Top 5 Challenges for Nonprofits in 2023


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2022 was a year of growth for many nonprofits across the country. While many have embraced the “new normal” as we move past the pandemic, there continue to be underlying challenges for nonprofits trying to raise money in 2023. These were both brought on and exacerbated by the pandemic and the resulting economic uncertainty that has followed.   

Despite organizations utilizing fundraising best practices, many challenges for nonprofits remain. They are: 

  1. Donor retention 
  2. Leveraging technology
  3. Economic uncertainty 
  4. Fundraising events 
  5. Donor communication and engagement 
challenges for nonprofits - donor retention; magnet with people-shaped cutouts sticking to it

1. Donor Retention

Donor retention as a metric has gained traction since 2001 when Adrian Sargeant published the first academic research on the financial impact of increased donor retention. Since then, the Fundraising Effectiveness Project has shown a slow yearly decrease in the percentage of donor retention, including a dramatic 7.1% drop in donor retention in Q3 of 2022. This problem is not going away. The organizations that can do the best job of retaining donors in 2023 will be most successful—not just in this year, but for years to come. Both Gabe Cooper’s Responsive Fundraising and Nathan Chappell’s Generosity Crisis discuss the underlying problems and offer solutions.   

2. Leveraging Technology

Nonprofit fundraising technology drives so much of today’s giving. Does this mean your organization needs to accept cryptocurrency? No, you can have a successful 2023 without accepting crypto, but it will help in the long run as various cryptocurrencies become more widely adopted. This is two-fold. Many organizations use disparate systems, CRM, online giving, volunteer management, email marketing, wealth screening, website tracking, the list goes on. If those systems don’t communicate, or place data into the same data warehouse, your organization can’t track donor/constituent engagement and behavior.

Using integrated solutions will help you accomplish this. If your online giving platform or wealth screening tool doesn’t bring data into your CRM, and I don’t mean imports, it’s time to change that. Many organizations struggle to send relevant communications because of these data silos; it’s tough to thank a donor for peer-to-peer fundraising if that doesn’t show up in the system of record, which brings us to the second item: making technology work for you.   

Today’s nonprofit fundraising technology is feature rich, and it’s easy to get lost in it. In addition to eliminating data silos by using API-integrated solutions, you will need to learn your product well so you can automate as many processes as possible, especially reporting. If you have a plan with goals and KPIs, there should be automated reports on a weekly/monthly/quarterly basis that show progress against goal.   

One final suggestion for leveraging technology, if you can’t accept gifts via Venmo or other money-sharing apps, it’s time to change that.  

challenges for nonprofits - economic uncertainty; piggy bank on top of a wobbly Jenga game

3. Economic Uncertainty

For the past few years, many economists have called for a correction, or a sustained 10% to 20% dip in the market. Most recently these predictions came as a result of inflation and The Fed’s response to raise interest rates. Experts calling for something doesn’t necessarily make it happen, but it does keep people’s attention. Some things have changed since late 2022. The stock market has performed better than expected with increased interest rates. Conversely, some of the largest technology companies laid off high-paying technology jobs, which will impact leadership and major donors for many organizations.   

4. Fundraising Events

Everyone is calling for an increase in fundraising events in 2023, and rightly so. There were more in-person events in 2022 than 2021. People are more willing to show up to in-person events, but it isn’t the same as pre-pandemic. We are living in a hybrid world. People are more comfortable attending virtual and hybrid events than they were before. Many organizations have struggled to regain event attendance numbers. In 2023, it will be important to ride the wave of people wanting to do more in-person while continuing to provide opportunities for others to engage from home or on their own terms.   

challenges for nonprofits - donor communication and engagement; wooden figures on a solid background connected by circles and lines

5. Donor communication and engagement

Jerry Panas once said, “The fundraiser is a first cousin to the explorer. The final destination is clear. The path, undefined. There are no precise road signs. But the journey and reaching the objective are never in doubt. He may slip, he may fall—but it will always be forward, never backward.”  

This is because learning about each donor is an exploration. Not everyone is motivated to give for the same reasons, but everyone is motivated to be heard, which means that when an organization communicates to and engages a donor, it needs to be specific to the donor. This problem can be exacerbated by data silos, either accidental or intentional, such as keeping marketing data and fundraising data separate.  

Spotify and Netflix made businesses by recommending media to subscribers based on previous consumption—“Because you watched ‘The Crown,’ you might like ‘Medici.’” While many nonprofits don’t have the capacity to identify relevant content for each donor using an AI-powered prediction engine, you can honor the donor’s last volunteer effort in your next letter to them, even if that’s not the central message. Even as PII (Personal Identifiable Information) changes impact the sector with the change in state privacy laws, people still expect to receive personalized, relevant messages, not canned content that doesn’t honor past engagement.   

Raising money for noble causes has never been easy, and new challenges arise every year. But with awareness and a proactive approach, these challenges — and any others that rise up in the future—needn’t derail your fundraising efforts. 

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About the Author 

Jeff Jowdy is the president and founder of Lighthouse Counsel. The firm has offices in Athens, Georgia and Franklin, Tennessee and serves nonprofits across the country in fundraising, strategic planning, board development and leadership development.  He has over 35 years of nonprofit leadership experience as a CEO, advancement professional, human resources professional, and consultant.  

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