5 Drawbacks of Big Money Donors
If you grew up in the 90’s you likely remember the song “Mo’ Money Mo’ Problems.” While perhaps more money is a problem many of us would like to have, there is certainly truth to the lyrics of this popular song. At least when it comes to fundraising and working with high net worth donors.
While many nonprofit teams aspire to find donors with significant discretionary income who can make substantial monetary contributions, there can be drawbacks to working with major donors. For this reason, it is very important that organizations recognize the importance of everyday, modest income donors and the contributions that they make, even if they don’t seem transformative.
So here are five drawbacks to consider with big money donors.
More money doesn’t mean more generosity. Many organizations may think that if they garner the attention of high networth donors, all of their financial struggles will be solved as that person will automatically contribute a large gift. However, research has demonstrated that the most wealthy donors are not necessarily the most generous. Even donors who earn lower incomes are often more generous (as a percentage of their income) than wealthy donors, including how generous they are with their time and volunteer contributions. So unfortunately, big money doesn’t necessarily mean a big gift.
Potential power imbalances. Sometimes large donors want or even expect decision making power within your organization. Or in some cases, donors want to contribute to a program or service that is actually out of scope with what your organization actually does. In this case, your organization should consider declining the gift, or it will risk pulling time and energy away from the mission and the important work you already do.
Reputational risk. Many times, very wealthy donors have a large profile and reach which can lead to reputational risk for your organization. For example, many of us have seen in the news what happens when a local celebrity makes an offensive comment that goes public, or a corporation makes a decision that has a serious negative impact on the environment. If that individual or corporation is associated with your organization as a donor, it can spell trouble for the goodwill your organization has in the community.
Recognition and fairness. Let’s consider a scenario where a major donor to your organization requests your building be named after them in recognition of a large gift. How will this naming make your other donors feel? Will they feel valued? What if a long-time, modest income donor feels slighted from not receiving a similar type of recognition? While a major gift to your organization may certainly warrant large scale recognition, always consider this against the weight of the contributions your other donors make, whether that be modest long-term support, significant volunteerism with your organization, or other ways that people share their generosity. Besides, a large donor may only give once, so is it really fair to recognize them more than others?
Self interest. There is fairly significant research about what motivates wealthy donors to give. While this research likely doesn’t include the entire story, historically wealthy donors are often interested in giving for tax credits, to heighten their reputation or the reputation of their business, or to move forward causes that are important to them on a personal level. This focus on self interest is often at odds with what is needed for the community at large. So, it is important for nonprofits to understand their donors’ motivation and how that may affect them.
If your organization has the expertise and resources to consider these drawbacks and how to manage them, then you certainly may be ready to develop a major gift program. But if not, remember, it is equally, if not more important to focus on your modest income donors who support you day in and day out. These folks are truly the backbone of a strong fundraising plan, and maintaining relationships with these donors can go a long way towards long term fundraising success.
