Kate Clifton finds the silver lining in an otherwise cloudy forecast for UK fundraising

 “In a world of abandoned items and discarded materials, Violet knew there was always something. Something she could fashion into nearly any device, for nearly every occasion.”

A Series of Unfortunate Events, Lemony Snicket, 2004

It’s all too easy to heap doom and gloom on professional fundraising. The much maligned cuts in public funding, as set out in the comprehensive spending review, have cast a shadow over the opinion that with the worst of the global recession behind us, now is the time to return to some form of normality.

In fact, fundraisers in the third sector currently find themselves facing up to a series of unfortunate events, which could make or break their long-term strategies and business objectives. But how many can honestly say that they didn’t see it coming?

When the coalition government first took control of the UK’s purse strings, it was always clear that the charity sector would feel the squeeze when budgets were evaluated in the wake of the financial crisis. It was equally apparent that the average taxpayer wouldn’t be willing to finance what was rapidly being seen as an unsustainable business model.

“I was in a meeting recently, where somebody described the situation as a ‘phoney war’ in that everyone knew that the cuts were inevitable, but they weren’t quite seeing them or feeling the pain just yet,” says Mick Aldridge, chief executive of the PFRA.

That pain is now beginning to show. With almost a quarter of charities in the UK receiving government grants and 13 per cent where state funding accounts for more than half their income, there will be tough times ahead.

The obvious remedy? Battening down the hatches and cutting back. That could mean service reductions, decreased investment in supporter care and new donor acquisition, closure of local branches or facilities and staff redundancies. These aren’t measures high on the wish list of any forward thinking charity.

Even those organisations that don’t rely on government funding aren’t immune to the symptoms of economic instability and ultimately recovery. Public investment in charitable causes has experienced a knock-on effect from falling house prices, job losses and plummeting share indexes.

Battersea Dogs and Cats Home, for example, is completely reliant on public donations and derives around 80 per cent of its income from legacies. “We’re keeping an eye on the situation as if there’s another dip in the recession it could have a significant affect on our legacy income,” says Liz Tait, the charity’s director of fundraising. “It’s a concern because we’re so reliant on that revenue stream at the moment.”

Therefore, a key objective for Tait and her team will be investing in a more proactive, diverse and sustainable fundraising strategy, including the introduction of a major giving programme over the coming months.

“We put a lot of building blocks in place in 2010 and will continue to invest in regular giving,” says Tait. “Given the size of our charity, we have a fairly small number of regular givers, so we’re looking to remedy this with more activities such as door to door and direct mail.”

Face-to-face fundraising, according to Aldridge, is also growing in popularity. If anything, the cuts represent an opportunity for this particular discipline. This might relate to proven track record and ease of planning. However, charities need to be aware that while demand for face to face is increasing, there are only a limited number of agencies to assist with larger projects.

That said, if you’re willing to shoulder the risk, in-house face-to-face projects do tend to build loyalty among staff, while keeping training costs down.

“It’s a long game,” says Aldridge. It’s not really a question of experience. It’s more about expertise and willingness to invest either externally, or in-house. It will likely take a year to 18 months to break even, but that compares favourably to recruiting committed donors through, for example, telemarketing.

Of course, getting new donors on board comes at a price. The old adage is that is costs roughly five times more to bring a new donor on board, than it does to maintain loyalty from your existing supporters. Charities must get this balance right – there is no point in spending a fortune to acquire donors, if your attrition rate increases due to poor ongoing relationship management.

“Charities must understand their donors; share a common agenda with them,” says Alistair McLean, chief executive at the FRSB. “There may well be pushback in this area, but donor care is a key business measure and will prove valuable in protecting your supporter base in these difficult financial times.”

The issue of public donations – or lack of – doesn’t end here though. With scrimping and saving comes increased scrutiny of where those pennies or pounds being spent, even in the case of the most committed giver. This will be compounded by the introduction of the government’s Big Society.

“The public will be aware of the more central role that charities will perform in the Big Society,” says McLean. “As a consequence, they will be looking for clear demonstration of the impact their chosen charities are having on the cause. There is no room for corner cutting.”

While many charities are already doing good work in this area, the onus will be on ensuring best practices in impact reporting and measurement strategies. Stark budgeting issues will be a factor as donors will not appreciate their hard-earned cash being spent on marketing or new donor acquisition.

Impact reporting could prove to be a key differentiator as the fundraising marketplace consolidates due to increasing competition in the charity sector. In particular, according to Aldridge, those charities that experience cuts in funding will look to cash collection as an alternative means of financing their cause.

“Donor fatigue will be an issue for everyone, as so many organisations will be filling the space and attempting to capture the public’s enthusiasm,” he says. “Some may resort to fairly desperate measures, so the background noise for the poor old donor will become much louder and more difficult to work through.”

It’s not all doom and gloom though. The salient point is that there’s no better time than a recession to step back and take an objective look at your existing business processes. This might include performance analysis, working out how to streamline processes, or identifying growth opportunities that won’t break the bank.

“Charities that invest during economic uncertainty will ultimately benefit at the end of the recession,” says Tait. “If you can succeed during difficult times it almost provides a benchmark for what is possible in a boom period.”

The most successful charities will be those that put fundraisers at their heart and advocate personal development and training.

A key issue highlighted by Aldridge, McLean and Tait is high turnover of fundraising staff, accompanied by a skills shortage throughout the profession. While the sector is bulging at the seams with expertise, not enough fundraisers are working their way through the system because there are few entry level roles available.

The new Institute of Fundraising Academy will help, by providing courses in core skills such as direct marketing. The fact that the profession is now opening up to candidates from the commercial sector is also a positive, in that it will broaden the pool of candidates available to take on influential fundraiser positions.

Charities are also advised to stick closely to their corporate donors and philanthropists. While corporate donors will want more transparency and accountability when it comes to large donations, and may even get involved at a strategic level, they will be significant revenue generators.

The more professional approach to fundraising, which has been touched on with the introduction of the IoFAcademy and inspiration from commercial organisations, is also evident here.

“These relationships will need to be managed in much the same way as PLCs advise their shareholders,” says McLean. “Investors will need regular updates and proof of impact. Keep them informed and they should remain onside.

While charities will suffer as a consequence of the obstacles touched on in this very brief summary of the marketplace, there are numerous opportunities to diversify income streams, improve business processes and raise awareness of charities’ brands and causal areas. This could include mergers, or partnerships with corporate organisations that have a shared interest.

The overriding messages are stay positive, maintain focus and invest in the future. If you are feeling the pinch, look to maximize those opportunities and resources already available to you. There is always something…

This article first appeared in The Fundraiser magazine, Issue 1, January 2011