Dear Analyst #33: Comparing one-time vs. monthly recurring donations to support racial justice organizations

The Black Lives Matter movement has come to the forefront in the news media. People around the world are looking for ways to fight racial injustice. If you are in a position to donate to an organization fighting racial injustice, you are joining the ranks of individuals and companies who are supporting the movement with their dollars. While all these donations are great for all these organizations, I wanted to explore what happens once the news cycle dies down and whether donations will continue. I also make an argument for why you should consider donating on a monthly basis to organizations fighting racial injustice. This is the Google Sheet I discuss in the episode.

One-time donation model

As people rush to make donations to organizations fighting racial injustice, what will happen once the protests and police brutality finds their way out of the news cycle? Will donations dip? Here’s an extremely oversimplified model of how an organization might see their donations over time:

Month 1 (today) we see a spike in donations, but then the total revenue from donations may decrease back to “normal” levels. What is the spike in month 7? This may be the organization’s annual fundraising gala, when the grant money hits their bank account, or perhaps a large marketing campaign to drive new one-off donations.

The issue with this model is that it’s–to give it a scientific term–lumpy. A lot of resources (human and monetary) is spent producing these fundraising events and applying to grants. To put the average donation size in perspective:

The average monthly online donation is $52 ($624 per year) compared to the average one-time gift of $128. According to Network for Good’s donation data, the average recurring donor will give 42% more in one year than those who give one-time gifts. Monthly donors also have a greater lifetime revenue per donor. Finally, 52% of Millennials are more likely to give monthly vs. a large one-time donation.
Source: Donorbox

I used the same numbers from Network for Good in the Google Sheet. Let’s see what happens with the monthly recurring donation model:

Monthly recurring donation model

This oversimplified model shows that total donation revenue (green bars) increases steadily over time. The reason the increase occurs is due to small increases in new donation revenue over the months but more importantly, there’s a base of recurring donations every month.

Benefits of the monthly recurring donation model

As I discuss in the episode, the main benefits for the organization (and why you should consider donating monthly) for this recurring donation model include:

Not relying on a large fundraising gala to raise funds for the year
Better predictability in terms of revenue which leads to better planning for costs and overhead
No time spent applying for grants

There are many other reasons for the organization, but to the individual donor there benefits as well:

Lower dollar amount to “get started”
Less pain compared to a large one-time donation
More involvement with the community you are supporting

The list goes on and on. Another way to think about why donating monthly vs. a one-time donation is comparing your donation to paying for SaaS software.

Similarities to SaaS

I think the challenges of donating monthly come down to:

Taking the emotion out of the donation
Knowing the expected value of the donation

I speak more about this in the episode, but imagine if you treated your donation like the cost you pay every month for Netflix or for the gym (pre-COVID). You are getting some sort of value from your monthly “donation” and you know that Netlix or your gym is on the hook to provide you with a “deliverable” every month. I think the same line of thinking can be applied to what you can expect from an organization fighting racial injustice beyond the platitude that it “feels good.”

Non-racial justice activism

One thought experiment I pose in the episode is what this current social environment means for other long-standing initiatives like animal rights, women’s rights, and environmental protection. It took literally took George Floyd’s life to spark this movement around the world. Will it take a similar event to trigger widespread activism for climate change, women’s rights in Saudi Arabia, etc.? Could funding for these other initiatives decrease in light of what’s going on?

I hope that all these initiatives are brought to the forefront and people around the world consider giving monthly to the organizations they care about. For aa list of organization to consider donating to for the Black Lives Matter movement, see this list.