FYI Blog

Avalon Dispatch 01.04.2024

Happy New Year from @AvalonFYI! It’s our tradition to kick off the year with a round-up of major factors that president Allison Porter sees shaping our profession and the nonprofit sector. Here are five strategic themes we are tracking for Avalon and our clients in 2024:

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Dear friends,

Happy new year! I hope you enjoyed the holidays and feel rested and ready to take on 2024. I love the chaos of the holidays, and we had a full house this year. I couldn’t have been happier.

It has become my tradition to kick off the year with a round-up of the major factors I see shaping our profession and the nonprofit sector. Here are five strategic themes that we are tracking for Avalon and our clients in 2024:

(1) Fundraising metrics have softened.

It doesn’t take a crystal ball to identify this trend. Major benchmarks have been tracking a decline in nonprofit donor counts since the pandemic highs of 2022, and in 2023 those benchmarks also began to indicate a dip in total donations. Avalon sees similar trends across our portfolio, with some exceptions.

Our advice is to use benchmarks for context and to keep in mind that your nonprofit’s data is the most relevant for your work. It is important to understand the extent to which your program matches (or diverges from) industry markers. For most organizations, the pandemic drove record-high donations, and now those organizations are seeing a softening in performance, which was expected. The big news is that performance, donations, and revenue are ahead of pre-pandemic levels. Again—for most organizations.

If your data shows a different pattern, dig into the “why”. Obvious exceptions are the visitor and ticket-based organizations, who are seeing opposite trends (contraction during the pandemic because visitors and ticket buyers dried up, and now a resurgence as they rebuild) for good reason.

In addition, we are looking to digital results as a real-time barometer—to be validated, of course, with data from other channels and long-term views, as they become available. But, if GivingTuesday and year end were any indication, there is good news: we’re seeing growth for most organizations in the digital channels.

Finally, let history be your guide. Avalon is moving to 10-year views that incorporate pre-pandemic trends. This contextualizes pandemic fundraising, provides a fuller picture of each program and donor file, helps with board communications, and strengthens strategy. Through this wide-angle lens, we see a broad pattern of resettling after outlier years in 2020 and 2021. The outlook is not exactly bullish, but it does put scary benchmark headlines in perspective.

(2) Rising costs impact profitability.

Inflation, paper shortages, supply chain problems, and postage escalation have increased expenses for all nonprofits. Digital channels are also impacted by an increasingly competitive landscape that raises cost per click. This means that, even when performance is flat, net revenue can decline. Rising costs reduce margins and squeeze nonprofits’ budgets—a difficult challenge that fundraisers should acknowledge openly.

To thrive in this context, nonprofits must approach fundraising as a strategic investment. The answer is not to cut aggressively, but to plan carefully. Each campaign should be a smart investment in future ROI, on a timeline that works for the organization. In addition, a portfolio approach with a strategic mix of channels, audiences, and giving tiers will strengthen your nonprofit’s financial resilience.

Experienced fundraisers will easily embrace this approach, but other stakeholders may need more education. Keep beating the drum for good strategy—and hang in there! Especially in this era of high turnover, new staff, new leadership, and new boards are not unusual. It may take a deep well of patience to explain, yet again, why the cost of fundraising is not the only metric that matters.

(3) Agency consolidation continues.

I expect the trend of agency consolidation to continue. This can be done well, and I understand why some leaders choose it. Consolidation can provide a secure offramp for deserving, retiring owners and boost both infrastructure and stature for smaller firms.

However, the private equity model and the driving factors behind many consolidations are not risk-free. Layers of ownership can obscure transparency and present conflicts of interest. In addition, the trend towards consolidation creates a supply shortage: there are simply fewer agencies in the mix, and I worry that this gives nonprofits less choice.

For these reasons and many more, I am proud that Avalon remains independently owned and operated. And a shout out to the small agencies and services providers, my friends and colleagues who are exemplifying what it means to be an independent small business and who remain committed to providing best-in-class strategy and services to nonprofits. I’m grateful to be sharing this space with you.

In this environment, nonprofits should conduct extra due diligence around who partners are, whom they work for, and what will happen when investors cash out. And, as we expect of ourselves at Avalon, I hope agencies of all sizes will prioritize transparency and choice for every nonprofit. No matter where we work, we must keep asking the tough questions that make our organizations and this industry good partners and stewards for the nonprofits we serve.

(4) Fundraisers will meet the AI moment with both a spirit of innovation and a commitment to responsible use.

Professionals everywhere stand at the precipice of a new era in automation and AI. Though AI was first developed in the 1950s, the pace of machine learning is now exponential—and marketing applications are evolving rapidly. It is thrilling to consider the possibilities! It can also feel daunting, given public fear and uncertainty around these technologies. To navigate this complexity, fundraisers need clear guidance.

Donor trust must remain centered in anything we want to embrace about AI. Our industry already approaches fundraising from a place of integrity, and any uses of AI should continue to model the existing principles of donor trust, authenticity, and data privacy. To support this, Avalon has created a task force to explore AI fundraising innovations and tackle the tough AI questions.

I hope this work will help catalyze and inform efforts across the industry. Responsible use is paramount for every nonprofit, for our profession, and for the health of the sector. The best way for fundraisers to honor that—and to embrace AI innovation—is to share high professional standards. AI can be a wonderful co-pilot, but trust remains our north star.

(5) DEI work must evolve with new learning and encompass systems change.

To keep momentum in DEI, fundraisers must continue learning—and we should not be afraid to lean into the complexities we uncover. This includes letting go of well-intended, but misdirected efforts and challenging ourselves to work for systems change in addition to tactical change.

For example, we have learned that quantifying diversity on donor files is limited as a DEI strategy. The data available to identify race is imperfect, we cannot overlay identity, and truly diverse files will require deeper systems change. As a result, we are shifting the conversation to accessibility and inclusion within programs and institutions to address root issues for lasting impact.

In 2020, Avalon was one of many organizations that committed publicly to the deep work of DEI. Today, I reassert my commitment to this effort, and I charge each person reading to do the same. Let’s continue, together, to cultivate what The Chronicle of Philanthropy calls a “culture of inclusive fundraising.”

Thank you for reading this special edition of the Avalon dispatch. I look forward to being in conversation with you about these topics and, I’m sure, many new trends that will emerge this year. For now, I would love to know: what major themes are you tracking for your organization in 2024? Hit reply and share what’s on your mind!

Take care,
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Allison Porter, President
Avalon Consulting Group
202-429-6080 ext. 102