Navigating the Economic Storm

Five practical tips for fundraising in a turbulent economy.

Derric Bakker | posted 2/01/2009

The forecasts seem unrelentingly grim. You can't turn on the television, glance at a newspaper headline, or open your homepage without hearing yet another story of doom and gloom. Can it get worse? Is this the bottom, or just the beginning of a long downward slide? You may have a capital campaign to run, budgets to approve, and decisions to make, but how can you know what to do?

There are those who say that today's economy is unlike anything previously seen. Others say this is simply another in a series of crises such as 1987's Black Monday, the 1990 Savings and Loan debacle, the 1997 Asian financial contagion, and the attacks of September 11. Both views are probably correct. This is something new, yet there is much we can learn from past experience.

FIVE PRINCIPLES

So what should we expect in the months to come? More importantly, as a nonprofit CEO or board member, how do you navigate these turbulent, uncharted waters? You are no doubt most concerned with what will happen to your fundraising income. As consultants to the nonprofit industry, we have been asked about this numerous times. In response, we provide these five principles to help guide you through.

(1) No matter what happens, don't panic. We live in a time of instant messaging and never-ending punditry. Negative chatter begets negative news. Remember that decisions made in the heat of the moment usually do not stand up to the scrutiny of time. In fact, time is often your best friend in a moment of crisis. Unless something absolutely needs to be decided now, the best decision may be to simply wait. When a decision must be made, turn off the TV and Internet. Pray and deliberate quietly. Consider that the best course right now may be to simply batten down the hatches, ride the waves, and do your best to keep to your heading (and keep your head) until the storm passes.

As a nonprofit CEO or board member, how do you navigate these turbulent, uncharted waters?

(2) Let history be your guide. Today's circumstances are unique, but there are lessons from the past that provide wisdom for making decisions today. The U.S. economy has always proved resilient, typically rebounding from downturns within two to four quarters. In the past four decades, our economy has endured several recessions, some more severe than what we face today. In only a few instances did overall charitable giving decline more than 1 percent, according to research conducted by the Center on Philanthropy at Indiana University. That same study showed that giving actually increased in several recessionary years, reminding us that there are opportunities even during tough times. Even in the worst economic conditions during the mid-1970s—a period of record inflation, skyrocketing interest rates, high unemployment, an energy crisis, a stagnant stock market, unprecedented political instability, an interminable war, and six straight quarters of economic decline—charitable giving only declined 5.4 percent in real terms, according to data provided by Giving USA.

Major economic crisis have historically caused only limited impact on charitable giving. Following an event such as a Stock Market plunge, charitable giving invariably drops off for a short period of time — typically 30 to 90 days — before leveling off at normal levels once again. If your organization has experienced a drop in giving due to economic and market volatility, this is probably a short-term effect.

Finally, Christian ministries typically fare better than others during downturns. Remarkably, giving to Christian causes increased or held steady during 1974 and 1975, two of the worst years on record since Giving USA began tracking this data. Surveys repeatedly show that Christians are the most consistent givers, six times more likely to give than their secular counterparts.

The bottom line? Don't let the doom-sayers frighten you. We have been through storms before, and charitable giving has never substantially eroded for long. Will there be a decline in giving? Probably. Will it be catastrophic? Not likely. You would be wise to plan accordingly.

(3) Take heart from the experience of others. People are still giving, and they are giving generously. At The Timothy Group, we can back that up with firsthand experience. Yes, your donors are probably more cautious, but don't let anyone tell you that giving is drying up.

October 10, 2008, was the closing day of one of the worst weeks ever in the stock market. That afternoon, I participated in a meeting with an Atlanta-area donor to challenge him with a $2 million request for a client's capital campaign. No sooner had we arrived than he began to cite a litany of bad news. Earlier he even had his phone in hand to cancel our appointment. Before calling, though, he and his wife made time to pray. As we sat in humble silence, he relayed to us that as they prayed, they felt the Spirit of God moving powerfully in their hearts. By the end of the meeting he committed a gift of $1 million and left the door open for a second million later.

I walked away with a strong sense that God was in control. Like Elijah on the mountaintop, we knew that our measly match was not going to light the fire on this sodden altar. We were profoundly reminded that it's not about us "closing the sale." It's about God working in people's hearts to bring down fire from heaven. Your donors are people of God whose giving is not simply fleeting or transactional. It is an outgrowth of a lifestyle of faithful stewardship governed by the divine guidance of the Spirit of God.

(4) Make wise decisions based on your own organization's "situation on the ground." We have worked for decades with more than 1,500 organizations, helping raise hundreds of millions of dollars. We can say with certainty that every organization is unique. Your situation is unique, so derive your decisions from the blend of challenges and opportunities inherent to your own organization and community, not just from macroeconomic conditions or out of reaction to what others are saying or doing.

Like most things in life, fundraising tends to follow the 80/20 rule: 80 percent of most organizations' funds come from approximately 20 percent of its donors. For better or for worse, most organizations' fundraising efforts will rise or fall in tandem with the giving patterns of their top 10 to 25 donors. How well do you know your top donors? Do you really want to know what to expect in terms of future fundraising revenues?

Visit your major donors. Ask them how they have been affected by recent events. It is critical for you to know each of these top supporters on a close personal basis. Then you can discern in advance if a donor's situation changes significantly. In fact, they will probably tell you outright. There is an old proverb that says, "Visit the house of your friend often, for weeds soon choke up the unused path." That's sound advice in any economy, but particularly so in troubled times. Know your donors, and in most cases you will probably know within a reasonable degree of certainty what to expect for the future.

(5) Pray to God, but row for shore. As in the parable of the talents, we need to keep in mind that God calls us to be faithful stewards with that with which he has blessed us. When times get tough, we must not become overly cautious, burying our treasure. Esther probably wasn't concerned with the value of the dollar when she took her life in her hands and appealed to King Xerxes to spare the lives of God's people. Nehemiah didn't check the market value of his 401(k) before quitting his prestigious job in the court of Artaxerxes and embarking on his quest to rebuild the walls of the city of Jerusalem.

I keep a picture on my office wall of a man in a rowboat in the middle of stormy seas. The caption says "Pray to God, but row for shore." As Christians in troubled times, we often fall back on the adage that we must pray and have faith that God will provide. We live in confidence that no matter how great the challenges, we serve a God who is greater by far. But God also calls us to put our faith into action. Nehemiah provides a lesson for leadership in times of trouble. Nehemiah's first response to crisis was always prayer and fasting. But Nehemiah also was a man of action. He made good plans, gathered resources, and provided strong leadership, discipline, and hard work to rebuild the walls in just 52 days amid real obstacles and challenges. (We may think times are tough, but when was the last time you had to carry a sword to work to protect against those seeking to kill you?)

In difficult economic times, resources begin to decrease at the very time when needs increase. Rather than backing off of your fundraising plans, you should be even more diligent in making your plans and in completing the hard work needed to ensure that your ministry stays near the top of the list.

As we move through difficult times, don't let the Enemy or naysayers rob you of hope. Rather, let's continue to pray and put our trust in God, make wise decisions, and do the hard work he calls us to do.

Derric Bakker is vice president of The Timothy Group, offering clients nearly 20 years of financial development experience spanning the fields of Christian education, health care, and social services. Derric received his undergraduate degree from Calvin College and his MBA from Michigan State University. He can be reached at dbakker@timothygroup.com.