Pareto’s Principle is No Longer the Standard in Fundraising

no longer the standard in fundraisingI just read a really interesting article titled, The 80-20 Rule is Dead! on MarketSmart’s blog.  As nonprofit consultants, we have long reported that wealth has shifted and we often find that 10% of donors now provide 90% of the funds to a campaign – especially an endowment or capital campaign. Now there is proof that Pareto’s principle is no longer the standard in fundraising. Of course, anyone listening to the news over the past year won’t be surprised that this is the case. The gap is widening across the country and the data is just starting to catch up.

According to the article, and report that supports it, 10% of the families control 76% of the total wealth in the US.  Wealth is defined as a family’s assets minus debt. The bottom 50% of the population holds just 1% of the $67 trillion.   How does the rest fill out? The 51st-90th percentile had, on average $316,000 in wealth and the 26th-50th percentile had $36,000, and those below the 25th percentile had an average of $13,000 in debt.

If you are looking for $50 donation, anyone in the top 75% (who are properly motivated to give) could probably make it happen.  Even someone on a very limited income will often give a dollar a week—most often to their church, synagogue or mosque.

If, on the other hand, you are looking for a $5,000, $50,000 or $500,000 donation, the top 10% have to be your priority.

These higher-end donors may not be on your board or your committees (although that is a great way to interest and involve these supporters) but they should be on the radar of your board and fundraising committee.  This group should be receiving a disproportionate amount of fundraising and development focus.  They should be the top priority of strategy, solicitation, acknowledgement and stewardship – even at small and mid-sized nonprofits.  Participation is essential for an organization to show that you have a strong case for giving and that you have wide community/member support.  However, it does not, always, pay for scholarships, exciting new programming or even the utilities.

Of course, there are a few exceptions where many smaller donors make a strong annual fund but, in all likelihood, that is not going to be your organization.  Think of the work you would have to do to expand by a hundred donors that could give you $50 vs. the time it would take to find one new $5,000 donor?  Or better still, 5 new $1,000 donors.

This is all to say that you should be aware of how you spend your time. You should not focus only on the top 10% but also you want to make sure that they are going to stay committed to your nonprofit for years to come.  And, if you don’t think you have any donors with the potential for $1,000 – email me to explore screening your donor database.

 

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