Annual Gifts and Major Gifts Don’t Need to Be Mutually Exclusive
Annual gifts support the day-to-day operations of a nonprofit organization. Major gifts, by nature, are much larger gifts with a focus on the future. While many organizations dream of getting that one big gift that will solve everything, most nonprofits depend on a combination of annual and major gifts to meet short-term needs and long-term goals.
The Difference Between an Annual Gift and a Major Gift
Annual gift are typically cash gifts intended to support a nonprofit organization’s current operations. Amounts vary between individuals, but tend to fall below the “major gift” threshold. Generally speaking, annual gifts are non-restrictive: meaning, the donor surrenders control over how their dollars are spent when they make the donation to the recipient organization. Consistent giving to your organization may become a regular component of a current donor’s overall philanthropic activity, and the gift size may increase over time. In both of these cases, there may be an opportunity to discuss major giving with the donor.
Major gifts typically involve large sums of money and therefore require more time, consideration, and financial planning. Rather than immediate cash-in-hand gifts, major gifts may be sourced from an individual’s assets over a period of several years. The donor may wish to direct where and how the funds are invested, such as new scholarships, facilities, awards, or programs. Securing a major gift often requires a team of professionals including prospect researchers, fundraisers, organization leadership, attorneys, accountants, and financial advisors. This team may work together for several months or years to secure a single (but definitely worthwhile) gift for the organization.
Every prospective donor connected to your organization has the ability to become an annual donor. A smaller segment (about 10-15%) of that donor base has the ability to become major gift donors.
Annual Giving Teams vs. Major Giving Teams
Fritz Schroeder, VP Development and Alumni Relations at John Hopkins University, wrote an excellent article about encouraging collaboration between annual gift teams and major gift teams at large organizations. To set the stage, he identified three ways in which competition and tension can build between the two teams:
- As the annual giving staff cultivates donors and moves them to positions at which major gifts seem likely, the annual fund may lose revenue if major gift commitments preclude ongoing annual support from these donors.
- Both annual and major gift staff members are typically evaluated on their donor contacts, relationships, visits, and solicitations. As a donor naturally increases his or her giving over time, there can be tension regarding which staff member gets credit for such activities.
- An annual fund job is sometimes seen as the first step on the ladder to a major gift career, sometimes creating an inappropriate sense of inferiority among annual fund staffers. Fortunately, the training, skill, and professional abilities of annual fund officers have increased their role in many development programs and made them peers with their other development colleagues.
Clearly, any competition or tension doesn’t help an organization’s cause. But when both teams might be speaking to the same individual, someone needs to come out on top — right?
There don’t need to be any losers here. In fact, sacrificing the efforts of one giving team to boon another is a classic case of robbing Peter to pay Paul. You also risk leaving money on the table and limiting the benefit a generous donor might be willing to give.
If 80-90% of donors fall into annual gift territory, and your organization’s day-to-day operations depend on the annual giving pipeline, then focusing all your efforts on major gifts will result in a collapse of your fundraising efforts. At the same time, focusing solely on short-term annual gifts without searching for major gift opportunities will eventually lead your fundraising program to become stagnant or slip into decline.
There is a Win-Win Solution
They key to moving forward together is a unified strategy that depends on open communication, transparency, and accountability.
If you implement a version of the moves management process at your organization, you know that discovery and qualification are critical steps to find major gift donors. If you’ve identified an individual as someone with a history of philanthropy and a connection to your cause, they are likely already in annual gift territory (where gift amounts could range from $1 to $10,000 or higher). You are already on the road to encouraging this individual to become a major gift donor. Annual gifts provide one method of qualifying the philanthropic fit of major gift prospects.
A consistent annual donor might be an excellent major gift prospect. A recent major gift donor who believes in your cause might also be willing contribute to your organization’s annual fund. Why not try for both? This is what’s called the dual ask.
The Dual Ask
Consider an example. You are a fundraiser with a theatre and art gallery in a small city. Jane Smith is a longtime annual donor who regularly contributes $5000 each holiday season. Your prospect research team has identified her as a serious major gift contender thanks to a strong iWave Score. Jane has assets numbering over $10 million and she sits on the board of numerous foundations. In your conversations with Jane, she told stories of when she acted on the theatre stage and that she wants to impart a legacy, but isn’t sure how.
In a development meeting, you bring up the case of Jane Smith. You offer to help the major gift team cultivate a relationship with Jane and solicit a major gift that will fulfill Jane’s legacy wishes. In exchange for the lead, you ask to be part of those ongoing conversations with Jane since you already have a strong relationship with her. You also identify that Jane’s holiday gifts are very important to the annual giving pipeline. Presenting a dual ask seems like the right approach.
Together with a major gift officer, you sit down with Jane and share with her the theatre’s long-term plans to renovate the main stage and lights, which will cost about $100,000. At the same time, the theatre requires private and public support to keep the doors open day-to-day, and especially to run acting classes for young children. You offer a $100,000 gift over four years with an additional annual commitment of $5,000. Each year, Jane contributes $30,000: the major gift component is $25,000, the annual component $5,000. Overall, Jane’s total giving over four years will equal $125,000.
Now let’s imagine a case where Jane Smith has been cultivated as a major gift prospect thanks to a network connection, but she’s someone who doesn’t understand the tangible value of annual giving. In fact, Jane has never made an annual gift at all and seems mystified by the concept. A more appropriate dual ask for Jane in this case might be a flat $100,000 commitment with annual giving incorporated into that figure. You might suggest $96,000 will go toward theatre renovations while the remaining $4,000 will be spread over the four years as annual gifts. In this way, Jane will fulfill her major gift commitment while seeing the real-time impact of her annual gifts. This may inspire Jane to increase her annual giving in the future. It’s a good idea to offer the opportunity to increase either annual giving or major giving (or both!) commitments each year. Of course, before you can ask for more, you need to have a proper stewardship strategy in place.
How does your nonprofit break down the workload between cultivating annual gifts and major gifts? Please share your thoughts with us in the comments below.
About the author: Ryan McCarvill is iWave’s Content Manager. He joined the iWave team in 2016. Ryan enjoys meeting and learning from nonprofit professionals, researching trends in the nonprofit community, and offering strategies for development teams to use iWave’s solutions to meet and exceed their fundraising goals.