2020 Philanthropy Predictions – Part III

Below is the third installment in the four-part series devoted to philanthropy predictions for the 2010-2019 decade.  Part I focused on how technology will change our work over the next 10 years, while Part II focused on the ways donor expectations and the regulatory environment will impact our work.  Part III focuses on major gift fundraising and total dollars raised.

So, without further delay and direct from my crystal ball. . .

2020 Philanthropy Prediction 7:  Major gifts will become even more important. The Law of the Vital Few (Pareto Principle) suggests that 80% of gift totals will come from 20% of donors.  For a number of years, fundraising totals roughly followed this allocation.  However, during the run-up to the dot.com bubble in the mid to late 1990s, the evidence suggested that a 90/10 split was more accurate.

Today, the wealthiest 10% of Americans have more total income (as compared to the other 90%) than at any other time in the last 100 years.  In addition, smart folk like Mark Zandi at Moody’s suggests that double digit unemployment could last to 2012 with full employment (~5% unemployment) coming by 2014.  Taken together these trends suggest that this decade will witness a lot more folks out of work with a smaller number of families becoming more and more wealthy.

In this context, I believe organizations will grow to depend more on major gifts for both operations and strategic goals.  The Law of the Vital few, as mentioned earlier, will evolve to a 95/5 or even 98/2 ratio.

2020 Philanthropy Prediction 8:  It will cost less to raise a dollar. Based in part on the major gifts focus, the overall cost of raising a dollar will decrease this next decade.  Currently, the cost to raise a dollar falls roughly between 16 and 24 cents, depending on organization size, type, and maturity of the program (among many other variables).  In general, organizations find that direct mail donor acquisition efforts cost the most ($1.25-$1.50 to raise $1.00) and major gift solicitation efforts cost the least ($.05 – $.25 to raise $1.00)

Therefore, as organizations spend more collective energy on the personal solicitations for major gifts, downward pressure will be placed on the cost to raise a dollar.  A by-product of this trend will be that the “cost to raise a dollar” will become and even more important organizational benchmark.

2020 Philanthropy Prediction 9:  Total U.S. charitable giving will top $500 billion. With over $307 billion given in 2008, we witnessed only the second year-over-year decrease in U.S. charitable giving since 1956 (the 2007 total equaled $314 billion).  Early indications are that major gifts were decreased in 2009 which suggests that the total giving number will decline again.

So, with these reductions in giving at the end of the last decade, why am I suggesting that total giving in the U.S. will rise significantly to $500 billion (a 5% annualized increase) by 2020?  Primarily, because I believe major gifts driven by increased wealth concentration will drive the higher totals.  Yes, there will be fewer major gifts, but those gifts will be exponentially larger than we’ve experienced in the past.

All told, then, the focus on major gifts will only become sharper for organizations of all sizes.  This development also will encourage an enhanced level of professionalism among fundraising leaders.  This will be the decade of the major gift and the major gift fundraiser.

The final, and most important philanthropy prediction for 2020 comes next. . .

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