The Future of Nonprofit Fundraising: Trends and Predictions

9 min read

April 18, 2024

A hallmark of any successful organization is adaptability. As a nonprofit leader, you already understand the importance of being aware of the shifting nonprofit landscape and being ready to evolve your strategies and adapt your organization for success.

Currently, nonprofits are facing rapid changes and emerging trends as a result of new technologies, shifting demographics, and a turbulent economy. As a result, nonprofit fundraising and fundraising strategies will be impacted. Staying up-to-date and ahead of the curve will give your organization the edge over your competition, helping to ensure you secure the funds you need to continue accomplishing your mission.

8 Trends and Predictions That Will Impact Nonprofit Fundraising

1. More Nonprofits, Less Giving, and Inflation: Growing Competition in the Nonprofit Landscape

Inflation has impacted 47% of American's charitable giving, and in 2022, Americans donated the smallest amount in 30 years. This represents only the fourth decline in charitable giving that has occurred in four decades, falling by 3.4% (equal to 10.5% when adjusted for inflation).

In addition to weathering an overall reduction in giving, inflation is having a two-fold impact on nonprofits, decreasing the purchasing power of the donations they receive. For example, a gift of $10,000 in 2021 would only be worth $9,300 in 2022, considering the impact of inflation. So, in order for a donor's gift to have the same impact on your mission, they would need to have increased it to match the steep inflation rates that the U.S. has experienced over the past several years.

Further compounding the challenges presented by inflation is the fact that more and more nonprofits continue to be formed every year. In 2022, just under two million nonprofit organizations existed in the United States, and they've been increasing at a rate of 5% over the past five years (about 100,000 new organizations each year).

Every year, your organization has 100,000 additional organizations competing for donors and donations, donations that are continually diminishing in value.

These facts all add up to one conclusion: operating a nonprofit is becoming increasingly difficult. As a result, your nonprofit needs an operating and fundraising strategy that allows you to do more with less while continuing to attract and retain donors who are excited about supporting your mission.

Read More: Why Isn't My Nonprofit Successfully Raising Money?

2. Machine Learning, Predictive Modeling, and Artificial Intelligence

Advancements in artificial intelligence have led to a variety of applications in the nonprofit sector. Nonprofits are using a combination of machine learning, predictive modeling, and AI to improve their fundraising strategies with the aim of decreasing the cost per dollar generated.

The technology can be used to automate and improve donor segmentation and to answer fundraising questions such as:

• Who to contact
• How to contact them
• When and how often to contact them
• How much to ask for
• What messaging to use

While AI can save you loads of time sifting through donor data and results to increase your odds of fundraising success, it is also important to be wary of potential pitfalls when using these revolutionary technologies. AI's true strength lies in its ability to quickly analyze large data sets. It lacks the ability to understand nuance or put a human touch on communications.

Although it can effectively analyze language and data, it cannot yet create compelling, human-like communication on its own. So, your nonprofit should be wary of relying too heavily on AI in its communications. You do not want to risk sounding less human and connecting less with your donor base.

3. Automation in Fundraising

New and emerging technology tools aim to increase automation in nonprofits to eliminate repetitive tasks and free up humans to do the more important mission-based, face-to-face work. Tools exist to help automate processes such as:

• Online donations
• Donor management
• Donation acknowledgments
• Email marketing campaigns
• Event management
• Donor prospecting
• Reporting
• Data analysis
• Account reconciliation

Automation tools can save you and your team time and resources, increasing your ROI on labor and making the most of your fundraising efforts. As is the case with the use of AI, be sure you have a human double-checking the automated work carried out by software. You don't want mistakes to be overlooked or your communications to lack a human touch.

7 KPIs Every Nonprofit Should Be Looking At 

The Ultimate Guide to Board & Management Reports for Executive Directors 

4. Social Media: Broader Communication and Deeper Relationships

It's been around for a while now, but it isn't becoming less relevant. On the contrary, social media is becoming increasingly important for nonprofit fundraising efforts - especially, as donor bases are aging and greater portions of younger donors actively use social media to engage with nonprofits.

For nonprofits, a social media presence can deliver real results. In fact, 55% of individuals who engage with a nonprofit on social media wind up taking some sort of action with:

• 59% donating money
• 53% volunteering
• 52% providing in-kind donations
• 43% attending an event
• 40% purchasing a product to benefit the organization
• 25% contacting political representatives on behalf of the mission
• 15% organizing their own community events to raise awareness

If your nonprofit is not yet using social media as a part of its fundraising strategy, then it needs to start now. It's also important to consider which platforms you are using to ensure you reach a wide audience that includes all of your potential donor demographic groups.

Read More: How Much Do Bookkeeping & Accounting Services for Nonprofits Cost?

5. Generational Power Shifts

More Americans than ever before will turn 65 this year, and this means that more Americans than ever before will be hitting retirement age. As leaders of the Baby Boomer generation age into retirement and leave the workforce, nonprofits are going to experience a shift in leadership. As the torch is passed down, more Millennials will be stepping into leadership roles and director positions on nonprofit boards.

To ease the passing down of leadership, nonprofits should incorporate generational diversity into their leadership teams now in order to better facilitate continuity, as the older generation continues retiring and stepping down from leadership positions.

6. Investing in Gen Z

Gen Z includes individuals born between 1997 and 2012. The generation is still comprised of children and young adults, but they are the largest generation yet. At this point, the average member of Generation Z does not represent most nonprofits' ideal donor type. However, in a few quick years, they will be.

Gen Z is generally regarded as a generation of individuals who are excited about change, who want to make the world a better place, and who are ready and willing to take action to accomplish these goals. As a result, communications with members of this generation should be viewed as investments into your nonprofit's future. Starting these relationships with members of Gen Z now will help you be at the front of their minds once they are working, earning citizens who are in a position to give.

7. The Widening Wealth Gap 

Individual donors comprise a large portion of most nonprofit organization's donor base. Unfortunately, a widening wealth gap (i.e. the number of top earners compared to the number of bottom earners in the country) is growing with fewer people earning more money and increasing numbers earning less. Your nonprofit's donor base could be shrinking because fewer and fewer hands now possess giving power.

As a result of income inequality, your organization's survival depends on your ability to attract and retain top donors. In other words, donor relationships are becoming increasingly important and must be a central part of your fundraising strategy.

"GrowthForce Cares About Your Mission As Much As You Do- So You Can Do The Hard Work Of Saving More Lives"

After lost time spent worrying about financials, Tiffany from Survivor Ventures was finally able to focus on furthering the organization's mission of providing support to victims of human trafficking.

 [READ MORE HERE]

8. Growing Significance of Transparency and Number-Driven Communications

Transparency in operations and financial management has always been central to the healthy operation of a nonprofit and its ability to attract and retain donors. With the challenges facing nonprofits today, however, transparency and number-driven communications are even more essential.

You must be able to show donors how you use their money and the impact of each dollar they give with clear, concise, and easy-to-ready donor communications. Using financial data to demonstrate your impact will strengthen donor trust, attract donors, and spur giving.

An excellent opportunity for this kind of donor communication occurs every year when your nonprofit files its annual report. The financial data contained in your annual report can be used to tell a story and create donor communication pamphlets that include concrete, easy-to-understand data. You can use this opportunity to thank them for previous gifts and encourage them to continue giving by demonstrating with real data their generosity's positive impact and potential.

Read More: Raise More Money By Showing The Donors The ROI Of Their Gift

A Data-Driven Evolution of Your Nonprofit Fundraising Strategy

Your organization's financial data contains an invaluable wealth of actionable insights that can help you improve your fundraising strategy, strengthen your operation, optimize spending, and maximize your impact. Designing and implementing a system that can gather data while providing automated reports, however, presents an additional challenge to nonprofit leaders.

Nonprofits that team up with outsourced accounting services providers that specialize in nonprofit management can overcome the challenge of gathering, reporting, understanding, and using financial and organizational data to strengthen the nonprofit's impact. An outsourced partner will help you identify the tools and technology that can help advance your organization. An outsourced partner will work with you to implement new systems and strategies while measuring and monitoring metrics of success.

With an outsourced nonprofit management accounting partner, you can get a handle on your organization's finances, fundraising, and operations to successfully navigate the increasingly difficult challenges facing nonprofits today.