Imagine this: A donor steps forward with a generous offer—she will provide your organization with a $200,000 “capacity building grant,” hoping that it will help ensure a sustainable future. Specifically, however, she wants to know how you would invest this money? Would you use it to increase your direct marketing efforts in support of your annual giving program, or would you hire two new major gift officers?

This was the conundrum under discussion at a conference session that I hosted with two of our Washington-area client representatives—David McMullen, director of annual giving at Children’s National Hospital and Courtney Surls, (then) senior vice president of development at the Newseum, (now) vice president for development and alumni relations at American University. The assembled group of development and direct response professionals at the Bridge Conference shared significant wisdom—and also described doubts, pressures and challenges that are part of the current competitive fundraising environment. At the heart of the debate is the concept of investment and how organizations can best use precious resources.

The answer to the sustainability question is hardly straightforward. For most organizations, direct marketing is still an effective tool for donor acquisition—but the cost to acquire a donor continues to climb and the conversion of that donor to profitability takes time (and patience). On the other end of the continuum, a major gifts program can provide healthy revenue and (potentially) quicker turnaround. But major donors require long-term engagement and unlike annual giving, must be considered a less predictable source of support.

Following a spirited debate, the solution to the sustainability conundrum was, not surprisingly, to invest in both annual giving and major gifts. No part of the individual giving spectrum should be evaluated on its own. The overall performance of the program depends on the effectiveness of the pipeline.

While an annual giving program should be profitable, its greatest return on investment should come through the next phase of the donor life cycle. And a truly excellent annual giving program generates not only dollars, but new donors. New opportunity is the key to sustainability.

The good news for organizations with limited resources is that “investment” today does not always mean greater quantities. It can mean doing things “smarter.” With research, data analysis, a deeper understanding of the value of donors and knowing how to identify your organization’s best donors, you can target individuals who will yield the greatest return.

By looking at individual giving as a process, organizations can optimize their investments and adjust expectations for fundraising based on:

  • A holistic strategy for donor communications
  • A “balanced scorecard” of performance metrics for annual and major gifts staff
  • A donor-centered perspective that prioritizes building a relationship with the organization, and understanding that gifts, of any size, come only from an effective relationship

Using these guidelines, nonprofits can attain sustainable—and growing—revenue from individual donors at all levels of giving.