If a well-managed museum has robust programming, a large endowment, and a profitable gift shop, should they still rely on contributions and grants? Often regarded as a fundraising burden to reduce or eliminate, instead we might want to consider these revenue sources as one of the best ways to sustain and expand an institution. Sixty-six percent of History-Focused Organizations [Museums (NTEE A50), History Museums (A54), History Organizations (A80), and Historical Societies & Historic Preservation (A82)] depend on contributions and grants for at least half of their annual revenue and nearly forty percent rely on contributions and grants for more than three-quarters of their revenue (see Figure 1 below).
To maximize revenue, museums must navigate fundraising in the present and future. Understanding the donor and engagement pyramids simplifies fundraising and ensures focus. Small history-focused organizations, in particular, must invest their limited bandwidth strategically to achieve success.
Figure 1. Sixty-Six Percent History-Focused Organizations Rely on Contributions and Grants for at Least Half Their Revenue (2012-16 Avg.). Source: Internal Revenue Service and National Center for Charitable Statistics.
Improving the fundraising success of a history-focused organization requires understanding the motivations of individual donors, both large and small, to prevent the slow attrition of smaller donors or major donors ignoring transformational opportunities. Major donors, which include wealthy individuals, foundations, and corporations, typically provide up to 80% of a museum’s total donations. In contrast, the wider donor community consists of smaller donors who, despite contributing less money, are the majority of the museum’s donor base.
Figure 2. The Donor Pyramid helps non-profits focus their efforts on donors who are most likely to bring them closer to achieving their goals.
Focus on the 20%
To maximize revenue history-focused organizations must recognize that the majority of donations come from a minority of donors, with the old fundraising adage being that 80% of donations come from just 20% of donors. Therefore, while engaging and cultivating the wider community of donors is essential, it is crucial to focus on building relationships with major donors who have the potential to provide a significant portion of the museum’s revenue. It’s worth noting that some professional fundraisers believe the 80-20 rule may be shifting closer to a 90-10 rule, with an even smaller percentage of donors responsible for an even larger proportion of donations.
Small history-focused organizations should focus on fundraising activities with a high rate of return, such as major donor campaigns, grant applications, and special events that can also serve as stewardship experiences for donors. These activities bring in the most money with the least amount of effort, maximizing fundraising efforts and optimizing the limited budget and staff capacity. Building relationships with major donors, including wealthy individuals, foundations, or corporations, is a crucial high-rate-of-return activity for small museums. If we assume that their donations provide 80 percent of the museum’s funding, it would affect about 50 percent of the total revenue for History-Focused Organizations with less than $1 million in revenue annually, as shown in Figure 3 below.
Figure 3. Major Donors Likely Drive Near Half of History-Focused Organization Revenue (2012-16 Avg.). Source: Internal Revenue Services and National Center for Charitable Statistics.
To build relationships with major donors, it’s important to personalize your approach. Remember, “major” means different things in different organizations. It could mean a donor at the $10,000 level for some history-focused organizations and at the $50,000 for others. Personalization may include meeting donors in person, inviting them to special events, and keeping them informed about the organization’s activities and future plans. Recognize their specific preferences and interests and show gratitude in a timely manner. Describe the impact of their contributions to demonstrate the value of their support. Tailor appeals and proposals to donors’ motivations, which can include highlighting the impact of their contributions, providing special access and recognition, or aligning their interests with specific programs or initiatives at the organization.
Bequests from estates can be a major source of philanthropic donations for small organizations, as they are often the largest philanthropic gift an individual will make in their life and can be transformational for any organization. Although the arrival of these gifts may seem sudden, it is likely the result of decades of a carefully stewarded relationship that led to the inclusion of the organization in the donor’s estate plan. Donors can change their wills at any time, so it is important to continue stewarding and keeping them engaged even after they have informed you of their decision to include you in their estate plans. If the organization has limited capacity, take steps to make the inclusion of the organization in a will as easy as possible for donors by including preferred legal language on the fundraising page for leaving a bequest.
Special events focused on fundraising can energize and focus the philanthropic energy of major donors and engage the wider donor base. However, small organizations should avoid being overly reliant on one event for their annual fundraising goals. Over-reliance on a single event can be risky, as unforeseen circumstances, such as a freak blizzard canceling a charity auction, can devastate a museum’s main revenue stream. For example, the Peggy Notabaert Nature Museum in Chicago experienced this during the COVID pandemic when they had to host their annual Butterfly Ball online, resulting in a weakened impact of an event that typically provides one-third of their yearly funding.
Small history-focused organizations can apply for federal, state, and local grants to support specific programs or projects, making grant applications another high rate of return activity. This is a great way to get funding for initiatives that align with the organization’s mission. Matching grants are another option that can leverage the support of smaller donors and engage them in the fundraising process, as they require raising a certain amount of money from other sources before the grant is awarded. It is important to be aware of the administrative requirements of some grants, and that significant reporting might be required on program and audience impact. Grant writing is an acquired skill, and small organizations may benefit from contracting a professional grant writer if their local environment is competitive. Gaining experience from a reviewer’s perspective and understanding the style and format of grants can be valuable, and volunteering for a local grant review board can provide this opportunity.
Figure 4. As History-Focused Organizations Grow Reliance on Contributions and Grants Decreases Very Slowly, as demonstrated by the slightly declining orange trend line. Source: Internal Revenue Services and National Center for Charitable Statistics.
Engage the 80 Percent Differently
Develop a pipeline of new donors and supporters through annual donations and membership programs to ensure long-term stability and growth for small-history organizations is essential. A successful membership program can be a key factor in building a loyal donor base and attracting new supporters, diversifying the donor base. Providing members with exclusive benefits and access, such as free admission or special events, can encourage them to give more over time and foster a sense of community and investment in the history-focused organization’s mission. As demonstrated by Figure 4 above, growing as an institution will only marginally decrease the importance of fundraising over time, meaning long-term investments in this area can be wise even if seeds planted take decades to mature.
Figure 5. The Engagement Pyramid demonstrates how as donors become more engaged their relationship with the non-profit evolves to be more personal. Source: Groundwire.
Small organizations should cultivate a culture of giving by regularly soliciting donations and encouraging supporters to increase their contributions over time. Direct mail campaigns and online giving portals can be effective tools for reaching out to donors and making it easy for them to give. Proper stewardship of donors by ensuring they receive a thank you and receipt can build donor confidence and trust in a smaller cultural institution. Donor relationships are not stagnant, and the focus should be on evolving these relationships at a pace comfortable for the donor and moving them up the engagement pyramid as they become more personally invested in the mission. Consider what technology can be used to help facilitate mass communication and how that saved time can be redirected towards more personal touches to those more invested in your organization.
Finally, it’s important for small history-focused organizations to be transparent and accountable in their fundraising practices. This involves providing regular financial reports and sharing information about how donor contributions are being used to further the history-focused organization’s mission. Regular communication with donors, such as newsletters or e-mails, can keep them informed about the organization’s activities and the impact of their contributions. By being open and transparent, small history-focused organizations can build trust with their donors and demonstrate their commitment to responsible and ethical fundraising practices. Efficient operation of pipeline development is crucial to ensure energy is invested robustly in cultivating major donors. A simpler membership program with fewer levels may be more efficient than a complex and difficult-to-execute program.
Remember, when you are diversifying your revenue streams by engaging with all levels of your donor pyramid you are doing this in two ways. The first obvious way is by reducing your overall dependence on a small group of major donors by drawing revenue from a large number of smaller donors. However, the second more subtle way is that by cultivating this bottom of the donor pyramid over time you are creating more potential major donors down the road. By cultivating relationships with a larger number of major donors, an organization can reduce its dependence on each individual major donor, which can be risky if one important player decides to reduce their giving or stop altogether.
In summary, to build a successful fundraising strategy for smaller historically-focused organizations, it is important to take heed of the donor pyramid and the 80-20 rule in order to focus on high-rate-of-return activities such as major donor cultivation, special events, and grant applications. These should be combined with efforts to maintain the long-term donor pipeline through memberships and cultivating a culture of giving. Actions should engage donors and have the potential to move them up the engagement pyramid from their current level. By understanding what motivates donors to give, small history-focused organizations can create a loyal donor base and ensure the immediate and long-term stability of their most important revenue stream. Another important revenue stream that can keep donors engaged is programs. Our next article will explore this aspect of history-focused organization revenue and its role in supporting your organization.
Coerver, Harrison and Mary Byers. Race for Relevance: 5 Radical Changes for Associations. Hoboken, NJ: Wiley, 2013.
Rosenblatt, Gideon. “The Engagement Pyramid: Six Levels of Connecting People and Social Change.” Groundwire, February 1, 2010. http://groundwire.org/blog/groundwire-engagement-pyramid/.