Before online giving came onto the scene, accepting monthly recurring donations from supporters was a difficult exercise. Nonprofits had to get donors to commit to making regular financial contributions (usually by phone or direct mail) and then had to make sure that they actually followed through. Now, with greater access to online fundraising systems, accepting monthly recurring gifts has not only become a realistic option for nonprofits of all sizes, but it has also become a necessary fundraising strategy to both protect their revenue streams and scale their organizations.
When a donor signs up for a recurring donation online, there are no checks to mail and no monthly reminders needed; much of the expense and hassle on the nonprofit’s side have been eliminated. In light of these advances, it’s time for your nonprofit to consider developing its own online recurring giving program. Here are some of the benefits of monthly recurring donations.
1. Increased Revenue
Recurring donors are over five times more valuable to your nonprofit than one-time donors, according to The State of Modern Philanthropy 2018. Even though monthly donors generally give smaller amounts on a per gift basis, the aggregate amount that they give over the course of a year almost always adds up to more.
For instance, the average one-time gift amount is $120; the average monthly recurring donation of $38 would provide equal return over three years as a one-time donation of $718. When you combine this higher annual giving level with the fact that monthly donors have much higher retention rates, you can begin to see why monthly donations are important.
2. Easy and Effective For Nonprofits and Donors
A monthly recurring donation allows supporters to spread the financial impact of their giving across the entire year, lessening the acute financial effect. Supporters end up contributing more on an annual basis, but the distribution of payments across the year makes the commitment more manageable. This makes recurring giving an especially effective way to increase gift amounts from committed supporters who might not have the financial resources to move up and become “major donors” with larger one-time gifts.
Also, from the nonprofit’s perspective, monthly recurring donations provide a relatively nonthreatening way of asking donors for larger financial commitments. Instead of asking for an increasing lump sum each year, your organization can ask for a smaller monthly donation that adds up to a larger annual total. The lower monthly figure tends to come across as less aggressive to donors, making them more likely to consider your request.
3. Improved Cash Flow
Monthly recurring donations are extremely beneficial from an operational perspective. It’s common for nonprofits to receive a majority of their income during a couple months throughout the year. Part of this is due to the seasonal nature of giving, and part of this is due to the fact that fundraising tends to be cyclical. If an organization has its big fundraising event in December, and its other major fundraising campaign during June, then its revenue is going to be concentrated in those two months.
This introduces operational challenges (particularly for smaller organizations). Revenue may be confined to certain months throughout the year, but operating costs are generally spread out evenly. As a result, organizations can wind up having insufficient cash on hand to function optimally during the down months. Building a predictable revenue stream helps to reduce this imbalance and provide much needed support during your organization’s fallow periods.
Monthly recurring donations also protect your nonprofit during times of uncertainty or emergency, such as during a disaster or pandemic. When unforeseen circumstances challenge your organization’s cash flow, a recurring giving program will provide much needed stability.
Hear how nonprofit leaders and experts around the world are creating sustainable donation models at our 2021 Collaborative: Virtual Sessions.
4. Better Long-Term Planning
As a corollary to the cash-flow point, a mature monthly recurring donation program can also help an organization improve its long-range planning and decision-making. Revenue from recurring donations is far more predictable than revenue from one-off gifts. Once some data has been accumulated, an organization can easily calculate the average span in months its recurring gifts last and the average number of new recurring donors it acquires each month.
Using these numbers, your nonprofit can model out its projected revenue from recurring donations with a high degree of accuracy. Being able to predict income in advance helps with longer range budgeting and planning. For example, it’s much easier to commit to hiring a new staff member or piloting a new program if you know that you will be able to cover these costs with recurring revenue.
There’s no need for repeat solicitation with recurring gifts. Once you’ve converted a donor into your monthly recurring donation program, the gifts continue indefinitely until the donor decides to stop. Of course, you’ll need a retention strategy to encourage continued engagement, but the costs of maintaining recurring donors are generally lower than annual givers.
Simple ways to improve your donor retention without spending more include personalizing your outreach messaging, experimenting with custom questions in your donation form to better understand your donor base, and sending customized follow-up emails in response to each donation.
6. Strengthened Donor Loyalty and Engagement
Of all one-time donors who return to start a recurring giving subscription, 25% go on to make an additional one-time gift on top of their recurring gift. Of those recurring donors, 51% return to also give through a different campaign type, according to The State of Modern Philanthropy 2020. It’s clear that recurring donors are willing to take additional actions for your nonprofit on top of their monthly donation.
This is also reflected in their participation in registration with fundraising campaigns, as well as peer-to-peer. Of recurring donors who return to take additional action, 14% sign up to fundraise or donate to a registration with fundraising campaign, and 10% participate in a peer-to-peer campaign. Don’t be afraid to engage your monthly donors with other one-time asks throughout the year.
Download our 8 Email Templates to Upgrade Your Recurring Donors for tips and examples of how you can make these asks of this committed cohort.
7. Heightened Sense of Community
The key to donor retention is facilitating conversation and connection within your community to keep supporters excited about your mission. Your recurring donors are a special cohort that deserve tailored communications, so reach out to them regularly with custom updates about your work and the impact of their monthly recurring donations, exclusive perks, and thank you messages.
Every month when a donor makes their contribution, you have the chance to start an organic conversation and remind them of their impact on your nonprofit, fostering the clear sense of community that’s so important to donors and solidifying a positive feedback loop that keeps them engaged with your nonprofit.
Integrate Recurring Giving Into Your Existing Fundraising Campaigns
As you build your branded recurring giving program, don’t forget that you can easily integrate asks for monthly recurring donations into your existing fundraising campaigns and donation forms. This is the easiest way to get your feet wet and start testing out different appeals, while beginning to acquire recurring gifts.
Start by including the option for donors to subscribe to recurring giving on the donation form for your next crowdfunding campaign. Then, when you’re getting ready to take the next step and launch your branded recurring giving campaign, you can also use a crowdfunding campaign to promote it.
Develop and Promote Your Own Recurring Giving Program
To start building your recurring giving program, identify your goals, analyze your audience, and plan a campaign to promote monthly giving. These goals could include your target monthly recurring revenue amount or number of monthly donors, for example. Once you identify your focus, it’s crucial to keep your audience in mind when deciding the best appeal.
Consider the top factors that make up your target demographic and leverage your donor personas to map out your strategy. From there, identify a small group of your most committed supporters to help you get your new program off the ground, and ask them to become monthly donors. By starting with a soft launch, you can test your strategy and receive valuable feedback from your most avid advocates.
Building a recurring giving program requires a lot of work, but it starts with these small, actionable steps. Create an exciting opportunity that your community wants to be a part of and the return on investment from each monthly recurring donation will set you on a path to sustainability.