As a nonprofit, whether you are new to fundraising strategy or have been successfully fundraising for years, it’s important to know the difference between types of nonprofit donors and the cultivation cycle and timeline for each donor.
This CauseVox guide reviews the donor cultivation cycle and provides an overview and basic fundraising strategy for three types of nonprofit donors:
- Individual Donors
Some nonprofits are eligible for government grants, and other nonprofits receive revenue from fee-for-service. While these other sources of nonprofit revenue are valuable, they are not discussed in this guide as they are more specialized and variable.
When building a fundraising strategy, it’s critical to keep in mind the different timelines and amount of effort needed for each type of nonprofit donor, or your staff may become overburdened focusing on one source of revenue and yield lower returns. With this guide, you will better understand how to diversify your revenue throughout the year, build relationships that matter and last, and run a sustainable nonprofit.
This guide begins with an overview of the cultivation cycle and the varying timelines for each type of nonprofit donor. Then the types of donors are reviewed, first, individual donors including major gifts, event and occasional donors, and annual givers. Then, foundations are reviewed, followed by corporations. Resources for further learning about each type of nonprofit donor are offered as well.
Nonprofit Donor Guide Takeaways
- Fundraising is about relationships, relationships, relationships! Build those relationships across sectors and disciplines, and keep in touch with everyone on a regular basis. Remember that a relationship isn’t supposed to be transactional or one-sided–make sure you are giving as much as you are taking.
- Understand the timelines and cultivation cycles for the different types of donors. Each donor type has their own timeline from when you meet to when you receive a gift, so plan your fundraising strategy and budget accordingly to bring in revenue throughout the year.
- Don’t depend on one type of nonprofit donor for funding. It would not be wise to depend on only individual donors or only foundation donors, as neither are predictable. Instead, diversify your funding sources, and have many individual donors at both major gift and low gift levels, several foundations, and some corporate givers.
- Tailor your ask. Remember that you’re dealing with people (and relationships!), and everyone has their own unique mission and interests. Don’t make the same solicitation to an individual that you would to a corporation. Know who you are speaking to, what they care about, and how that relates to your mission.
The Nonprofit Donor Cultivation Cycle
The donor cultivation cycle, the process in which a person or entity becomes and remains a nonprofit donor, is virtually the same no matter what type of donor. The cycle always starts in the identification phase and then you move the donor through the cultivation cycle as your relationship continues and strengthens.
Below is an overview of each phase in the cycle.
- Identification – A person or entity is determined to be a potential donor either due to expressed or noticeably sympathetic interest in the nonprofit’s mission. They are added to a list of prospective donors to go through the cultivation cycle.
- Qualification – Research is conducted into the prospective donor’s giving history, interest in the mission, and relationship with the nonprofit. If the prospective donor is deemed a high enough potential to become a donor, they continue through the cultivation cycle; if not, they are removed from the list.
- Cultivation – The prospective nonprofit donor is invited to meetings and events, is added to the communications/newsletter list, and/or becomes a volunteer, and a relationship is built with the nonprofit. This is typically the longest phase, and depending on the prospective donor, can take weeks, months, or over a year until they are ready to be moved to the next phase.
- Solicitation, Negotiation, Donation – After the prospective donor has been suitably cultivated and becomes familiar with the organization, a solicitation is made for a donation. This “ask” may be negotiated for a lower or higher amount, and a donation is eventually (hopefully) made. If a solicitation is rejected, it is typically encouraged to keep the prospective donor in the cultivation phase for additional time until they are ready to be solicited again, unless it is explicitly made clear they will never be donor.
- Stewardship – Once a prospective nonprofit donor becomes a donor, they should continue to be cultivated in a similar fashion to the cultivation phase, though some additional donor benefits may apply if relevant to the nonprofit’s fundraising strategy.
- Renewal/Referral – The donor is ideally always an active donor and throughout the infinite stewardship phase will be asked to renew their gift. The donor may also help the nonprofit identify other prospective donors to enter into the cultivation cycle at the identification phase.
Keep in mind that each phase will vary in length depending on the type of donor and each unique nonprofit donor.
Nonprofit Donor Sources & Timing
Each type of nonprofit donor offers a different revenue source, and each has a different timeline within the donor cultivation cycle. While the donor types and these cycles will be discussed further below, it is worth reviewing the individual timelines in the context of the cultivation cycle here.
- Individual Donor – These donations are typically awarded at the time of the solicitation, meaning that a check is written or offered on the spot and deposited to the nonprofit’s account soon after.
- Major Gifts – Depends on the length of the cultivation phase–some donors may be primed to donate early in the phase, while others may require a significant amount of cultivation and time to build the relationship with the nonprofit.
- Events and Occasional – These gifts are solicited around events, holidays, or need, with varied frequency, and therefore the cultivation phase may be much shorter compared to that of a major gift.
- Annual – These gifts are solicited and given on an annual basis from existing nonprofit donors who are now permanently in a stewardship/renewal loop.
- Foundations – This revenue source arguably has the longest timeline, and it could take more than a year for a nonprofit to receive the donation in their account from start to end. Foundations tend to have a long cultivation cycle, and within the solicitation phase, nonprofits typically have to submit a letter of inquiry, followed by full proposals, followed potentially by further review or documentation required from the foundation. The donation may still not be received for a significant amount of time after solicitation.
- Corporations – This revenue source’s timeline is variable based on the corporation donating. Corporate gifts can come in the form of a sponsorship or in-kind donation, employee matching gift, an annual discretionary gift, or a corporate foundation gift, and each of these donations also have their own timeline. The corporate foundation gift will typically follow the process and length of time of a traditional foundation gift, while a sponsorship or discretionary gift may be accessible soon after solicitation.
Next up, let’s talk about the types of nonprofit donors you can find.
Types of Nonprofit Donors
This section will provide an overview of the different types of nonprofit donors. In addition to describing the various donor profiles, cultivation cycle advice and additional learning resources for each type of donor is provided. It’s important to understand each type of donor and how their profile relates to the cultivation cycle and your staff’s time involvement in cultivating and winning each type of gift.
Individual nonprofit donors are the source of significant funding for nonprofits. They can come in the range of low-level $5 gifts to several million dollar donations. Nonprofits typically report that 80% of their donors are individual donors with the remaining 20% coming from other sources.
These donors can be introduced to your nonprofit in a variety of ways. These are the same ways in which you can cultivate these individuals to become donors:
- Relationships with industry leaders and others who speak to the nonprofit’s impact
- Mailing and newsletter lists
- Prospect research into donors at similar organizations
Individual donors are founded upon relationships and require significant time and attention in the cultivation cycle, as well as a strong CRM system to track their information and details. It’s important to realize that even within the individual donors category, there is a range of giving levels and cultivation needs.
Let’s discuss a few of the sub-types of individual nonprofit donors.
1. Major Gifts
These are individual donors who give a large donation, either one time, or annually. The definition of major gifts will vary depending on your nonprofit’s budget and size, but could be typically anywhere above $5k up to millions of dollars.
Major gifts are based on strong relationships with your nonprofit’s staff and mission. These givers need to be cultivated for longer and require more one-on-one time and attention throughout the cultivation and stewardship phases.
The hope with major givers is that they will renew or increase their gift annually.
2. Events and Occasional
These donors may donate at occasional events, via mailed solicitations, or a crowdfunding campaign. Their gifts are typically low-level, perhaps $5 or $100. Because this type of donor is not a major giver, and may have been introduced to your organization at the time of the “ask,” such as during a crowdfunding campaign, they may have a very short cultivation cycle.
The goal with these donors is to cultivate them after their initial gift as well as qualify them to see if there is potential for them to become major givers or other types of advocates for your organization.
You can attract these types of nonprofit donors by hosting a fundraising event and having existing donors invite their network, or through your crowdfunding campaign, social media, and occasional donation solicitations to your mailing list.
These donors also require an effort to build a relationship with your staff and mission, but less time than you would with a major giver.
3. Annual Givers
This type of individual donor gives regularly to your nonprofit through your membership program or annual major gifts. If your nonprofit has a membership program with donor benefits, this donor will donate regularly to receive the benefits of the program and relationship with your organization.
If you successfully cultivate and steward a major giver or an occasional giver, they could become an annual donor, even at a low-level.
As with all the other donor types, annual givers are also based on relationships with your staff and mission. They require regular communication and attention to keep them interested and up-to-date with your work and impact.
More Advice – Advice on creating a gift chart to track annual donation needs and how many donors you should have to meet your budget, and other basics of major gifts. Making a strong ask is fundamental to success with individual givers. Reading the book ASKING by fundraising expert Jerold Panas will improve everyone’s ask and relationship-building fundraising strategy.
Foundations are an appealing source of funding because foundation gifts are typically larger than gifts from individual nonprofit donors, and when interests are aligned, a foundation’s financial and network resources can maximize your impact. Foundation funding is also notoriously tricky, tedious, and time consuming, and each foundation has their own policies and procedures for funding.
Applying for foundation funding requires research, relationships, patience, and strong writing skills. It’s also important to note that foundation funding can take significant time from initial research to submitting the final proposal, and then again to receive the funding if your proposal is successful. Therefore, it is essential not to depend on foundation funding as your main revenue source nor as a source of immediate funding.
Before you Start the Application Process
There are hundreds of foundations, each with their own specific funding interests based on their founding charter, the evolving landscape of their interests and global needs, and the President and Board’s funding interests.
Some foundations will review all proposals, while others will not review unsolicited proposals at all and will determine on their own who and what they will fund. Because each foundation is unique, it’s important to research each foundation, what they state they fund and which nonprofits they’ve funded in the past, and their funding process (do they accept proposals?; what do they require for submission?). If a foundation’s funding interests are explicitly stated and your mission does not align (i.e. they only fund health initiatives and you are a math education organization), do not waste your or their time by applying.
Similar to individual donors, foundation fundraising still depends on relationships, with program officers at the foundation or even someone in the executive leadership or Board of Directors. These relationships can help you submit a proposal for funding to a foundation that does not accept unsolicited proposals, or help guide you through the proposal writing process. You can cultivate and steward a foundation relationship in much the same way you cultivate and steward an individual donor.
Some foundations are open to funding general operating expenses, while others will be more inclined to fund specific programs. Keep that in mind when researching and submitting your proposal and planning your budget for the year. If you receive a foundation grant for a specific program, that funding is restricted to only that program and can not be used for other general operating expenses.
Of note, some wealthy individuals will provide their major gift donations through their family foundation. Depending on the charter of their foundation, they may or may not require a proposal or additional procedures. Small family foundations typically do not accept unsolicited proposals.
6 Stages of the Foundation Funding Cycle
While the foundation funding cycle is similar to the cultivation cycle, foundations have their own grants cycle. Each foundation has their own timeline, and some accept Letters of Inquiry and Proposals year-round, while others have specific month or date deadlines. Below are the additional stages that take place within the Foundation cultivation cycle, and how they relate to the cultivation cycle phases.
- Research (Identification) – Learn more about the foundation and their funding priorities. This information is available on their website, on sites like Foundation Center and Guidestar, and via Google searches. Relationships with foundation affiliates also helps here to learn more details and history on the foundation’s previous and evolving interests.
- Letter of Inquiry (LOI) (Qualification/Cultivation) – If the foundation requires this as part of their funding process, or solicits this from you, you will submit a short (typically two to three-page) LOI describing your organization and for which project or program you would submit a full proposal for funding.
- Proposal (Solicitation) – After the foundation reviews your LOI, they will inform you of whether they would like you to submit a full proposal. Few nonprofits make it past the LOI stage to submit a full proposal. The proposal is unique for each foundation, but will typically be lengthy and require detailed information on your mission, successes, the project you are hoping to fund, your project implementation plan, background on the staff involved, and a detailed budget. The proposal will typically have a deadline for submission, and your grant writer needs to be a strong storyteller with a great eye for detail, and follow all the proposal requirements exactly as stated.
- Review (Solicitation/Negotiation) – The foundation will review your proposal and if you’re one of the lucky few, your nonprofit will receive funding. If you do not receive funding upon review, the foundation may be able to offer feedback on your proposal or the reason you didn’t receive funding.
- Reporting (Stewardship) – Foundations typically require regular reporting from their funded nonprofits on progress of their projects and budgets. Each foundation’s reporting guidelines will be different. In addition to submitting the reports by their submission deadlines, keep the foundation staff on your communications and events list for regular updates and further cultivation of those relationships.
- Renew (Stewardship) – The grant you receive may provide funding for several years or just one, and you may be eligible for renewal for further funding or submission of a new grant. This will be particular to each foundation, and if renewal or a new submission is accepted, you will likely need to go through the cycle again, beginning with research to see if any of the foundation’s funding priorities have shifted.
For more advice, The Foundation Center has great resources for researching foundations and taking courses for grantwriting and fundraising. If you’re ready to write an LOI or Proposal, you’ll want to read The Only Grant Writing Book You’ll Ever Need.
Corporations have a history of giving to nonprofits through their foundations, sponsorships and in-kind gifts, discretionary budgets, or employee matching donation programs. Just like interests must align with individual or foundation donors, to successfully pitch and win a donation from a corporation, a nonprofit has to appeal to the corporation’s bottom line or community giving interests.
The term corporation here doesn’t necessarily mean a Fortune 500 company. It could also mean your city’s local pizza franchise, or any small or large business. And lest you forget, it’s still all about relationships between corporate staff and your nonprofit. Similar to the other nonprofit donors, alignment with the mission and relationships are crucial to success with corporate donations.
Your pitch and relationship with corporate staff should be strategic. Corporations are more likely to donate to your nonprofit if your bottom-line missions are aligned–they are a health insurance company and you are a community health nonprofit–or if you have an audience they are hoping to attract to their business. Therefore, your pitch to the corporation should be explicit about how a partnership and donation is mutually beneficial.
Relationships with corporate staff and executive leadership is crucial–and ideally you build a relationship with a decisionmaker who has management or oversight of a budget or aligned business division, or in the corporate foundation. These relationships should be cultivated and stewarded in the same fashion as individual donors.
Types of donations corporations can give to nonprofits
- Sponsorship: Corporations can sponsor tables or advertisements at events to promote their work to your network.
- In-kind donation: Corporations can provide in-kind donations of food, equipment, supplies, materials, or other resources that they offer. For example, your nonprofit provides an after-school reading program, a book publisher could potentially provide an in-kind donation of books.
- Employee gift matching: Some corporations offer employee gift matching programs, where if an employee donates a gift to a nonprofit, the corporation, up to a certain amount, will match that donation. Ask your donors if their company matches gifts.
- Discretionary gifts: Some managers in charge of their divisions budget may be able to write your nonprofit a gift directly from their discretionary budget, if missions and interests are aligned. But this type of gift is rare and difficult to come by.
- Corporate foundations: Larger businesses have corporate foundations, often run in a similar fashion to traditional foundations, with a proposal and grants process. Do your research into the corporate foundation’s giving priorities, and then follow the advice listed in foundations section above.
For more advice, check out Grant Space from The Foundation Center. It offers some great Introduction to Corporate Giving resources.
There are multiple sources for funding your mission to have a greater impact in the world. Success depends on recognizing and understanding the various types of nonprofit donors, and diversifying your funding sources and effort to maximize gifts.
By understanding the time it might take to cultivate, and the potential return on investment for each type of donor, you can build a multi-year fundraising strategy to run a sustainable nonprofit.
And don’t forget, these donors are not just types, numbers, and strategy; they are people, and relationships matter first and foremost!