Effective fundraising is the lifeblood of every nonprofit organization. Raising money enables groups to increase awareness about their causes, expand their reach, cover administrative costs and, ultimately, pursue their mission to respond to emerging needs in their communities.
However, a variety of challenges are hampering the efforts of nonprofit organizations to achieve their fundraising goals. These challenges range from greater competition for people’s attention and donor fatigue to declining engagement and poor communication strategies.
Overcoming these challenges may not be easy, but nonprofits can take steps to improve their chances of success. With the right people, planning, processes and technology in place, nonprofit organizations can improve their reach, boost their donation pool and increase their impact.
- Nonprofit organizations often struggle to achieve their fundraising goals for reasons including economic downturns, limited use of technology and difficulty retaining donors.
- Addressing these challenges requires proper planning, the right messaging and the ability to foster donor trust.
- Organizations should routinely show appreciation to their donors and share how their donations are making a difference.
17 Nonprofit Fundraising Challenges
At a time when the economy is rocky and inflation is an issue, many nonprofit organizations are seeing a decline in funding. According to a 2023 study of 215 nonprofits, the average nonprofit organization reported a 4% decrease in revenue between 2021 and 2022. And the long-term outlook for many nonprofits isn’t great either: About 30% of nonprofits won’t last beyond 10 years, according to the National Center for Charitable Statistics.
Nonprofits face a wide variety of fundraising challenges, from ineffective communication and poor board involvement to donor fatigue and low retention of contributors. However, with thoughtful planning, nonprofit organizations can engage broad audiences, foster long-term support and increase their impact on communities. Learn about the various obstacles many nonprofits face, as well as ways to overcome them to increase your organization’s chances of fundraising success.
1. Competition for Funding
The number of nonprofit organizations has steadily increased at a rate of 1.4% annually during the past 20 years in the U.S. alone. Therefore, nonprofits must continually compete with a growing number of nonprofit organizations to gain the attention of donors and encourage them to steer their dollars to their particular causes. For many organizations, it can be challenging to generate the same financial support from one year to the next, particularly as new charities start up.
The solution: While it’s important to consider how and when to invest in fundraising efforts, it’s also important to revisit the nonprofit’s vision and mission statements. These statements should be as clear and specific as possible, with the goal of reaching donors who are interested in particular causes. As competition for dollars becomes more intense, nonprofits should consider increasing the number of fundraising events they host; finding new ways to raise money, including pursuing additional grants; and actively working on strategies to retain loyal donors.
2. Donor Fatigue
Nonprofits that have counted on regular contributions from a particular set of donors may at some point see donor fatigue set in, as key contributors reduce the amount of their donations or stop donating to certain causes altogether. Donor fatigue can occur when people feel discouraged about a particular cause and worry that their contributions are not making a difference. In addition, organizations sometimes see donations decline due to conditions outside their control, like an economic downturn that leads donors to make fewer contributions to nonprofits overall.
The solution: Nonprofit organizations can tackle donor fatigue in a number of ways. Organizations should routinely recognize and express gratitude for their donors to make sure they feel appreciated, share how their donations are making a difference and avoid pressuring donors too often for more money. Organizations should also consider holding donor appreciation events, where the main focus is not on additional fundraising but is centered instead on applauding the support donors have previously provided and highlighting the improvements in the community that these donations have spurred.
3. Limited Resources
Many nonprofits operate as lean machines, but when resources are stretched too thin, organizations may experience a variety of problems. For example, if administrative overhead is reduced, nonprofits may have more difficulty attracting and retaining top talent. Also, without proper resources, nonprofits may have trouble supporting the right tools and staff training, which can make it more difficult for employees and volunteers to perform their jobs effectively. These factors may lead nonprofits to fall short of their fundraising targets, which could also perpetuate further reductions in resources.
The solution: To deliver on their promises to the communities they are serving, nonprofits need to carefully craft a realistic budget that takes into account a variety of expenses, including staffing, marketing and event-planning costs. In addition, organizations should look beyond individual donations and explore additional opportunities for funding, including applying for government or private foundation grants; charging annual or monthly membership fees in exchange for providing materials, information or other benefits; seeking corporate sponsors; hosting additional fundraising events; and renting out meeting space to other organizations.
4. Changing Demographics
Each generation experiences a different set of challenges — as well as opportunities. As the demographics of donors change over time, the ideals, motivations and circumstances that nonprofits must consider often change, too. If organizations don’t keep up with the latest trends, maintaining donations and influence can be difficult.
The solution: Organizations should be aware of the circumstances that define each generation and take those factors into consideration when designing new donor strategies. This may include recognizing the experiences of different generations, their technological expectations and how they use their time and resources. For instance, while older generations may be more inclined to send handwritten checks in the mail, younger generations may expect an organization to provide an easy way to make donations on mobile devices.
5. Economic Downturns
Recessions, economic downturns and concerns about inflation can pose problems for charitable organizations that aren’t prepared to weather a decline in donations. During these periods, people are often less likely to give and, as a result, reaching fundraising goals can become challenging. The number of donors decreased by 7% in the first six months of 2022, compared with the first half of 2021, according to The Chronicle of Philanthropy. The decline was largely due to a sharp decrease in the number of supporters who gave small contributions, the report says, which is a reminder that every gift, large and small, matters.
The solution: During periods of economic uncertainty, nonprofit organizations should focus on retaining the donor base they have cultivated through a variety of outreach efforts, including initiating recurring giving programs, perhaps encouraging donors to sign up for automatic donations. Nonprofits should also take a hard look at their finances and find ways to trim their budgets, pay off debts and shift as much money into their reserves as possible.
6. Lack of Engagement
When donors feel disconnected from a nonprofit and its cause, they may stop supporting an organization. Lack of ongoing engagement with donors and with community members also makes it more difficult for organizations to attract new supporters and limits their ability to achieve their mission.
The solution: To improve engagement, nonprofit organizations should refocus their communication strategies, carefully prepare appropriate messages and ensure that they are reaching out to their donors regularly about the impact they are making in the community. They should also consider hosting events to boost engagement and provide opportunities for supporters to volunteer, which can foster a stronger connection to the organization.
7. Effective Storytelling
Potential donors must be able to easily understand the messaging of the organization — its focus, the work it does and why its mission matters. Clever and compelling storytelling about how the nonprofit is helping people can go a long way toward getting the message across. When organizations can communicate the needs of the community effectively and share success stories, their causes often resonate more strongly, and people are more likely to donate.
The solution: The story the organization tells should appeal to the emotions of the donor and clearly demonstrate the impact that a donation can have. People should also clearly understand how their money will be used and what the organizational goals are. Telling the stories visually, through videos on social media, for instance, can have a big impact.
8. Limited Access to Technology
The technology used to facilitate fundraising is critical — for donors and for staff and volunteers. When a nonprofit’s technology is out of date, not only are staff and volunteers less efficient and productive, but donors may run into glitches when attempting to make contributions. Limited access to technology also inhibits a nonprofit’s potential reach with new audiences.
The solution: Organizations should prioritize technology investments to improve their operations and outreach. This might include platforms that automate the payment process and connect the organization to supporters across the globe, for example. Organizations should also consider technologies and tools that make it easier for supporters to donate, such as mobile applications, as well as donations via text messages and QR codes.
9. Donor Trust
Donors want to hear that their contributions are being put to good use and are making a difference. When news breaks of a nonprofit mishandling funds — no matter how rarely this happens — it can erode trust in all nonprofit organizations and, as a result, donations may stall.
The solution: Financial transparency and strong fiscal discipline throughout the organization will help to build and maintain trust with donors. Some best practices include publishing quarterly financial reports, conducting independent audits of the organization’s finances, providing transparency about where and how the organization spends its money and obtaining accreditation from the Better Business Bureau or Nonprofits First.
10. Inadequate Communication
It’s important for nonprofit organizations to effectively communicate with their donors and the public. Too little communication doesn’t build a strong enough connection, and too much communication can be overwhelming. The content of the communication is important, too. For example, communicating only when more money is needed may be a turnoff. Organizations must find the right balance.
The solution: Communication should be consistent, and the nature of messages should vary. Rather than communicating only when an organization is soliciting contributions, communications should include a mix of stories about the impact the organization has made, as well as news and updates about the organization’s progress with a specific cause.
11. Legal Compliance
Nonprofit organizations are subject to a number of federal, state and local laws that govern their fundraising activities. If an organization fails to comply with these laws and regulations, they risk fines, penalties, loss of tax-exempt status and damage to their reputation.
The solution: To ensure compliance with regulations, organizations should research their federal and state guidelines, prepare the necessary documents to register their nonprofits so that they can solicit charitable contributions and maintain proper records. Organizations should also have a deep understanding of the requirements and procedures for reporting financial data as well as the necessary licensing compliance details and keep adequate records of their governance policies.
Determining the best time to launch a fundraising campaign is important. Holidays, for example, may seem like an appropriate time because people are in the giving spirit, but that timing could also backfire. During the holiday season, donors may be more focused on their own celebrations and less likely to think about donating to a campaign; they may not have the same disposable income during this period; and there is more competition from other organizations looking to raise funds at the same time.
The solution: A number of factors are important when considering the timing of fundraising campaigns. Organizations should consider which periods of time generate the most donations, avoid competing with major fundraising drives by other organizations and analyze data to spot trends or changes in engagement to pinpoint the optimal timing for soliciting contributions. For many nonprofits, Giving Tuesday, which is often described as a global day of giving on the Tuesday after Thanksgiving, might be a good time to make an intense push for donations. In 2022, donations on Giving Tuesday accounted for 3% of the total revenue donated online to hundreds of nonprofits in the U.S.
13. Board Engagement
The engagement of the board is critical to the success of nonprofit fundraising, but many organizations struggle to get board members more involved. For example, board members may lack an understanding of the organization’s fundraising goals and how they can contribute to those goals, or they may not feel motivated to participate in fundraising activities.
The solution: When appointing board members, nonprofit organizations should check to be sure they have a solid understanding of the organization’s fundraising goals and clear expectations about their roles and responsibilities in helping to raise funds. Organizations should prioritize regular communication with the board and celebrate their wins in order to establish trust, seek help and improve engagement.
14. Development Director Turnover
Development directors play a critical role as the organizers of fundraising efforts for organizations. However, the turnover among directors is high, and these positions are often left vacant for months or even years. When these roles are filled, colleagues and board members often report that they are unhappy with the performance of their new development directors. This can be disruptive to getting staff on the same page and reaching organizational goals.
The solution: To improve the success of development directors, organizations should smooth the transition of directors during the hiring and onboarding process. This includes expanding the scope of a director’s work to include meaningful assessments of fundraising strategies and providing directors with a roadmap that outlines the optimal conditions for fundraising success.
15. Impact Assessment
An impact assessment is an evaluation that helps organizations understand the performance of their charitable programs. For nonprofits, regularly evaluating fundraising efforts is key to determining the success and effectiveness of various initiatives. Yet research shows that one-quarter of nonprofits do not have a system in place for measuring program impact.
The solution: Performing an impact assessment involves building a framework for conducting an evaluation, determining key performance indicators that reflect the organization’s impact, training staff on how to measure progress, collecting data from a variety of sources and leveraging and sharing findings across an organization’s network.
16. Donor Retention
A person may make a one-time donation, but turning that donor into someone who gives regularly is an ongoing challenge for nonprofit organizations. Retaining donors is crucial for the sustainability and growth of nonprofit organizations because it enables them to establish consistent revenue streams, build strong relationships and maximize the impact of their missions.
The solution: Because donors like to know how their contributions have made a difference, organizations should consider emailing and posting on social media regular updates about their accomplishments and the lives they’re touching, while also acknowledging and thanking donors for making these achievements possible. This also helps to create a sense of community, communicate the nonprofit’s impact and allow organizations to stay in close contact with people who have donated in the past. Nonprofits may also want to offer a recurring payment option to automate future contributions.
17. Crowded Marketplace
As the number of nonprofit organizations increases, so does the difficulty of standing apart from the competition in terms of mindshare and, ultimately, garnering donor funds. As previously discussed, a crowded marketplace may result in funding scarcity and donor fatigue — challenges that can impact the organization’s ability to reach their fundraising goals.
The solution: To counteract the effects of a crowded marketplace, organizations should focus on differentiating their missions and goals from other nonprofits and ensuring that their messaging is clear in order to attract attention, as well as donors who support causes that align with these goals.
Overcome Fundraising Challenges With NetSuite for Nonprofit
Nonprofit organizations face a number of fundraising challenges, but the right technology can help nonprofits get ahead of a variety of potential issues. NetSuite for Nonprofit is a unified, automated business management solution that helps nonprofits manage their end-to-end operations with a single cloud application that includes integrated nonprofit accounting, fundraising, constituent relationship management, inventory management and more. This solution has helped hundreds of nonprofits grow resources, reduce costs, better target and engage constituents, build relationships and increase the support needed for long-term success.
By addressing potential challenges through conducting research, creating best practices, making process improvements and implementing technology, nonprofits can build stronger relationships with their donors, achieve their fundraising goals and make a more positive impact in their communities.
Nonprofit Fundraising Challenges FAQs
What are the biggest challenges facing nonprofits?
Some of the biggest challenges that nonprofits face today related to fundraising concerns include low engagement, donor fatigue, increased competition with other nonprofit organizations and difficulty with retaining donors.
What is the hardest part about fundraising?
One of the hardest parts about fundraising is building trust with the public. Donors want to know that their contributions are making a difference and are being put to good use. Financial transparency and strong fiscal discipline will help to build and maintain trust with donors. To build trust, publish quarterly financial reports, conduct independent audits of the organization’s finances, provide transparency about where and how the organization spends its money and obtain accreditation.
Why do fundraisers fail?
Fundraisers fail for a variety of reasons, including poor messaging and lack of interest. Strong messaging is important to convey why an organization’s mission matters, share success stories and ensure that the cause resonates with people.
What are some common legal compliance issues that nonprofits face related to fundraising?
Common compliance issues that nonprofits face in fundraising include declining to complete all required legal forms, failing to maintain a license to raise funds, neglecting to update fundraising records and lacking the knowledge and ability to adhere to applicable regulations.
How can nonprofits navigate seasonal trends and events, such as holiday giving, to maximize their fundraising efforts?
Organizations should regularly gather and analyze fundraising data to determine which periods of time generate the most donations – for example, Giving Tuesday. They should avoid competing with major fundraising campaigns and events hosted by other organizations and spot changes in engagement and donations.
What are some fundraising challenges?
Nonprofit organizations are hindered by a number of challenges that impact their ability to fundraise successfully. These might include donor fatigue, economic downturns and communication challenges, for example.