How to Make Sure Your First-Time Donors Repeat Their Gift

by | June 27, 2018

The Law of Inertia states an object at rest tends to stay at rest unless acted on by an external force. The same tends to be true about church donors. Church members who do not contribute are challenging to inspire. When someone donates for the first-time, it is cause for celebration! However, knowing how and when to respond to a first-time gift will ensure a repeat donation. Repeat donors will provide significant resources that enable your church to fulfill its vision. Here's what to do.

Why don't first-time donors repeat their gift?

Some of your church members will finally take the plunge and make a first-time gift to the church. (For insights on why 50% of church members don't contribute, click here.) Sometimes, it is the only gift they ever make and you might never know why.  After significant study, non-profit researchers learned the number one reason first-time donors never make a second contribution. Can you guess what it is?

It’s not because they were ignored. Sending a personal thank you is recommended, however, it is not the most important factor in receiving a repeat gift.

It is not because they felt their gift was wasted or unnecessary. At the beginning stages of giving, people aren't typically concerned about the stewardship of their gifts.

It’s not even because they lost interest in the organization. Their interest in the community doesn't disappear overnight. Their interest in your ministry may continue, but they chose not to give again.

So, why do some first-time donors never repeat their gift?

 

The number one reason first-time donors don't make a second gift --- they were asked for a second gift BEFORE being thanked for the first one.

Receiving a sudden second solicitation can feel impersonal.

Likely we have all had this experience of being asked for another gift too soon after making a first-time donation. Charities seize the opportunity to ask for a gift because they think, based on your gift, you are sympathetic to their cause. As soon as your check lands on the Executive Director’s desk, another solicitation arrives in your mailbox. It feels impersonal and greedy.

Has this happened in your church? It shouldn’t.

We are the Church! We are all about love, and grace, and gratitude (among other things.)  Expressing gratitude lets donors know you care about them, not just their finances.

 

How you say thank you is as important as how you ask for support.

Your plan for acknowledging first-time donations should consider the following:

1) First-time givers should receive a thank you note within a week of making the donation.

2) Your thank you note should include information about how donations are making an impact through your church. Connect their donation with the church's ability to achieve its God-given vision.

3) Do not make a second ask in the letter --- the letter is 100% gratitude.

 

Here is a sample thank you letter to first-time donors to get you started.

This blog was adapted from the original published 11/2/2017.

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How to Increase Your Church’s Giving in Spite of the New Tax Law

The headlines suggest impending doom for churches:

“Charitable Donations Are Tough to Get Under the New Tax Law”
“Charities Brace for Giving Plunge in Wake of New Tax Law”
“Charities to Lose Billions in Donations Due to New Tax Law”

This is not the first time that changes in tax laws have resulted in such dire predictions. In 1981, the New York Times published this headline: “New Tax Law is Said to Endanger Billions of Gifts to Private Groups.” Fortunately for the nonprofit sector, that predication was wrong: gifts to charity over the next three years actually increased!

What impact will the new tax law have on charitable giving?

The long-term impact on philanthropy of the Tax Cuts and Jobs Act of 2017 (TCJA) remains unclear.  However, a strategic giving summit, led by Robert Sharpe of the Sharpe Group, highlighted new opportunities for donors made possible by the new law. Also, Sharpe suggested several strategies to grow giving to compensate for changes in the law. Here is an overview of Sharpe’s perspective on the law and the most effective ways to give going forward.

First, the reality. The new law was the most comprehensive revision in the tax code in over 30 years. The changes included a doubling of the standard deduction and a reduction in the mortgage interest and state/local tax deductions. Also, the cap on cash gifts was raised from 50% of Adjusted Gross Income (AGI) to 60%. Limits on deductions for high income donors were suspended until 2026 and home equity interest deductions were eliminated. As a result, it is expected that half of the people who itemized their deductions in 2017 will not itemize in 2018. However, high income donors who will continue to itemize may find expanded opportunities and incentives for larger charitable gifts.

So, how can churches guide donors? What can be done to salvage the tax benefits for those who no longer itemize and promote new opportunities for those who do?

Sharpe suggested three strategies: bunching, boosting and bypassing.

Bunching refers to donors making charitable contributions every other year. The every-other-year strategy enables donors to bunch two years of giving into one allowing them to itemize in the year their gifts were given. As an alternative, donors can contribute to a donor-advised fund (DAF) every other year and give ½ to the church each year. This strategy helps the church’s cash flow but can skew income if the church is not aware of the donor’s intentions. Some of your donors may have done this last December. You should review your 2017/2018 giving, especially among your larger donors, to see if they may be using a bunching strategy already.

Boosting is most applicable to capital campaigns. Some high capacity donors may choose to make asset gifts that boost them to itemizer status for a number of years. Donors choosing this option lock in current market values, bypass capital gains taxes, and save a substantial amount on state and federal taxes. Boosting makes sense for donors who have highly appreciated assets that pay minimal dividends and who want to make a larger gift to a capital campaign.

Bypassing is the third way to take advantage of the changes in the tax law. Donors can enjoy a “deduction equivalent” by making gifts that bypass their income stream. The most common form of bypassing is the IRA rollover provision in the tax code. People age 70 ½ and older who have IRAs are required to take a yearly minimum distribution (RMD) that is taxable as ordinary income. These people are now able to make a yearly gift of up to $100,000 directly from their IRAs to churches and charities. This gift counts as their RMD, avoids the taxes, and reduces their AGI on which many other deductions are based. Although the IRA rollover provision predates the new tax law, its importance has been amplified by recent changes and by the increasing number of Boomers becoming eligible.

Finally, Estate and Gift Tax laws remain essentially unchanged. However, by doubling the exemption amount ($11.18 million per individual and $22.36 million for married couples in 2018) and indexing it for inflation, the TCJA eliminated federal estate taxes for 99.9% of Americans. For some perspective on the scope of this change, the exemption was $600,000 as recently as 2000. As a result, it is likely more discretionary assets will remain in the typical estate. Surveys show that donors with such increased assets probably will split the tax savings between family and charity.

So how should churches respond to these changes? Here are some suggestions:

  1. Educate yourself, your staff, and donors about the changes that impact charitable gifts. The TCJA left the charitable deduction intact while repealing and limiting many others. In fact, some benefits were actually expanded! Many denominational and community foundations have staff whose primary job is providing advice and resources for their constituents. Take advantage of these low-cost (or free) resources. The Sharpe Group has excellent white papers and educational materials, too. “Talk to your financial advisors” should be your mantra in 2018 and 2019!

 

  1. Promote the benefits of gifts of appreciated securities and other non-cash assets, such as IRA rollovers. Because about 8,000 Baby Boomers turn 70 ½ every day, appreciated asset gifts will be increasingly important in funding your ministry. Remember the IRA rollover provision allows eligible donors to enjoy the tax benefits of their gifts regardless of whether they itemize. However, your church will not receive asset gifts unless you make a conscious effort to educate members about these opportunities. Remember to tell donors how these gifts make a substantial difference to your mission and ministry. Colleges and nonprofits are making the case for why they should receive these gifts. Be sure you are doing the same.

 

  1. Inform your donors that the federal estate and gift tax has, for all practicable purposes, been eliminated. Many donors created estate plans based on the old tax laws. Those plans usually included insurance or assets in trusts to pay the necessary taxes. Any bequests to family and charities were made from the remaining assets. The higher estate tax exemption means donors can leave more to charity and increase the amount distributed to family members! Position your church to be the recipient of these “extra savings.” Once again, take advantage of the resources available through denominational and community foundations.

The new tax law does not mean your giving will be negatively impacted. But growing giving requires being informed about the best ways to give.

Too many church leaders are operating under the assumption that the TCJA will have a negative impact on giving. Robert Sharpe reminded us that the “sky has never fallen” except during major economic downturns. It is clear the opportunities made possible by the new law outweigh the threats created by it. Churches need to tell that good news in order to enhance their ability to proclaim THE Good News!

Tom Norwood, D.Min, CFRE is a Senior Vice President with Horizons. He is an ordained Presbyterian minister who holds degrees from Davidson College, Columbia Theological Seminary, and Yale University. Tom is a regular speaker at regional and national fundraising and stewardship conferences.

Is your Generosity Approach Helping or Hurting your Church?

Register now for a free webinar!

The One. The Few. The Many.

 

Join two of the most knowledgeable leaders in church stewardship, Joel Mikell (Horizons Stewardship) and Doug Turner (Culture of Ready) for a free webinar entitled, The One. The Few. The Many. On Thursday, November 8, 2018 at 11AM ET/8AM PT, these industry experts will discuss how a one-size-fits-all approach to generosity may be negatively impacting your church. The webinar will address how to develop distinct approaches for three important groups within every church.

The One: a small percentage of individuals who process giving in a highly relational setting. You’ll learn strategies for developing a disciipleship approach for those who have capacity to become the financial leaders in your church.

The Few: a core group that tends to live out their faith in community. You will learn ways to create safe spaces for “the few” to take risks and grow in the grace of giving.

The Many: the largest group in any church that contributes very little financial income. You will learn how to engage this group and help them engage in the generosity journey.

Click here to register now for this free webinar produced by Church Executive Magazine.

 

How Canceling Services Actually Increased Church Giving

It is a source of angst for many pastors: a forecast of inclement weather scheduled to hit on a Saturday night or Sunday morning. Whether heavy snow, ice, hurricanes, major storms or brutal cold temperatures, pastors have to make the decision of whether to cancel church services entirely or hold worship for the faithful few who will brave the elements regardless of the forecast. The angst is not just about what canceling services will do to the annual attendance figures or preaching a sermon (that took 15 hours to prepare) to a much smaller crowd. Rather, the angst typically centers on church giving, or the lack thereof.

 

How will church giving be impacted when services are canceled?

When weather negatively impacts attendance, the church may face a financial crunch without that week’s regular offering. The impact on the budget may be felt for months as the church tries to “catch up.”  And if bad weather hits on more than one weekend, the effect is multiplied.

Pastor Aaron had not canceled worship services for over twenty years. There was no snow deep enough or temperature too low to keep him away from church on Sundays. As lead pastor at St. Paul’s UMC in Joplin, Missouri, a multi-campus church with 1,000 average Sunday attendance, he was willing to preach to 10 people if they were willing to come out. But last winter he faced a forecast that even he could not overcome.  Inches of ice falling from Saturday evening into Sunday afternoon were predicted. A mandatory order was issued for people to stay off the roads. Church was canceled. Like many pastors who faced the same wintry weather, Pastor Aaron was concerned about the impact of canceling services on church giving.

 

On a day when the doors of the church were iced over, imagine his joy when he learned the offering was $4,000 higher than the same Sunday a year before when good weather prevailed, and worship services actually happened!

 

What made this possible?

It all started a year earlier when the church went through Horizons’ “Stewardship Discovery” program. We reviewed data, met with staff and ministry leaders, and had conversations with financial supporters. Through the Stewardship Discovery process, the church gained valuable insights into their unique culture and how it impacted church giving. The recommendations were accepted, and the church engaged a Horizons coach to assist with implementation.

 

The church leadership initiated the following Horizons recommendations:

  • In the church bulletin, remove the weekly offering “received-to-date” data. The amount “received-to-date” provided an inaccurate and incomplete depiction of annual church giving.
  • Communicate more effectively through enhanced giving statements, regular mailings, emails, and meetings. This strategy provided a more comprehensive view of overall church giving.
  • Share life-change stories in worship of how money given to the annual budget was used to impact people’s lives. Giving to the church was being used to deepen ministries and grow disciples not just pay the bills.
  • Encourage electronic church giving through the website and text-to-give. Provide instructions and testimonies in worship from people contributing electronically.
  • Write thank-you notes to those who gave, whether financially or by teaching/leading a Sunday School class or small group, volunteering in a ministry, or helping at a church work-day.

 

These strategies cultivated a deeper understanding of church giving as a spiritual discipline.

When Pastor Aaron sent an email announcing church services were canceled, he reminded and encouraged members to make their offerings electronically. Because the church had developed effective electronic giving practices, people knew how to respond. Not only did the ice eventually melt, so did the stress about needing to ‘catch up’ or cut expenses.

 

Most importantly, the mission of the church continued without disruption.

It may be another twenty years before Pastor Aaron is forced to cancel worship again. But if inclement weather should strike, he won’t need to be anxious about church giving. Now, about that well-prepared sermon…that’s another story.

Rev. Aaron Brown is Lead Pastor of St. Paul’s United Methodist Church in Joplin, Missouri. 

Rev. Dustin Cooper is a Senior Vice President and Partner with Horizons Stewardship. Having served the local church for over 25 years, Dustin enjoys working with pastors and church leaders to achieve their visions and create disciples for Jesus Christ. Email Dustin at dcooper@horizons.net.

 

 

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