By Jim Hackney, Managing Partner
The philanthropy field is beginning to bounce back. Back in March, the stock market indices reached a record high, which means for many major donors, the reason to NOT make a gift (such as a depressed investment portfolio) has all but disappeared, or at least diminished, as an obstacle.
Some art organizations and nonprofits feel the effects of the stock market more than others because a share of their donations may come in the form of securities. So when the markets are up at a time charitable giving is down, it’s time for art organizations to think big and ask big in order to harness major philanthropic dollars.
Changes in the Funding World
Donors are becoming more demanding and fickle. They live in a world of transparency and results. For example, a couple from Houston is planning to give away $4 billion, but only to projects that prove they are worthy. As Brad Reagan said in a recent article on WSJ.com, “They want to see if they can use their money to solve some of the country’s biggest problems through data analysis and science, with an unsentimental focus on results and an aversion to feel-good projects – the success of which can’t be quantified.”
Other changes we’re seeing in the funding world include:
- People are accelerating payments on outstanding commitments because of the increase in the market. They’re also capitalizing on the value of appreciated securities, especially in light of the five percent increase in the capital gains rate for 2013.
- Major donors tell us they are giving larger gifts to the organizations they support. However, these donors are giving to fewer organizations.
- There is a lot of wealth now at the top of the pyramid. The top five percent of income earners account for nearly 40 percent of all individual giving.
- A 2013 study by the Urban Institute concluded the tax policies and rates in place for 2013 will help increase giving by $3.3 billion, mostly through gifts from those in the highest two tax brackets.
Why Target Major Donors
During tough economic times, it’s important to retain your top donors. Why? Because large gifts from major donors typically represent up to 75 percent of nonprofits’ total annual funding.
With this in mind, consider these points:
- Ask your wealthiest supporters if they would consider making an impact gift. Come with a proper, sound case for support, and be prepared to show what their money will enable the organization to accomplish.
- If you are planning to ask someone for $1,000,000, consider asking for $5,000,000. Those of us who work in the nonprofit sector tend to undervalue the giving capacity of our wealthiest donors.
- Money follows good ideas. Do you have a strategic plan? What are your plans for the next five years? How will additional funds help you implement your organization’s vision?
One thing we do know: Now is the time to be bold. The stock market will likely go down again so don’t wait to have conversations with potential donors. Have them now. You could change the future of your arts organization, and give donors the opportunity to effect change in a positive and proactive way.