The future of fundraising: reasons to be cheerful?
Howard Lake | 26 February 2016 | Blogs
Fundraisers are living in interesting times. The media spotlight on fundraising is continuing, and no-one knows yet how the Etherington report will affect practice and income generation. But we’re approaching the new financial year, and budgets and plans have had to be set. Fundraisers are trying to chart their way across an ocean of uncertainty, because somehow, for charities to continue their work, they need to keep on bringing in the money.
But everyone is in the same boat. So early in February, =mc worked with the British Red Cross to host a seminar for senior Fundraising Directors of many of the largest charities, to get together and discuss scenarios for the future of private/voluntary income. We wanted to know how recent events had impacted on long and short-term hopes and plans.
Twenty fundraising directors attended, representing charities with a combined net voluntary income of nearly £1 billion and across sectors including health, heritage, education, social welfare, and animal welfare. The discussion was wide ranging-covering demographic trends over the next 10 years, changes in public trust etc. There were expert speakers from the fundraising industry, from academic life, and from the commercial sector.
Overall ambition for growth
Despite all of the difficulties faced over the past year, most of our attendees were broadly positive about the future. Based on a survey filled in before the event, the combined net growth projections for the charities attending reached 27% over the next 5 years (based on 18 sets of submitted projections).
But this strong projection concealed wide variances. Many directors also felt their growth projections were fuelled by a need from CEOs and Boards to drive voluntary income to continue delivering services, in a climate of increasing need and shrinking government funds.
15 charities shared with us their thoughts on the change of their income mix over the next 5 years, showing some enlightening patterns. Firstly, there was a significant push for diversification, with the current largest income streams – mass giving and legacies – expected to decline as a percentage in the mix to make way for smaller income streams to grow. But despite losing share, these streams were expected to grow in cash value. The legacy stream was expected to decline in the mix by more than 3 percentage points, but net value was estimated to grow by close to 15%, far outstripping the Legacy Foresight predictions of a c.4% increase in income by 2020.
Only two of our 15 charities predicted a drop in net value for this stream, despite eight expecting it to lose share. This may be based on the idea of a window of opportunity for legacy income connected to rising death rates among the boomer population.
Regular giving led to the greatest variance of opinion, with five charities expecting net value to decline and nine expecting it to increase. This is a good reflection of the wider uncertainty in the sector regarding the future of low-level individual giving.
The higher value pieces – High Net Worth Individuals, corporates and trusts – were areas for optimism, all predicted to grow in net value by all charities. HNWI giving in particular came out as a key focus, expected to more than double in aggregate net value for our respondents.
Excluding one outlier (excluded because of low income and a radically different business model), HNWI giving was a relatively small part of the current fundraising mix for our respondents, averaging at around 3.3%. But this stream was expected to account for an average of 6.2% of voluntary income by 2020, almost doubling its share of the mix. The trusts and corporates streams showed a little more variance, with several charities expecting no increase or even a decline in the mix, but overall both streams were expected to grow by an average half a percentage point in prominence in the fundraising mix.
There was also cautious optimism around the community/events line – nine of our 15 charities were expecting an increase in share of the fundraising income mix, and all but one expected net value to increase. The growing importance of these streams seems to reflect the drive towards increased and varied donor engagement.
Business model
There was a feeling among the group that fundraising is facing necessary change, and that this gives the sector an opportunity to improve ways of working. How well the sector will be able to grasp that opportunity caused some debate. Some attendees expressed concerns that boards and CEOs may be underestimating the impact that these changes could have, both on income and on ways of working beyond fundraising.
For example, increased involvement by HNWIs brings benefits but may also cause governance challenges as these donors seek to direct charity priorities. Across the sector people are ‘talking about stronger, deeper relationships with donors’, but our discussion struggled to pin down what that means in practice. Giving donors genuine involvement with the charity’s work needs buy-in from the whole organisation, not just fundraising. Many participants felt that a number of boards, CEOs and programme departments would be wary of allowing donors too much input into the work they undertake.
Even if this barrier could be overcome, some attendees questioned whether donors actually want deeper relationships? Charities also need to cater for those who don’t necessarily want to engage. This may be people who are event-led, rather than cause-led, but it might also be longer term, committed donors who give because they want to know a cause is being addressed without needing further information.
People who are very involved with the cause initially may well prefer to take a back seat as time goes on, continuing their support in the confidence that their money is being used well, but without wanting to know all the details. The suggestion was raised that the key might not necessarily be stronger relationships, but in giving the donor control over those relationships.
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Who will do well?
When asked who was admired and who would prosper in the coming years, MacMillan and Cancer Research topped the list, with Save the Children, British Heart Foundation and RNLI all also getting multiple votes. The most mentioned factors for future success were: those who had already begun to develop ‘donor-centric’ relationships; those with funds to invest in developing fundraising; a simple and clear proposition and Case for Support; and causes that affected people personally – especially health. The importance of engaging in a ‘meaningful’ way with donors came though strongly.
The strong growth projections of an aggregate 27% raised some eyebrows, particularly in view of the prediction by Adrian Sargeant, Director of the Centre for Sustainable Philanthropy at the University of Plymouth, of a sector-wide £2 billion reduction in fundraised income over the same period. But when we broke the aggregate figure down, we could see a huge level of variance. Of the 18 charities who submitted figures, seven predicted growth even higher than the 27% average, while five predicted growth of less than 5% or none at all. So confidence in growth varies very strongly.
Good reasons to be cheerful?
Given the current context, is the strong prediction of aggregate growth realistic?
The bulk of attendees were from established charities with well-known brands, and these are likely to be more insulated from the pressures facing the sector than smaller, less established charities. But the strong forecast may also signal pressure being placed on fundraising departments to drive continual growth regardless of the context. And so the question was raised: it is time for the sector to move away from this focus on continual income growth, and instead focus on using our existing resource more cost-effectively? This would be a huge cultural shift for the sector – a daunting prospect.
But the day ended with an enthusiasm for more – more discussion, more joint thinking, more opportunities to meet and sense check with peers. At =mc we are planning to host future events to keep building on the discussion, and work with our clients to help build the evolving sector-wide picture into strategies and plans.
Perhaps working together on questions such as these is the first step towards paradigm-shifting change.
If you’re interested in taking part in the ongoing dialogue or would like to talk about developing scenarios, please get in touch with Maeve MacRory.
Maeve MacRory 
is a consultant at The Management Centre. She has been working in the charity sector for nearly 10 years, for a variety of organisations including healthcare, international development and arts. She specialises in strategic and operational planning and delivery, and project management. Her past roles have included business and operational management for high value, corporate, community, membership, and individual donor fundraising, taking in management of capital appeals and other large projects as well as day-to-day business operations and supporter care. At the Management Centre, she has recently been supporting the South Downs National Park Authority and east-African INGO Adeso to begin fundraising in the UK, and working with Humane Society International to explore and develop their international markets.
Main image: light at the end of the tunnel by Glebstock on Shutterstock.com
About Howard Lake
Howard Lake is consultant editor of UK Fundraising. He founded the site in 1994 and successfully sold it in 2022. As director of Giving X Ltd he is exploring growing giving on a massive scale.
He is the founder of Fundraising Camp and co-founder of GoodJobs.