Denver Institute for Faith & Work just launched a new monthly partner community. Above is the video we created to accompany our new webpage denverinstitute.org/give.
It came after a year of thinking and research about a single question: How does a nonprofit scale its impact?
It’s a good question, one that many nonprofit leaders are also asking. And it makes me think of another question many people have about their giving: how can I make the biggest impact on the issues I care most about?
Last fall I started to dive into our numbers at DIFW. Though our budget had consistently grown, one area had remained flat for years: the number of monthly givers supporting our work.
This was troubling because any nonprofit has recurring expenses (such as staff salaries, program expenses, office space, etc.) and monthly givers were our most consistent and predictable source of revenue for years.
So I decided to step back and do some research on how nonprofits scale their impact.
Viktoria Harrison is the co-founder of Charity Water, a nonprofit focused on clean water projects. She said three things that stuck out to me about nonprofit growth:
- Most nonprofits raise money in slow, inefficient ways: expensive galas, direct mail, one-time gifts, corporate sponsors, auctions.
- Because of this, revenue is often inconsistent and makes it very hard to plan for the future.
- Every January 1st many nonprofits have to start over again at $0 just to try to reach the same level of impact as the previous year.
I’ve found that these insights are very true. Many nonprofits see 40%-50% of their entire revenue come in just November and December. One nonprofit recently sent me a year-end packet that says 75% of their $429,000 budget comes in just in December!
What that means on the nonprofit side is that when you look at your financials each month, you see a high point on January 1 and then 11 months straight of losing money each month. And we wonder why nonprofits have a scarcity mindset! If somebody forgets to give in December, the boat is sunk!
Harrison also said something I won’t soon forget: recurring givers have a lifetime value 5 times greater than that of a one-time donor. Not only do monthly givers provide more consistent revenue and more predictability, they actually give more when they automate their giving.
And so many nonprofits try to encourage their community to give monthly by creating programs. But again, Harrison says there are five reasons why most monthly giving programs fail:
(1) The program is an afterthought, not a flagship product.
(2) There is little to no inspiring marketing content on their giving page.
(3) There is no follow up other than a tax receipt.
(4) Donors don’t understand how their money is being used.
(5) Donors feel like a means to an end, not a valued community.
I realized that we at DIFW had been guilty of at least three of these!
Not yet fully convinced, I decided to do more research. Gabe Cooper, the Founder of Virtuous Software, works with hundreds of nonprofits and sees what’s working and what isn’t.
I asked him more about this monthly giving approach, and he said three things:
- Most of the largest businesses in the world, from Amazon to CostCo, have moved to a subscription model approach. “As a result, monthly memberships and monthly giving products have become an incredibly powerful way to grow revenue. I’m a huge fan of this approach.”
- Monthly giving programs tend to work best with people giving less than $3,000/year. Most people giving over $3,000 tend to give year end based on annual income and tax benefits.
- Businesses tend to do better giving single, annual gifts. They’re still recurring, but on an annual basis rather than monthly.
This again helped us at DIFW to think about serving the unique needs of business leaders versus everyday givers who want to support the causes they care about. It also made me realize that for much of my career, we spent a disproportionate amount of time going after “the big gift” rather than focusing on the actual power of monthly givers to scale our impact sustainably.
So what can a nonprofit actually do to scale? The Stanford Social Innovation Review put out an article entitled “The Secret of Scale” that argues, “The largest civic organizations have all scaled up using the same basic approach. All of these organizations provide benefits and services that cater to the everyday needs of their members.”
Peter Murray, the author, says “For me, ‘growing to scale’ happens when a civic organization both builds deep relationships with a significant portion of the people in its community (measured by frequency of interactions and ability to influence members) and develops a robust, sustainable financial base (measured by percentage of revenue that is self-generated).”
From AARP to the NRA to Planned Parenthood to megachurches, the evidence is clear: each of these organizations reached scale through a growing base of monthly members or givers.
The business world essentially takes the same approach. The businesses (particularly SaaS businesses) that get most investor dollars are those that can show strong ARR, or annual recurring revenue. They are also those who can show that they have frequent engagement with their customer base.
After several more months of research, here are the summary conclusions I came to for DIFW.
- Initial Question: How do we scale?
- Recurring or monthly donors have been nearly flat since DIFW’s inception.
- Recurring donors are 5x more valuable than one-time givers, yet most organizations don’t have an intentional way to serve this community.
- Membership or partnership programs can be a way to meet this need and scale.
- Monthly giving works better for individuals; an annual gift works better for businesses and larger donors.
- DIFW directly serves its donors/constituents, whereas for most nonprofits, donors and constituents are different communities.
- Generosity and deeper ways to engage an organization’s mission can and should co-exist.
- Scale is built on finding ways to serve the everyday needs of its members or monthly partners through investing in deepening relationships, creating engaging media platforms, and providing tangible experiences or benefits.
If you’re reading this and you work in the nonprofit sector, I’d love to hear your thoughts! Since we launched our own monthly giving community 3 months ago, we’ve increased monthly revenue from our monthly giving base by 50%. Though we have a long way to go, monthly partnership and working with high capacity givers are the two core revenue strategies for DIFW moving forward.
If you’re reading this and you simply support various nonprofits and want to see them scale their impact, here’s what you can do:
1. Decide which nonprofits you want to support and set up monthly giving. Rather than a shotgun approach of giving to any charity that sends you a letter, be strategic. Think hard about the causes you care most about and then set up monthly giving on their website or from your bank or DAF. Want to make a bigger impact? Increase the size of your monthly gift.
2. Communicate to the nonprofit that you intend to consistently support them. This doesn’t mean you can’t or shouldn’t give year end gifts. Go for it! Simply communicate the amount you’ll give each month, and as the spirit leads, then give one-time gifts to special projects such as capital campaigns or new program launches. Knowing about this baseline level of supports allows nonprofits to comfortably set their annual budget and then take strategic risks in the future knowing their core operational costs are covered by committed givers.
3. Encourage others to do the same. Encourage people you know to give monthly to the charities they care the most about! It’s the way smart givers make the biggest long term impact.
Truly, this is the way you can help nonprofits make the biggest, long-term impact. If you want to make a huge gift, consider giving a large gift for an endowment that can provide annual returns for your favorite church, ministry, school or nonprofit. If all you can do is a small monthly gift, still give generously! Small, sacrificial gifts are the kind that Jesus praises the most (Mark 12:41-44).
So how does a nonprofit scale? The huge foundation gift? The mega donor? Most often, no.
A nonprofit scales by caring for and growing a community of donors who provide faithful, consistent support and who commit to a cause over the long haul.