Multi-Year Gift Agreements: Your Donor Retention ‘Ace-In-The-Hole’

Nonprofits who care about donor retention employ numerous strategies to keep their donors coming back year after year.

Personal acknowledgments, impact reporting, and a strong monthly giving program are some of the cornerstones to a high donor retention rate.

But there’s one unsung strategy that can elevate your donor retention rates, while expanding mid-level and major giving: multi-year gift agreements.

How multi-year giving agreements impact donor retention

According to the Fundraising Effectiveness Project, retention hit an all-time low of 42.6%. While the full 2023 data has not yet been compiled, FEP has found that, through Q3 2023, donors decreased moderately and donor retention continued to slide, driving a slight decrease in fundraising dollars. Q3 itself saw a YOY drop of 7.6%. This continues a trend that began in 2021, after a large uptick in donations and donors in 2020.

Savvy fundraisers have always kept donor retention top of mind. Just a small improvement in donor retention rates translates into higher donor lifetime value. However, it’s an increasingly uphill battle to build long-term relationships with donors.

But multi-year giving is a cheat code in the donor retention game. Because pledge fulfillment rates are typically in the 80-90% range, multi-year giving provides a predictable revenue stream, allowing nonprofits to plan and implement long-term projects with greater confidence. Securing multi-year commitments also signifies a deeper level of trust and engagement from donors, indicating that they are truly invested in your mission.

Just look what happens over the course of five years when donors have an 80-90% retention rate (right-hand image) versus a donor retention percentage in the low-40s:

By improving your retention rates through multi-year commitments, the lifetime value increases by almost 3x!

Studies also show that the best major gift and planned gift prospects are donors that have been retained for multiple years. Donor retention is the key to major gift and planned gift success, and multi-year commitments are one of the best ways to increase donor retention.

Does this really improve donor retention?

A common criticism of the value of multi-year gift agreements in the context of improving donor retention rates is that you are simply inflating your donor retention rates by breaking up a large one-time gift into multiple payments.

Multi-year giving isn’t just a statistical trick, but a genuine opportunity to steward your donor over the course of their pledge. When someone commits to a multi-year gift, they’re not just agreeing to a payment plan; they’re entering into an ongoing relationship with your organization. This isn’t about slicing a big gift into smaller parts; it’s about building a bridge of continuous involvement and commitment.

Over the course of a multi-year agreement, you will have numerous opportunities to engage with the donor. This could take the form of updates on how their contributions are making a difference, invitations to events, or even discussions about additional ways they can support your cause. Each interaction is a chance to reinforce their decision to support your cause and to deepen their commitment.

In other words, if someone makes a one-time $50k gift, there isn’t as strong of a context for ongoing communication and stewardship as there is when they’re locked into a $10k per year commitment over five years.

There’s also the possibility of upgrades within the payment schedule. As donors become more involved and invested in your cause over time, a donor might be willing to increase their contribution as they see the impact of their gift and grow more attached to your work.

How to generate more multi-year agreements

If your organization is new to multi-year giving, here are a few ideas to get started:

1. Integrate into your fundraising efforts

Introducing multi-year gift agreements into your nonprofit’s fundraising efforts is like adding a new, exciting chapter to your organization’s story.

Start by sharing the big picture with your team and supporters: multi-year gifts are not just donations, they’re commitments to a shared future. To integrate these into your existing efforts, begin by identifying your most passionate and capable donors – those who truly believe in your mission. Then, have heartfelt, one-on-one conversations with them about how their sustained support can make a massive impact over time.

You can also weave the concept into your regular communications, like newsletters and social media, highlighting the long-term benefits of multi-year pledges. It’s about telling a compelling story where these gifts are the heroes, providing stability and enabling ambitious, long-term projects.

Remember, the key is to make donors feel like they’re not just giving money, but embarking on a journey that unfolds and grows over several years. With the right approach, multi-year gift agreements can become a cornerstone of your fundraising strategy, building a foundation for both stability and innovation.

2. Digitize your gift agreements

Collecting multi-year gift agreements through online agreements with e-signatures is a game-changer. It’s not just about saving trees (which is awesome, by the way), but it’s also about making everything smoother and faster.

When you move to digital gift agreements, you’re cutting out the whole print-sign-scan-email loop. This means you can secure pledges quicker, and your supporters can make their commitments without the hassle of dealing with paper.

Plus, it’s way easier to keep track of these digital documents. No more digging through your inbox or worrying that it got caught by a spam filter.

Going digital is a smart move – it’s convenient, efficient, and let’s be honest, it makes your nonprofit look pretty savvy too!

3. Make pledge reminders a priority

Making pledge reminders a priority is a bit like watering plants – do it right, and you’ll see growth!

First, check the functionality of your existing donor database or CRM (Constituent Relationship Management system) and make good use of it. You may even consider investing in dedicated gift agreement software that integrates with your CRM.

When you use these tools, you can automatically send personalized, friendly reminders to donors about their pledges. It’s like having a smart assistant who never forgets to nudge your supporters at just the right time.

This not only helps in ensuring a steady flow of funds (super important for planning cool projects), but it also keeps your donors engaged and feeling appreciated. Plus, these systems can provide valuable insights, like who’s super punctual in their giving, who might need a little extra nudge, or who is nearing the end of their schedule.

By making pledge reminders a priority, nonprofits can build stronger, more reliable relationships with their donors. It’s a win-win! Your organization stays on top of funding, and donors feel like they’re really part of your mission’s journey.

In the ever-evolving game of donor engagement, multi-year gift agreements are your ace-in-the-hole, a strategic endeavor that not only fortifies your organization’s financial future but also deepens the bond with your donors, creating a lasting partnership rooted in shared commitment and sustained impact.

Has your organization seen donor retention rate improvements as a result of multi-year giving? Let us know in the comments below!