The Modern Pareto Principle

Actions Have Consequences!

Vilfredo Pareto was an economist in the early 1900s who is still famously credited with the Pareto Principle, stating that 80% of consequences come from 20% of causes.¹ Although this theory started off as a general explanation for life outcomes, it has been consistently applied to fundraising for years. Moreover, nonprofits have used the 80/20 rule to measure efficiency in activities such as volunteering, marketing, and programming, working toward not wasting resources.² However, as we continue to progress through this time of economic volatility, these numbers have begun to shift toward a “90/10” or “95/5” split, showing the sector’s newfound reliance on major gifts and large donors.³

So, should nonprofits completely ignore their small and mid-level donors? Absolutely not; in fact, they may be the key to balancing out the distribution. CCS completed a study within the last 5 years that analyzed an organization’s 732 largest donors. In the analysis, it was found that almost 33% of those donors started off as smaller donors, giving under $250.⁴ While small and mid-level donors may not deeply impact the immediate balance sheet, the long-term relationship can ultimately transform into a major gift. The question then is: are donors giving less, or are they just giving later?

What Does the Data Say?

The Gini Coefficient is generally used by the World Bank to measure economic inequality on a scale from 0-100, with 100 representing complete inequality.⁵ From 2021-2023, the coefficient jumped 2 percentage points, the greatest increase since the 1990s.⁶ Basically, the US is becoming more economically inequitable, and as a result, there is a mass movement toward asset preservation and economic conservatism by the wealthy.

All of these factors suggest that people are going to continue to give later and later in life. While these amounts may be bigger because of yearly returns, accumulated income, and smart investments, this trend will ultimately hurt nonprofits because of inconsistent cash flow. As nonprofits often have many receivables, liquidity is a common issue and will be hurt drastically by a reduced frequency in giving. In order to combat this change in donor behavior, here are a few ways nonprofits can sustain themselves financially.⁷

Best Practices

If there is going to be a higher amount of larger, one-time gifts, consider turning them into endowment structures that produce yearly returns.
Monthly giving programs can engage younger donors and seem less daunting in terms of commitments.
Event-based community engagement is the best way to capture the spirit of giving in a young donor; it may be a long courtship, but it can also create a pipeline for becoming a major donor.
Fundraising must be integrated and holistic; the development team should connect with staff and constituents in order to learn all networks and methods to raise money.
As the average middle-class American is involved on social media (a recent study reported about 75 percent of respondents aged between 18 and 24 followed at least one virtual influencer)⁸, micro-influencers are the key to raising awareness and expanding low-and-mid-sized donations.

References

Investopedia Team. (2025, July 14). Pareto principle: What it is and how to use it. Investopedia. https://www.investopedia.com/terms/p/paretoprinciple.asp
Wilson, K. (2025, August 7). The 80 20 rule for nonprofits: Understanding donor giving patterns. StratusLIVE. https://stratuslive.com/blog/80-20-rule-for-nonprofits/
Mersky, Jaffe & Associates. (2023, April 18). Pareto’s principle no longer standard fundraising. Mersky, Jaffe & Associates. https://merskyjaffe.com/paretos-principle-no-longer-standard-fundraising/
Sammis, J., & O’Brien, M. (2022, April 28). How small donors become major donors: Analyzing major donor pathways. CCS Fundraising. https://www.ccsfundraising.com/insights/how-small-donors-become-major-donors-analyzing-major-donor-pathways/
Institute for New Economic Thinking. (n.d.). The Gini coefficient: How do we measure inequality? Economics Observatory. https://www.ecnmy.org/learn/your-society/the-question-of-equality/the-gini-coefficient-how-do-we-measure-inequality/
World Bank. (2024). Gini index United States. World Bank Open Data. https://data.worldbank.org/indicator/SI.POV.GINI?locations=US
Childress, R. (2026, February 19). The secret weapon nonprofits are using for sustainable fundraising. The Chronicle of Philanthropy. https://www.philanthropy.com/solutions/the-secret-weapon-nonprofits-are-using-for-sustainable-fundraising/
Dencheva, V. (2023, June 29). Share of consumers who follow at least one virtual influencer in the United States as of March 2022, by age group. Statista. https://www.statista.com/statistics/1304080/consumers-follow-virtual-influencers-age-us/