Guest post by Deep Sync

When nonprofits develop a fundraising strategy, they often overlook a major source of potential revenue: donor-advised funds (DAFs).

With DAFs, donors can contribute to their favorite causes through a specialized financial account. They receive immediate tax deductions and can use their accounts to grant funds to nonprofits over time.

In 2023, grants from DAFs surpassed $54 billion, and the average DAF account size increased by 9.2% between 2022 and 2023. DAF giving is on an upward trajectory, and nonprofits should actively take advantage of this immense fundraising opportunity.

To successfully tap into this revenue stream, you need a data-driven approach. We’ll provide five best practices for effectively leveraging your donor database and incorporating insights into your DAF fundraising strategy, empowering your nonprofit to earn more.

1. Send surveys gauging current donors’ interest.

Kickstart your DAF fundraising strategy by gauging current donors’ interest. After clearing up any misconceptions about DAF fundraising, send a quick survey that asks questions like:

• What is your preferred donation method?

• Have you ever contributed to a nonprofit using a DAF?

• Would you be interested in becoming a DAF donor?

• Is there anything else you need to know about DAFs before getting started?

Store survey results in your constituent relationship management platform (CRM) to keep clear records of donors’ willingness to participate in DAF fundraising. For donors who indicate interest, follow up with communications explaining the process in further detail and let them know how to get involved.

2. Conduct prospect research.

To identify more potential DAF donors, conduct prospect research. Prospect research is the process of determining potential donors’ capacity and propensity to give.

Nonprofits usually embark on prospect research to identify potential major donors. Considering the average DAF donation is nearly $5,000, prospect research is also a great avenue for finding DAF donors.

Most organizations work with a data provider or prospect research consultant to help them navigate the process and acquire all necessary data. Your prospect research partner will help you obtain two main types of third-party data:

• Wealth data. To determine potential DAF donors’ capacity to give, you’ll investigate information such as business affiliations, stock ownership, and home value.

• Philanthropic data. To establish potential DAF donors’ propensity to give, look into factors like personal information, past giving, and nonprofit engagement history.

Once you’ve identified potential DAF donors, reach out and help them determine whether DAF fundraising is right for them. You may review the main advantages of DAFs and the top considerations to keep in mind when opening a DAF for the first time.

3. Segment donors.

Once DAF donors contribute, segment them by giving level, history, or frequency. Then, based on these factors, tailor your communications and ask amounts accordingly.

During the donation solicitation process, using the right ask amount is the key to maximizing your revenue. If your ask amount is too high, you risk turning donors away. On the other hand,  if your ask amount is too low, you could miss out on additional funds donors are willing to contribute.

Basing your ask amounts on donor data ensures an appropriate request and encourages donors to keep contributing, ideally at slightly higher levels. For example, if a donor contributes to their grant in $2,000 increments, you may email them asking for a $2,500 donation.

You may also segment donors based on giving frequency. Donors who contribute through DAFs monthly are likely interested in hearing from your nonprofit more often than those who donate only once a year. Thus, you can adjust your communication strategy to reach out to more frequent donors regularly.

4. Report the impact of donors’ grants.

After you receive a donor’s grant, they’ll want to know that their funds are being put to good use. While it’s important to thank your donors promptly after they contribute through DAF fundraising, eCardWidget stresses the importance of centering donors’ impact in your donor thank-yous. You may consider automating more generalized emails to be sent immediately after donors contribute and following up later with more detailed information about their impact.

Your nonprofit can also create impact reports highlighting the programs and projects funded by DAF grants. When you use clear metrics to demonstrate how DAF donors have made a difference, they’ll feel confident in their choice to contribute to your cause and will be more likely to do so again.

Additionally, developing an impact report holds your organization accountable for using DAF funds responsibly. For instance, nonprofits cannot accept DAFs as payment for tickets to fundraising events, galas, or auctions if the ticket cost isn’t fully tax-deductible. With an impact report, you can verify that your organization follows this rule and other DAF guidelines.

5. Analyze donor behavior and interests.

Enhance your DAF donor data by recording information about their behavior and interests. You may survey DAF donors about their preferences, leverage information from your prospect research, or append missing demographic and lifestyle data.

Then, you can offer additional engagement opportunities based on their interests, building lasting relationships with your DAF donors beyond donation solicitations and contributions.

For example, if a particular DAF donor has been a dedicated volunteer at other charitable organizations, encourage them to join your volunteer network. You may also invite them to events, introduce them to advocacy opportunities, or gauge their interest in joining your board.

Set yourself up for DAF fundraising success with a dedicated, data-driven DAF strategy. When you use donor data to find, solicit, and steward DAF donors, you’ll form long-lasting, mutually beneficial relationships with them that help you fulfill your mission and allow donors to feel proud of their impact.