Don’t eat your seed corn – keep working, spending on acquisition

publication date: Aug 18, 2011
author/source: Alan Sharpe
Read through the diaries of the pioneers who settled the Western parts of Canada and the United States and you'll discover that the most desperate act of hunger was to eat your seed corn. Eating your seed corn sealed your death, even though it prolonged your life for a while.

Charities today are making the same deadly mistake.Alan Sharpe photo

What is seed corn? Seed corn looks like popping corn - hard, yellow kernels. You plant corn by placing the kernels in the ground one at a time and covering them with soil. Then you wait months for the kernels to sprout, grow into stalks and bear ears that you harvest and eat.

Vital investment can't be reduced

One kernel of seed corn produces one stalk, which produces at least one ear, which contains around 500 kernels. So if you plant one kernel, you harvest at least 500 kernels. That's a good return on investment. But to reap the harvest, you have to plant the seed corn. And you have to wait for the results.

The dangerous thing about seed corn is that you can eat it instead of planting it. In pioneer days, a desperate, starving family would divide the hard kernels of seed corn and eat them, knowing they were destroying their hope for the coming season. They prolonged their lives for a while at the expense of their future.

Some boards of directors, scared of spending money in 2011's near-recession, are instructing their charities to cut budgets for donor acquisition. Some boards are demanding that all donor acquisition activity cease until the economy improves. "We can't spend money now hoping for a return tomorrow," they say.

They are eating their seed corn. Here's why.

Your donor file will shrink

If your charity is normal, the percentage of active donors in your database shrinks by up to 15% each year. The average rate of attrition is 7%.

Donor attrition is a fact of life (or a fact of death, depending on how you look at it) at every nonprofit organization. Donors move, lose their jobs, divorce, retire or die. This inevitable, weekly, natural donor attrition is the main reason you must invest money in donor acquisition each year. If you cut acquisition, the number of active donors in your database will shrink every year. Guaranteed.

You will lose money

Boards of directors slash or eliminate donor acquisition budgets because they're misguided. They think reducing spending saves money. Well, cutting donor acquisition does save money in the short-term. But wait a year and see what happens.

A year later your revenue will plummet. That's because for every current donor you lose, you lose revenue. And for every new donor you should have acquired, but didn't because you eliminated donor acquisition, you lose revenue.

A year later, at least 7% of your donors will have stopped giving, and you'll notice that your bottom line will be smaller. Two, three, four or five years later, the missing income from all the new donors you never acquired will be as obvious as a FORECLOSURE sign stapled to your front door.

Your lifetime donor value will suffer

How much is each lost donor worth? Find out by calculating how much a typical donor gives to your charity during the donor's lifetime. It's likely to be hundreds of dollars, or in some cases, thousands. How many of these donors are you willing to lose each week without replacing them?

The donor that you don't acquire today won't respond to your most successful direct mail appeals. She won't join your monthly giving program in two years. She won't give you a major gift in eight years. She won't leave you a bequest in her will when she passes away.

The majority of donors who join monthly giving programs, make major gifts and leave bequests are annual donors. Most were acquired through direct mail. They have a high lifetime value only because they gave that first new gift. If you don't get that first gift, you don't get the new donor. And if you don't get the new donor, you don't get any of the revenue that follows.

Your mission will suffer without new donors

Net income is the only income you can use to carry out your mission. The higher it is, the more you can do to improve the world. Every time you lose a donor, your capacity to bring about meaningful change diminishes. Every time you acquire a new donor, it increases.

If you want your donor file to grow, if you want your revenue from monthly gifts, major gifts and bequests to grow, if you want to continue transforming lives, you must invest in donor acquisition every year. You must plant your seed corn.




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