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Last week we published the first in a two-part series on major donors and annual fund programs. Today I want to continue this exploration by sharing a model that I use that may help you see the clear difference between major donors and annual fund programs and how they can work in concert to help fund the future of your organization.

I like to visualize the financial needs of a nonprofit as stair steps. Nonprofits desire to build new services and expand existing services to meet a wider set of needs. They want to “step up” their impact, as you can see in the image.

As the nonprofit increases its capacity to meet needs, a greater level of ongoing support is needed to sustain those services over time. For example, if a university adds more classrooms and classes, then its utility use, staffing, and ongoing maintenance needs will also increase. If a relief organization expands its services into a new country, then that expansion is accompanied by an increase in demand for goods, field workers, shipping, and so forth. Hospitals that add a new wing incur higher costs to condition air and maintain expensive equipment for the new space.

Organizations tend to view the entire set of needs—both capital and general budget items—as one large financial pot to be funded. Thus, annual fund and/or major gifts are used to meet both capital and budgetary demands. While that is certainly possible, it misses a crucial understanding of (1) how major donors are distinct from broad-based donors who give to the annual fund, and (2) why the cultivation of both forms of giving is not only important, but also complementary in a comprehensive, sustainable fundraising program.

A Better Model for Major Donors and Annual Fund Programs

A slight revision to our stair step model depicts this idea. Instead of seeing the entire environment as one big “pot” that needs to be funded, we now see a division in financial opportunity. Major donors are challenged to build and support expansion opportunities (pictured in white), while the annual fund/broad-based program is cultivated to new levels where ongoing support eventually becomes sufficient to sustain those new efforts over time (pictured in gray). The two work harmoniously!

In a hospital setting, major donors might fund the addition of a new wing that will eventually be sustained through paid services. In human services organizations, major donors might fund research into new disease treatments, while annual fundraising events help spread awareness among broad-based supporters about the availability of new treatments to better meet people’s needs.

This scenario avoids major donor fatigue that arises from being asked to sustain valuable services. It also avoids a “disconnect” with broad-based donors who are asked to support new initiatives they don’t have enough information to understand and therefore lack the motivation to support.

The net result: donors at both ends of the pyramid can be engaged in ways that are meaningful and appropriate to their relationship with the organization.

Learn more about the stair step fundraising model by downloading the entire content paper free here.