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Revenue Growth, Donors Continue to Decline

(April 21, 2008) Charitable organizations participating in the Target Analytics Index of National Fundraising Performance experienced negative revenues (when adjusted for inflation) from 2006 to 2007 and continued to see declines in the number of donors.

The index tracks the performance of organizations from year to year in a number of subsectors, including animal welfare, environment, health, human services, international relief and societal benefit.

Revenue grew by just a median 1.5 percent from 2006 to 2007 (and actually declined by 2.8 percent when adjusted for inflation), below the 2.8 percent median growth from the previous year and well below the historical average median rates of approximately 4.0 percent annual growth.

Median index revenue generally parallels national economic performance, but tends to grow more slowly than GDP during periods of relative economic hardship. As the economy slows down, people shift their spending priorities away from charities, compounding the effects of an economic decline on fundraising. In 2007, not only was index revenue growth relatively slow, correlating to a general national economic slowdown, but it also significantly lagged growth in GDP.

Donors Rates Better But Still Declining

Continuing a trend seen over the past 2 1/2 years, the number of donors declined a median 1.0 percent in 2007, slightly better than the median decrease of 1.4 percent in 2006.

Donor acquisition improved, but still was down a median 5.1 percent from 2006 to 2007, compared to a median 10.0 percent decline from 2005 to 2006. In addition, retention rates were actually positive, growing to a median 1.0 percent from 2006 to 2007, after a median 0.4 percent decrease from 2005 to 2006.

However, reactivation of lapsed donors continued to contribute to overall donor declines, falling a median 3.0 percent from 2006 to 2007 after a median decrease of 1.3 percent from 2005 to 2006.

Ongoing donor declines over the past two years have meant that the revenue growth that most index participants experienced in 2006 and 2007 was entirely due to increases in revenue per donor rather than increases in donor population. Overall index revenue per donor increased a median 4.1 percent from 2006 to 2007, on top of a 3.0 percent increase the previous year. Almost three-quarters (74 percent) of the organizations in the index experienced positive revenue per donor growth in 2007.

Trends by Subsector

With median revenue decreasing by 2.8 percent when adjusted for inflation, no subsector experienced positive growth from 2006 to 2007. Two subsectors, animal welfare and the environment, saw relatively flat growth, with median decreases of just 0.3 percent and 0.8 percent, respectively.

Other subsectors saw more significant declines, with human services suffering a 1.1 percent median decline in revenue, international relief at a median decline of 2.8 percent, health at a median decline of 3.1 percent and societal benefit experience a median 5.1 percent decrease (all figures adjusted for inflation).

The animal welfare sector was the only industry sector in the index with positive new donor growth in 2007. Several sectors, including societal benefit, international relief and human services, experienced particularly large declines.

About the Index

To receive a copy of the report about the latest index, click here and input your name, organization and email (the report is free of charge).

The Index of National Fundraising Performance is produced by Target Analytics, a Blackbaud Company. For the 12 months ending Q4 2007, Target Analytics evaluated transactions from 70 organizations, including more than 35 million donors and more than 64 million gifts totaling more than $1.8 billion in revenue. Quarterly results are reported on a calendar year basis. This report includes results through December 2007. Index findings are based on analysis of actual donor transactions, not survey responses from fundraisers. All calculated measures have been reviewed by participants for accuracy.

Target Analysis Group, headquartered in Cambridge, Mass., provides fundraising data and analytical services to help nonprofits improve their direct-response fundraising programs.

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