We all know by now that the economic meltdown of the past 2 years has had a serious effect on charity fundraising around the world.

If your program is suffering, at least you can take some lukewarm comfort in the fact that you are in good company:

• In the US, giving dropped by $6.4 billion in 2008, with the # of new donors down almost 7% in the fourth quarter
• In Australia, 60% of charities polled in July of this year reported falling revenues in the previous 6 months, and 2/3 of respondents predicted further losses for the rest of 2009 and 2010
• In the UK, individual giving was down 11% in a late-2008 report
• And here in Canada revenue appears to be down about 10% on 2008 

Last week, the Vancouver Foundation released a study of the effect of the economic downturn on B.C. charities. 54% have seen a decrease in revenue, on average a 19% decrease. 

Boards and senior managers are stuck with very hard decisions about how to balance the books, and fundraising programs are taking a hit in many organizations.

One easy target of budget-cutting is prospecting programs, or donor acquisition campaigns.  But we caution our clients and fundraising managers not to slash too deeply.  Cuts in prospecting may make a more attractive balance sheet in the short term, but in 2 or 3 years time the absence of new donors will have a dramatic effect on your bottom line.

Consider the following data.  This is a simplified projection of the effect on a donor base of cutting prospecting altogether, using current industry benchmarks for renewal rates, frequency of giving, average donations, etc.  Without revealing confidential client information, I can tell you that we have seen the same trends for clients who have seriously cut or halted their new-donor acquisition.   

Gross income is almost halved.  Net income follows more slowly, but the long-term effect is similar. With the huge drop in the number of donors there is also a serious domino effect on the monthly donor program, mid-level donor program, and legacy prospects too.

Our recommendation?  Cut back a bit on prospecting if you need to, particularly if your prospecting results were already challenging before the recession.  But:

1. Don’t cut prospecting altogether
2. Do calculate the impact on your program over the next 2-4 years of any cuts to acquisition programs now, and make sure your Board or senior management team understand this
3. Do spend this time refining and testing your messages and your campaigns on smaller, better lists (campaigns can include direct mail, online, face to face), and re-launch your prospect program when donor confidence has returned
4. If you can, do take advantage of a less competitive marketplace to increase your acquisition campaigns now
5. And most important: Do conduct a data audit so you have a clear picture of the lifetime value of your supporters.  That is the only way you can confidently decide what you can afford to spend for each new donor you recruit 

Good luck – and be in touch with any questions, or for advice on figuring out the lifetime value of your own donors.