Observations (Not Predictions) Of The 2023 Nonprofit Landscape

Created By: Stephen K. Orr
January 30, 2023

I’m not presumptuous enough to make predictions or foolish enough to publish them in a blog. Instead, these are my observations about the economy in 2023 and its consequences for nonprofit organizations. Why does Orr Group care? To state the obvious, the economy has an impact on donors, and by extension nonprofits. Leaders who treat philanthropy as a business, subject to economic principles, are most likely to succeed, if only because they will relate more naturally to the investors, CEOs, and other business-minded donors with the capacity to make substantial blended major gifts.

• The economy: reasons to be optimistic. I am fairly bullish at the start of 2023, because while inflation hasn’t gone away, it’s slowing down and becoming less of an issue. Many commentators think we’re in a recession now, or that 2023 will see negative GDP growth, but even if that’s true, it’s the most highly anticipated recession of all time. (Read Goldman Sachs’ analysis of whether the U.S. is in recession.) The Federal Reserve has been raising interest rates, just as it announced it would do, and those moves are having the desired impact of bringing inflation down. Despite these changes, Orr Group is not seeing a discernible slowdown or pullback in charitable activity. In fact, not a single nonprofit in our stable of clients is considering slowing or halting their campaigns. It’s full steam ahead. Capital campaigns continue to be an effective fundraising tactic for most types of nonprofit organizations, regardless of concerns about economic slowdowns. These campaigns tend to focus on major donors, who are still making leadership gifts, and their commitments remain the dominant force in charitable activity today. And the receptivity to blended gift proposals that include substantial planned giving tools has accelerated, as is typical in uncertain economic environments.
• The economy: reasons for concern. Of course, not every sector is strong. The soft spots are apparent around the edges, in certain industries. Crypto, of course, has had a spate of bad news, and there have been highly publicized layoffs in the tech and financial industries. As a whole, however, the diverse U.S. economy is thriving overall, and unemployment is not an issue. (In fact, the war for talent remains fierce.) Of course, stagflation could turn things upside down. And if more industries encounter turbulence, if unemployment starts climbing, if we go into a much broader recession, panic could spread among donors. Even in this scenario, however, nonprofits can shift strategies and put more resources into planned giving, which I discuss below. As the economy slows down, planned giving speeds up.
• The wealthy are feeling confident. Orr Group specializes in major gifts, campaign gifts, and the people capable of writing checks of six figures and up. (Read “Where the Money Is and Why That Matters for Nonprofits.”) When this segment is feeling comfortable, charity is a winner, because charitable behavior generally tracks with pursuits such as luxury travel and buying vacation homes. All evidence points to acceleration in these areas of the economy are all thriving. One big reason is the government’s Covid-19 response; historic amounts. The Paycheck Protection Program (PPP) loaned out $793 billion, and nearly all of those loans have been forgiven. People accumulated a lot of savings during this period, and we’re still seeing that liquidity holding up the economy and benefiting nonprofits.
• Fortune favors the bold. Organizations receiving grants from MacKenzie Scott and other mega-philanthropists are leveraging that money to expand capacity—including fundraising capacity. Her no-strings-attached style of philanthropy is unleashing waves of creativity, which is a good thing, because most major charitable organizations have the potential to be more entrepreneurial and offer more creative investable programmatic opportunities. As Orr Group partner CJ Orr wrote this time last year, “It’s crucial for nonprofit leaders and staff to re-engage donors using creativity, so that they’ll buy back into the organization’s programs at their peak level.” Some leaders become risk averse in uncertain times, but uncertainty is always there, and letting it paralyze you means relinquishing opportunity to those willing to take a chance. And the number of mega-donors is increasing, and they are increasing both the volume of major gifts and inspiring the matching of other major gifts.
• Planned giving makes more sense than ever. Beyond the ups and downs of the stock market, the economic mega-trend with the greatest consequence for nonprofits is the generational transfer of wealth. Estimates vary, but Bank of America says that $84 trillion will change hands from the baby boomers between now and 2045 and that an estimated $12 trillion will go to nonprofits. High-net-worth donors gravitate toward tactics that are tax-advantageous. (Note that annuities are back again because interest rates have climbed.) This explains why donor advised funds, which facilitate the timing of a donation for the greatest benefit to donors and their families, continue to expand. Even people without charitable tendencies would rather see their money go to nonprofits than to estate taxes. (Read more about planned giving.)

Everyone at Orr Group has a passion for nonprofits as well as a discipline with regard to the business of philanthropy. Organizations that partner with us will benefit from both of these qualities—in 2023 and beyond. That’s a prediction I’ll stand by.

Want to set your organization up for sustainable fundraising success in 2023 and beyond? Get in touch with Orr Group today to understand how we can help you design impactful strategies for growth.

Steve Orr is the Co-Founder and Managing Partner of Orr Group, and draws from his investment banking and finance background to bring a problem-solving approach, a focus on metrics, and an outcomes-driven perspective to the nonprofit sector.