Is 2022 the Long-awaited Drop?
Jonathan Sills, Vice President, Fundraising Strategy
August 24, 2022
Fear of the Drop
Healthcare sector fundraisers might be forgiven for feeling like the sky is constantly about to fall on their heads.
No sooner did the pandemic begin than demand for emergency funds surged. But where would those donations come from in the midst of layoffs and furloughs?
Later that year, we worried whether donors would give again at year-end.
Then, as we went through the second year of the pandemic, we wrung our hands with concern that donors were fatigued even though the need continued to be high.
Month-by-month comparisons in 2021 all suggested that results would not match 2020’s highs and we worried again.
Astonishingly, 2021 fundraising totals actually exceeded 2020s – though only modestly, largely thanks to donors who dug deep and contributed more. The economy roaring back to life and a buoyant stock market coinciding conveniently with peak fundraising season.
The narrative seems to be that, despite fears to the contrary, our donors come through when we need them most.
Is 2022 the long-awaited drop?
Leveraging historical performance data showing corporate, foundation and estate giving all increasing in line with strong stock market performance, the Lily Family School of Philanthropy predicted that donors would continue giving and that total charitable giving would rise by 5.7% in 2022.
But then 2022 unfolded.
War in Ukraine. Extended COVID lockdowns in China. Further supply chain tightening. Inflation reaching its highest point in 40 years. The Federal Reserve twice increased interest rates in response. The reversal of Roe vs Wade. A series of devastating heatwaves and wildfires. Another (less-publicized) COVID surge.
Unsurprisingly given this context, Q1-Q2 fundraising revenue was down 2.2% across the nonprofit sector year-over-year, suggesting the drop may already be upon us.
Historically, weaker year-end fundraising performance has correlated strongly with the kind of bear stock markets we have experienced in the past two quarters.
Charitable giving also correlates quite strongly with consumer spending which has been trending down as inflation has pushed up the cost of goods and services.
There is hope
However, economic data shows that markets tend to bounce back in the second half of years in which the first halves were in a recession. And, elections usually cause short-lived economic spikes.
Healthcare nonprofits are also better equipped to face the future thanks to their COVID-enlarged donor files. More donors to reach out to can help mitigate lower response rates.
More total donors tend to mean more wealthy donors. As we saw at year-end 2021, donors giving larger gifts can also mitigate lower response rates, and it is wealthier donors who are more likely to have the capacity to donate when the economy is weaker. In fact, research suggests that philanthropy has an asymmetric relationship to the stock market. Meaning that giving spikes with strong stock markets, but tends to lag, not mirror, downturns.
But while files are larger, they grew thanks to the pandemic when donors often gave to causes they hadn’t previously supported, typically with online gifts. That means donors now have even more organizations vying for a share of their digital wallet. Combine that with softer year-to-date revenues across the nonprofit sector and it makes for a highly competitive year-end period when standing out in overcrowded inboxes and mailboxes will be a challenge.
Oh, and remember inflation?
Because the costs of running an organization have risen dramatically this year and prices seldom drop even when inflation cools, 2022 dollars can purchase less than 2021 dollars. This puts a greater emphasis on finding ways to further upsell year-end gifts to bridge that gap.
Year-End Fundraising Outlook Weaker, But Not Dramatically
To summarize, it appears that the 2022 fundraising outlook is weaker than in recent years, but not dramatically, thanks to continued interest in healthcare issues, and deeper and wealthier donor files. So, how should healthcare nonprofits prepare for year-end?
- Focus on reinforcing relationships with higher-capacity donors
- Effectively communicate impact and need to all levels of the file to encourage retention and new donor conversion
- Expand online giving opportunities to be more competitive for digital dollars
- Consider implementing new ways for donors to give (DAFs, gifts of stock, crypto, mobile wallets, PayPal, ACH)
- Focus on encouraging donors to increase their gift size