics about numbers of donors and numbers of nonprofits, ending with:
don't sell your donor's name.

What a shock! At all nonprofits I worked with, we have never sold donor names, though I have found my name on a few lists for subscribing to Mother Jones magazine! I kindly asked them to remove me from their lists, but still the requests come, from Greenpeace, from the League of Women Voters, from other progressive magazines. I find them instructional for my fundraising clients, and save them as examples.

This is not really an issue for donors as much as it is made out to be. I think that the far greater issue is:

The World is Changing. Unemployment is still rising. House prices are still dropping. We have lost faith in our banks and our government due to lack of regulation. We are going through another Great Depression.

How are Nonprofits Responding?

Are they attacking the issues head on? Are they making programs to address these new concerns? Are they merging? Are they cutting costs in innovative ways? Are they collaborating more on events? Mailings? Advertising?

Such a post would be most informative. I would be happy to research and write it for you.

Posted by: Mazarine | 15 February 2010 at 16:06

There is not a huge set of data points for mergers within the Non Profit sector, mostly smaller local and regional organizations when you do some research.
http://www3.interscience.wiley.com/journal/114031301/abstract

And perhaps the question shouldn't be, how many bankruptcies have we seen?, but rather, how many well run, efficient Non Profit organizations are no longer able to grow their file or revenue from one year to the next?

Posted by: SF | 07 February 2010 at 22:00

Is anybody actually tracking nonprofit mergers or "bankruptcies"? I've heard people beating their breasts about this for years, but never seen any hard data on whether these predictions are coming true at any scale.

Posted by: Jon Stahl | 06 February 2010 at 11:19