Effective fundraising is the lifeblood of every nonprofit organization. Raising money enablesgroups to increaseawareness about their causes, expand their reach, cover administrative costs and,ultimately, pursue their missionto respond to emerging needs in their communities.
However, a variety of challenges are hampering the efforts of nonprofit organizations toachieve their fundraisinggoals. These challenges range from greater competition for people’s attention anddonor fatigue to decliningengagement and poor communication strategies.
Overcoming these challenges may not be easy, but nonprofits can take steps to improve theirchances of success. Withthe right people, planning, processes and technology in place, nonprofit organizations canimprove their reach,boost their donation pool and increase their impact.
Key Takeaways
- Nonprofit organizations often struggle to achieve their fundraising goals for reasonsincluding economicdownturns, limited use of technology and difficulty retaining donors.
- Addressing these challenges requires proper planning, the right messaging and theability to foster donor trust.
- Organizations should routinely show appreciation to their donors and share how theirdonations are making adifference.
17 Nonprofit Fundraising Challenges
At a time when the economy is rocky and inflation is an issue, many nonprofit organizationsare seeing a decline infunding. According to a 2023 study of 215 nonprofits, the average nonprofit organizationreported a 4% decrease inrevenue between 2021 and 2022. And the long-term outlook for many nonprofits isn’tgreat either: About 30% ofnonprofits won’t last beyond 10 years, according to the National Center for CharitableStatistics.
Nonprofits face a wide variety of fundraising challenges, from ineffective communication andpoor board involvementto donor fatigue and low retention of contributors. However, with thoughtful planning,nonprofit organizations canengage broad audiences, foster long-term support and increase their impact on communities.Learn about the variousobstacles many nonprofits face, as well as ways to overcome them to increase yourorganization’s chances offundraising success.
1. Competition for Funding
The number of nonprofit organizations has steadily increased at a rate of 1.4% annuallyduring the past 20 years inthe U.S. alone. Therefore, nonprofits must continually compete with a growing number ofnonprofit organizations togain the attention of donors and encourage them to steer their dollars to their particularcauses. For manyorganizations, it can be challenging to generate the same financial support from one year tothe next, particularlyas new charities start up.
The solution: While it’s important to consider how and when to invest infundraising efforts,it’s also important to revisit the nonprofit’s vision and mission statements.These statements should beas clear and specific as possible, with the goal of reaching donors who are interested inparticular causes. Ascompetition for dollars becomes more intense, nonprofits should consider increasing thenumber of fundraising eventsthey host; finding new ways to raise money, including pursuing additional grants; andactively working on strategiesto retain loyal donors.
2. Donor Fatigue
Nonprofits that have counted on regular contributions from a particular set of donors may atsome point see donorfatigue set in, as key contributors reduce the amount of their donations or stop donating tocertain causesaltogether. Donor fatigue can occur when people feel discouraged about a particular causeand worry that theircontributions are not making a difference. In addition, organizations sometimes seedonations decline due toconditions outside their control, like an economic downturn that leads donors to make fewercontributions tononprofits overall.
The solution: Nonprofit organizations can tackle donor fatigue in a number of ways.Organizations shouldroutinely recognize and express gratitude for their donors to make sure they feelappreciated, share how theirdonations are making a difference and avoid pressuring donors too often for more money.Organizations should alsoconsider holding donor appreciation events, where the main focus is not on additionalfundraising but is centeredinstead on applauding the support donors have previously provided and highlighting theimprovements in the communitythat these donations have spurred.
3. Limited Resources
Many nonprofits operate as lean machines, but when resources are stretched too thin,organizations may experience avariety of problems. For example, if administrative overhead is reduced, nonprofits may havemore difficultyattracting and retaining top talent. Also, without proper resources, nonprofits may havetrouble supporting theright tools and staff training, which can make it more difficult for employees andvolunteers to perform their jobseffectively. These factors may lead nonprofits to fall short of their fundraising targets,which could alsoperpetuate further reductions in resources.
The solution: To deliver on their promises to the communities they are serving,nonprofits need to carefullycraft a realistic budget that takes into account a variety of expenses, including staffing,marketing andevent-planning costs. In addition, organizations should look beyond individual donations andexplore additionalopportunities for funding, including applying for government or private foundation grants;charging annual ormonthly membership fees in exchange for providing materials, information or other benefits;seeking corporatesponsors; hosting additional fundraising events; and renting out meeting space to otherorganizations.
4. Changing Demographics
Each generation experiences a different set of challenges — as well as opportunities.As the demographics ofdonors change over time, the ideals, motivations and circ*mstances that nonprofits mustconsider often change, too.If organizations don’t keep up with the latest trends, maintaining donations andinfluence can be difficult.
The solution: Organizations should be aware of the circ*mstances that define eachgeneration and take thosefactors into consideration when designing new donor strategies. This may include recognizingthe experiences ofdifferent generations, their technological expectations and how they use their time andresources. For instance,while older generations may be more inclined to send handwritten checks in the mail, youngergenerations may expectan organization to provide an easy way to make donations on mobile devices.
5. Economic Downturns
Recessions, economic downturns and concerns about inflation can pose problems for charitableorganizations thataren’t prepared to weather a decline in donations. During these periods, people areoften less likely to giveand, as a result, reaching fundraising goals can become challenging. The number of donorsdecreased by 7% in thefirst six months of 2022, compared with the first half of 2021, according to The Chronicleof Philanthropy. Thedecline was largely due to a sharp decrease in the number of supporters who gave smallcontributions, the reportsays, which is a reminder that every gift, large and small, matters.
The solution: During periods of economic uncertainty, nonprofit organizations shouldfocus on retaining thedonor base they have cultivated through a variety of outreachefforts, includinginitiating recurring giving programs,perhapsencouraging donors to sign up for automatic donations. Nonprofits should also take a hardlook at their finances andfind ways to trim their budgets, pay off debts and shift as much money into their reservesas possible.
6. Lack of Engagement
When donors feel disconnected from a nonprofit and its cause, they may stop supporting anorganization. Lack ofongoing engagement with donors and with community members also makes it more difficult fororganizations to attractnew supporters and limits their ability to achieve their mission.
The solution: To improve engagement, nonprofit organizations should refocus theircommunication strategies,carefully prepare appropriate messages and ensure that they are reaching out to their donorsregularly about theimpact they are making in the community. They should also consider hosting events to boostengagement and provideopportunities for supporters to volunteer, which can foster a stronger connection to theorganization.
7. Effective Storytelling
Potential donors must be able to easily understand the messaging of the organization —its focus, the work itdoes and why its mission matters. Clever and compelling storytellingabout howthe nonprofit is helping people can go a long way toward getting the message across. Whenorganizations cancommunicate the needs of the community effectively and share success stories, their causesoften resonate morestrongly, and people are more likely to donate.
The solution: The story the organization tells should appeal to the emotions of thedonor and clearlydemonstrate the impact that a donation can have. People should also clearly understand howtheir money will be usedand what the organizational goals are. Telling the stories visually, through videos onsocial media, for instance,can have a big impact.
8. Limited Access to Technology
The technology used to facilitate fundraising is critical — for donors and for staffand volunteers. When anonprofit’s technology is out of date, not only are staff and volunteers lessefficient and productive, butdonors may run into glitches when attempting to make contributions. Limited access totechnology also inhibits anonprofit’s potential reach with new audiences.
The solution: Organizations should prioritize technology investments to improvetheir operations andoutreach. This might include platforms that automate the payment process and connect theorganization to supportersacross the globe, for example. Organizations should also consider technologies and toolsthat make it easier forsupporters to donate, such as mobile applications, as well as donations via text messagesand QR codes.
9. Donor Trust
Donors want to hear that their contributions are being put to good use and are making adifference. When news breaksof a nonprofit mishandling funds — no matter how rarely this happens — it canerode trust in allnonprofit organizations and, as a result, donations may stall.
The solution: Financial transparency and strong fiscal discipline throughout theorganization will help tobuild and maintain trust with donors. Some best practices include publishing quarterlyfinancial reports, conductingindependent audits of the organization’s finances, providing transparency about whereand how the organizationspends its money and obtaining accreditation from the Better Business Bureau or NonprofitsFirst.
10. Inadequate Communication
It’s important for nonprofit organizations to effectively communicate with theirdonors and the public. Toolittle communication doesn’t build a strong enough connection, and too muchcommunication can be overwhelming.The content of the communication is important, too. For example, communicating only whenmore money is needed may bea turnoff. Organizations must find the right balance.
The solution: Communication should be consistent, and the nature of messages shouldvary. Rather thancommunicating only when an organization is soliciting contributions, communications shouldinclude a mix of storiesabout the impact the organization has made, as well as news and updates about theorganization’s progress witha specific cause.
11. Legal Compliance
Nonprofit organizations are subject to a number of federal, state and local laws that governtheir fundraisingactivities. If an organization fails to comply with these laws and regulations, they riskfines, penalties, loss oftax-exempt statusand damage to theirreputation.
The solution: To ensure compliance with regulations, organizations should researchtheir federal and stateguidelines, prepare the necessary documents to register their nonprofits so that they cansolicit charitablecontributions and maintain proper records. Organizations should also have a deepunderstanding of the requirementsand procedures for reporting financial data as well as the necessary licensing compliancedetails and keep adequaterecords of their governance policies.
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12. Timing
Determining the best time to launch a fundraising campaign is important. Holidays, forexample, may seem like anappropriate time because people are in the giving spirit, but that timing could alsobackfire. During the holidayseason, donors may be more focused on their own celebrations and less likely to think aboutdonating to a campaign;they may not have the same disposable income during this period; and there is morecompetition from otherorganizations looking to raise funds at the same time.
The solution: A number of factors are important when considering the timing of fundraisingcampaigns. Organizationsshould consider which periods of time generate the most donations, avoid competing withmajor fundraising drives byother organizations and analyze data to spot trends or changes in engagement to pinpoint theoptimal timing forsoliciting contributions. For many nonprofits, Giving Tuesday, which is often described as aglobal day of giving onthe Tuesday after Thanksgiving, might be a good time to make an intense push for donations.In 2022, donations onGiving Tuesday accounted for 3% of the total revenue donated online to hundreds ofnonprofits in the U.S.
13. Board Engagement
The engagement of the board is critical to the success of nonprofit fundraising, but manyorganizations struggle toget board members more involved. For example, board members may lack an understanding of theorganization’sfundraising goals and how they can contribute to those goals, or they may not feel motivatedto participate infundraising activities.
The solution: When appointing board members, nonprofit organizations should check tobe sure they have asolid understanding of the organization’s fundraising goals and clear expectationsabout their roles andresponsibilities in helping to raise funds. Organizations should prioritize regularcommunication with the board andcelebrate their wins in order to establish trust, seek help and improve engagement.
14. Development Director Turnover
Development directors play a critical role as the organizers of fundraising efforts fororganizations. However, theturnover among directors is high, and these positions are often left vacant for months oreven years. When theseroles are filled, colleagues and board members often report that they are unhappy with theperformance of their newdevelopment directors. This can be disruptive to getting staff on the same page and reachingorganizational goals.
The solution: To improve the success of development directors, organizations shouldsmooth the transition ofdirectors during the hiring and onboarding process. This includes expanding the scope of adirector’s work toinclude meaningful assessments of fundraising strategies and providing directors with aroadmap that outlines theoptimal conditions for fundraising success.
15. Impact Assessment
An impact assessment is an evaluation that helps organizations understand theperformance of their charitableprograms. For nonprofits, regularly evaluating fundraising efforts is key to determining thesuccess andeffectiveness of various initiatives. Yet research shows that one-quarter of nonprofits donot have a system inplace for measuring program impact.
The solution: Performing an impact assessment involves building a framework forconducting an evaluation,determining key performance indicators that reflect the organization’s impact,training staff on how tomeasure progress, collecting data from a variety of sources and leveraging and sharingfindings across anorganization’s network.
16. Donor Retention
A person may make a one-time donation, but turning that donor into someone who givesregularly is an ongoingchallenge for nonprofit organizations. Retaining donors is crucial for the sustainabilityand growth of nonprofitorganizations because it enables them to establish consistent revenue streams, build strongrelationships andmaximize the impact of their missions.
The solution: Because donors like to know how their contributions have made adifference, organizationsshould consider emailing and posting on social media regular updates about theiraccomplishments and the livesthey’re touching, while also acknowledging and thanking donors for making theseachievements possible. Thisalso helps to create a sense of community, communicate the nonprofit’s impact andallow organizations to stayin close contact with people who have donated in the past. Nonprofits may also want to offera recurring paymentoption to automate future contributions.
17. Crowded Marketplace
As the number of nonprofit organizations increases, so does the difficulty of standing apartfrom the competition interms of mindshare and, ultimately, garnering donor funds. As previously discussed, acrowded marketplace may resultin funding scarcity and donor fatigue — challenges that can impact theorganization’s ability to reachtheir fundraising goals.
The solution: To counteract the effects of a crowded marketplace, organizationsshould focus ondifferentiating their missions and goals from other nonprofits and ensuring that theirmessaging is clear in orderto attract attention, as well as donors who support causes that align with these goals.
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Nonprofit Fundraising Challenges FAQs
What are the biggest challenges facing nonprofits?
Some of the biggest challenges that nonprofits face today related to fundraising concernsinclude low engagement,donor fatigue, increased competition with other nonprofit organizations and difficulty withretaining donors.
What is the hardest part about fundraising?
One of the hardest parts about fundraising is building trust with the public. Donors want toknow that theircontributions are making a difference and are being put to good use. Financial transparencyand strong fiscaldiscipline will help to build and maintain trust with donors. To build trust, publishquarterly financial reports,conduct independent audits of the organization’s finances, provide transparency aboutwhere and how theorganization spends its money and obtain accreditation.
Why do fundraisers fail?
Fundraisers fail for a variety of reasons, including poor messaging and lack of interest.Strong messaging isimportant to convey why an organization’s mission matters, share success stories andensure that the causeresonates with people.
What are some common legal compliance issues that nonprofits facerelated tofundraising?
Common compliance issues that nonprofits face in fundraising include declining to completeall required legal forms,failing to maintain a license to raise funds, neglecting to update fundraising records andlacking the knowledge andability to adhere to applicable regulations.
How can nonprofits navigate seasonal trends and events, such as holidaygiving, to maximizetheir fundraising efforts?
Organizations should regularly gather and analyze fundraising data to determine which periodsof time generate themost donations – for example, Giving Tuesday. They should avoid competing with majorfundraising campaigns andevents hosted by other organizations and spot changes in engagement and donations.
What are some fundraising challenges?
Nonprofit organizations are hindered by a number of challenges that impact their ability tofundraise successfully.These might include donor fatigue, economic downturns and communication challenges, forexample.
