How to forecast fundraising risk before your walkathon stalls

How to forecast fundraising risk before your walkathon stalls

Can the risk to your next fundraising effort be forecast in advance through some basic data algorithms? The answer is a resounding ‘yes,’ which should be good news to nonprofit organizations concerned about recent news articles portraying the declining fortunes in walkathons and other popular team-building events.

Throughout the early 00’s these team-building events enjoyed enormous popularity with their nonprofit sponsors and the participants who joined them. Walkers, runners, bikers, climbers, and a host of other participant types leveraged Web tools to enjoin friends, family, colleagues and others to sponsor their activity on behalf of a favorite charitable cause. Obviously, the more supporters they gathered, the greater their donation results.

But in recent years, writes Mary Pilon in an eye-opening article in the New York Times, these events seem to have ‘hit the wall.’ Participants are having a harder time getting supporters to pony up, leading to industry heavyweights like Susan G. Komen announcing plans to eliminate half of its once-popular 3-day races.

Which naturally begs the questions, why the decline and what, if anything, to do about it?

What is happening to the walkathons?

So what’s to blame for the declining fortunes of nonprofit team-building events? Are there too many events chasing the same finite pool of participants? Is our social media-saturated society increasingly enured to these socially-inspired overtures? Is it the dour economy? Or maybe it’s just good old-fashioned donor fatigue?

The truth may be something more subtle yet profound – namely, the degree to which the nonprofit organization is separated from the end donors. Consider, for example, that in any given event the participant (one degree of separation) asks for the support of a family member (two degrees of separation) who, in turn, may forward along that invite to his or her own network (three degrees of separation). In some instances you may actually have donors who are as much as 4x removed from the nonprofit.

So while more money may be coming in from one year to the next, a deep and lasting connection to many of these donors is not being made. The result, from a raw donation-generation perspective, is at best precarious. Which is why, when the music stops (i.e. those disconnected donors opt to do something else with their money), nobody sees it coming. The impact, as many nonprofits are recognizing, can be dramatic and swift.

How to identify fundraising risk

In the business world, revenue sources are often risk-rated. This allows management to focus appropriate levels of energy and resources on improving customer relationships and stabilizing the revenue streams. It also alerts management to potential disruptions in that stream so they can plan for revenue replacement.

Assessing the fundraising risk level for events and other revenue sources may be exactly what your organization needs to do. Assessments allows you to plan ahead and alert you to where your risks are. That’s a good thing. Some steps include:

  1. Assess the completeness of your donor records. A little mining and analysis will reveal if your data is complete on your most loyal donors. Donor turnover/churn should be highest among the donors you know the least about. Segment your donors by data completeness.
  2. For team-building events, break down and map the donations by those aforementioned degrees of separation. For event X, how much revenue was derived from donors with a direct relationship to your nonprofit? How much was derived from donors with a secondary relationship, and so on.
  3. Now map your donor data from Step 1 to your donations in Step 2. With each additional degree of separation, your revenue is at greater risk of being lost. If you have multiple years of data to work with, you could begin to quantify that risk, but you don’t have to do all that math. Recognizing the risk factors associated with the separation degrees is the most important step.
  4. Now you have groups of donors identified based on (a) record completeness and (b) degrees of separation.  You can also cross reference these groups by the number of touch points they have with your organization. For example, a donor supporting a marathon participant might also subscribe to your e-newsletter. Donors fitting that profile are lower risk than another participant who has no other contact with your organization.
  5. Congratulations! You are assessing risk. Create a plan to address each group that you consider to be at risk.
  6. Be sure to measure the results of your efforts. That’s in the data too.

fundraising risk

 

A word about donor retention statistics

Talk to your fundraising consultant about donor retention and skip givers. A common rule of thumb has been that donors who gave last year but did not give this year represent donor loss and you need to replace them. We do not agree with such assessments. In today’s consumer driven world, with so much information in the hands of the consumer – the buyer, the donor – they are more likely to establish multiple brand relationships, and may well move between brands as they spend (donate) limited funds.  Look at the data over time. Think of retention in a longer time span of three or five years.  Gather more information about your skip givers, and find the right message that cuts through the noise and touches what they care about.

Fight donor fatigue with data, because you can use data to forge better relationships.

Use more and better data to help you build more and better donor relationships.

About Gary Carr

Gary is the founder and president of Third Sector Labs. With more than 20 years of experience delivering software and data solutions to a wide variety of clients, Gary turned his attention to the overwhelming problem of data. Third Sector Labs is committed to making sense of data for the nonprofit industry.

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