How You Give Matters (Part 2): Multi-Year Commitments vs. Annual Contributions

Securing multi-year contributions is a major focus for many nonprofit organizations. Knowing these funds are committed not only signals the donor’s confidence in the nonprofit and gives the nonprofit a longer runway for new or sometimes larger initiatives, but also takes some pressure off those responsible for fundraising in the years ahead. Donors are regularly asked to consider multi-year grants for these reasons. However, donors may want to think carefully about whether you want your support to be reviewed on an annual basis or committed for multiple years. 

What is a multi-year contribution? 

To put it simply, a multi-year contribution (often known as a pledge) is when a donor makes a grant payable over multiple years. If desired, the donor can ask the nonprofit to achieve certain benchmarks before the next payment is released.   

What are the benefits of multi-year contributions?  

Multi-year contributions allow nonprofits to pursue longer initiatives, knowing that the funding will be there throughout its lifecycle. This could be a fellowship, research project, staff position, program, or even unrestricted support.  Multi-year gifts are also very appealing to fundraisers, as multi-year awards allow them to chip away at future fundraising goals. For donors, multi-year grants can be helpful to ensure that desired projects have the funding to be seen to completion and often lead to deeper engagement with a nonprofit. A pledge can also allow donors to make a larger overall contribution, without draining the budget in one particular year. 

What are the benefits of annual contributions? 

For donors, annual contributions have a few advantages. Nonprofits are constantly changing and evolving. What seems like a great investment one year could look totally different the following year – whether that’s due to the loss of a visionary leader, a new major funder coming on board (or a major funder leaving), or a decision to pivot on the mission or programs. Annual contributions also allow donors to have the flexibility to fund the nonprofits that are most meaningful and effective at any given time. Annual gifts are particularly important for newer nonprofits that don’t have a long track record of success. In addition, negotiating a one-year grant (or preparing a gift agreement) vs. a multi-year grant can be quicker and less of an administrative burden for the donor. 

What would HJ do? 

The team at HJ reviews all funding opportunities on a case-by-case basis. No two opportunities are alike! In general, our goal is always to make donors feel confident in their decisions. Our team has decades of experience reviewing both annual and multi-year opportunities. We have a keen eye for knowing when an investment may be worthwhile – or even necessary – to support for multiple years or when it is better to review annually. 

If you would like to learn more about the factors that go into weighing a decision of multi-year support, contact us today! The team at HJ would be happy to discuss our methodology and best practices.