The New 80/20 Rule for Fundraising
If you work in fundraising, you have likely encountered the adage that 80 percent of your revenue comes from 20 percent of your donors. This is derived from the Pareto Principle, which can be extrapolated to just about anything—80 percent of traffic accidents are caused by 20 percent of drivers, 80 percent of beer is consumed by 20 percent of the population, etc. Although the numbers may not always be exact, the theory holds that a relatively small audience is responsible for a disproportionate number of the results in many fields.
It turns out fundraising is a prime example of where the Pareto Principle is played out to an even greater extreme. According to data collected from over 7,000 small to mid-size charities by AFP and the Fundraising Effectiveness Project, 89 percent of giving comes from the top 14 percent of donors (those giving $1,000 or more). Taken even a step further, 76 percent of contributions come from the top 4 percent of donors, those giving $5,000 or more.
In short, 14 percent of donors are going to decide if you meet your annual or campaign goals. Don’t assume you know these donors off the top of your head. Some will likely come to mind, but others may fly under the radar. Pull a list to be sure. You should be building personal relationships and figuring out what motivates these donors and what they want to see from your organization.
If you’re looking at a campaign, assessing the feelings of these donors through a feasibility study is an important step. These are the people who will make or break your campaign, and you don’t want to find out they have concerns after you’ve already launched.
One word of caution. The 14 percent of donors who account for 89 percent of your revenue often start their giving as one of the 86 percent who make up 11 percent of your revenue. While it’s not feasible to have a personal relationship with every one of your donors, you do still need to have proper stewardship systems in place that promptly and thoughtfully thank donors and let them know how their gift is used. With proper stewardship, consistent and increasing gifts will help identify and build your pipeline of major donors.
Shocking Statistic: Thirty percent of $1,000+ donors made a first gift of less than $1,000 (Ben Miller, DonorTrends/AFP).