2020 was a year of record-breaking charitable giving as a result of political unrest motivated by racial justice and the social ails facilitated by the pandemic. 84% of donors were poised to match or increase donations in 2021.
2022 has contained a string of events that have impacted the economy significantly beginning with the Russian invasion of Ukraine in February. Subsequent international sanctions and Covid shutdowns in China have had rippling effects on the U.S. supply chain.
Imminent recession and inflation impacts can prove challenging for nonprofits that rely on donorship and fundraising. Here are the key ways inflation proves challenging for nonprofits and navigation strategies to address each impact.
Impact of inflation on nonprofits + Strategies to Navigate our Current Economic Reality
- IMPACT: FEWER DONATIONS
The most immediately noticeable impact of inflation will be a decrease in donations. When people have to spend more on gas, food, and other necessities, they don’t have as much wiggle room in their budgets for “extras” like charitable donations, especially if those donations are not already set up on a recurring basis. Nonprofits will have to enact proactive measures to account for donors who have less to give.
Expect to see some of your monthly donors decrease their donation amounts or halt their donations altogether.
NAVIGATION STRATEGY: START WITH RECURRING DONORS
Your recurring donors are your most loyal supporters. Budgeting becomes easier and more clear when you are able to rely on monthly donations.
Individuals who are more financially comfortable during periods of inflation can help cover the loss in monthly donors by making larger, one-time donations during events like Giving Tuesday and holiday donation drives. Ideally converting those one-time donors into recurring donors helps optimize your chances of retaining donor engagement and boosting donorship in the long term.
Charitable giving can be one of the first expenses people cut out of their budget when they are facing financial hardship. Recurring donations that may be a bit smaller are better than eliminating donations completely. Ask your current recurring donors to recruit others in their network to start a small recurring gift amount that feels financially accessible to them.
Try soliciting more donations by
- Being transparent
- Sharing high-quality content
- Providing suggested donation amounts
- Encouraging donation matching
- IMPACT: LESS PURCHASING POWER AND HIGHER FUNDRAISING COSTS
When the costs of countless products and materials increase, purchasing power decreases. For nonprofits, this means their donors’ dollars don’t stretch as far as they have in the past and the cost of fundraising will be higher.
Inflation usually leads to higher fundraising costs. If your nonprofit fundraisers include selling a product, you will start to see tighter margins due to inflation. The charity-run t-shirts that used to net $5 per shirt may only bring you $3 per shirt as the price of materials increases. The fundraising gift baskets that used to raise $30 per basket sold may only bring in $20 per basket now.
You may also notice that hosting fundraising events is more costly, meaning that you have to charge more for tickets and risk poor donor turnout.
In this way, inflation can significantly decrease the impact of your fundraising efforts.
NAVIGATION STRATEGY: DIVERSIFY YOUR REVENUE
If all of your organization’s money comes from donors, then it will have a hard time staying afloat if inflation causes people to stop donating as frequently.
Try diversifying your income by creating several different opportunities for your nonprofit to gain money. While donors are important, there are many other potential income streams that your nonprofit can use for funding:
- Apply for volunteer grants and donation matching grants that will provide additional revenue
- Encourage your volunteers to use social media fundraising tools to raise funds for your nonprofit
- Host events or galas where people buy tickets for entry or pay a certain amount per table
- Lead silent auctions where you sell services, items donated from businesses in the community, or products that are relevant to your field
- Try selling t-shirts, hats, and other items that help spread awareness about your cause while raising money for your organization
When you have multiple ways to earn money, you will have a buffer when inflation impacts some of your revenue streams.
- IMPACT: TIGHTER MARGINS
Organizations that provide resources, especially material or human, with rising costs of basic goods demand for help will increase in conjunction with the cost of essential supplies. For instance, the amount an education-based nonprofit may have been able to use to purchase 20 backpacks to distribute to their community might only buy 15 backpacks now.
This means that even if donations remain steady, nonprofits still need more funding to fulfill their missions. An increase in demand for services compounds the need to grow and fortify your volunteer base and lower the cost of operations. Well tuned volunteer recruitment strategies will be necessary given that it may be harder to incentivize people to dedicate their time without financial return.
NAVIGATION STRATEGY: ASK FOR IN-KIND DONATIONS
When purchasing power decreases, sometimes it can be more beneficial to an organization to receive donations of goods and services outside of cash.
Nonprofits can avoid some of the problems that come with tighter margins if they have local businesses donate goods and services for their fundraising efforts. When businesses and donors donate gift cards or pass for free services, nonprofits can gain a lot more money for their organization when they sell these items because they won’t have to pay high material costs.
It can also be helpful when individuals donate items that nonprofits would otherwise have to buy for the community they serve.
For instance, if a nonprofit works to provide affordable housing for refugees, a donation of a gently used washing machine or sofa could make a bigger impact than a monetary donation that can’t quite cover the purchase of furniture or appliances due to inflation.
In-kind donations are one of the best donor solutions, too, because they allow donors to give away items they already own instead of spending money they may not currently have in their budget.
- IMPACT: FEWER STAFF MEMBERS
Hiring and retaining high-quality staff costs money. If your nonprofit isn’t able to offer competitive wages, especially during a time when high wages matter most, top talent will look elsewhere for jobs.
This can leave you scrambling to find people to keep your organization running as smoothly as possible. According to a National Council of Nonprofits survey, 79% of nonprofits reported difficulty filling open positions due to salary competition. Losing outreach coordinators and donor communication positions, for example, can further harm your nonprofit by limiting your potential to receive funding.
Providing wage increases to keep top talent can also lead to staffing shortages. When nonprofits have to designate large parts of their budget to wage increases to retain existing staff, they have less to spend when hiring new employees. When times are tight, many nonprofit organizations find themselves struggling to thrive because they can’t afford to attract and keep effective, hardworking employees.
NAVIGATION STRATEGY: SEEK OUT MORE VOLUNTEER LABOR
In many cases, volunteer labor can help supplement losses that come from losing staff over competitive wages. Make sure your organization’s needs are listed on sites like VolunteerMatch and Volunteer.gov, which match prospective volunteers to volunteer opportunities in their areas. With more volunteers, you will be able to continue to do great work in your community even if you can’t afford to hire new staff members.
NAVIGATION STRATEGY: SUPPORT YOUR STAFF AND VOLUNTEERS NAVIGATION STRATEGY: SUPPORT YOUR STAFF AND VOLUNTEERS
When you don’t have the funds necessary to offer competitive wages to new hires, it is important that you do everything in your power to retain the staff and volunteers you already have working for your organization.
Send out appreciation emails and letters, offer low-cost perks to celebrate accomplishments, and acknowledge their contributions by highlighting their efforts through your organization’s newsletter and social media platforms.
Supporting and encouraging the individuals who help keep your nonprofit afloat can go a long way toward keeping them from looking for other opportunities.
This article is published on Civic Champs