Measure what really matters in #fundraising
It’s always surprising to me when I see a nonprofit’s request for proposal (RFP), or talk to a development officer and the focus of their inquiry is on “increasing average gift”, or “doubling the response rate in direct mail.”
These are fine goals for any organization to have, but by themselves, they do little good for any organization. Here’s why…
If an organization has 1,000 donors, they could simply focus only on the top 50 donors and thereby increase their average gift. However, disregarding the remaining 950 donors would significantly reduce the total revenue the organization raises annually.
Similarly, if an organization’s goal is to double response rate, they could easily change their ask strategy and only request that each donor give $5 in support of their cause (in fact, I’ve seen this happen — and the result isn’t pretty!). This could dramatically increase response rate, but also similarly decrease their overall revenue by downgrading donors who had been giving gifts of $100, $500, or even $1,000+.
It’s easy to focus on these things though. They’re the quickest to impact, and often the easiest to measure. But if you want to build and grow a successful fundraising program, focus on these key metrics instead:
- Annual value per donor
- Income coverage (the amount of income generated over and above the amount lost to donor attrition)
- Donor retention by segment (focus on retaining the highest value donors – sometimes it’s OK not to retain the lowest value donors)
- Donor upgrade and downgrade percentage
- Long-term value
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In #fundraising, sometimes you get what you pay for (be warned!)
A few years ago we had a client who fired our firm because they found another direct response fundraising agency that quoted them a cheaper price. And in fact, this other firm was cheaper by roughly $100,000. That’s a big number.
However, focusing only on cost, and not on value, is dangerous (as it was for my client).
18 months after moving their business to this other agency, my client came back asking for help. The discount strategy their other agency had employed lost them $300,000 in revenue year-over-year because it wasn’t as personalized or customized to their donors. It also damaged relationships they had with many great and loyal donors.
While it was certainly cheaper on the front-end, it was much more costly for them in the long-term. It took my client another 14 months before their income had returned to the level it was before they changed agencies — that’s a total of nearly $600,000 in lost revenue. More importantly, it’s $600,000 worth of life-changing services that people in need didn’t get access to.
It’s always tempting to focus on cost. After all, we’re all under pressure to do more with less every day. But I’d encourage you to make cost the secondary focus, and instead, put a premium on value.
Image courtesy of Stuart Miles at FreeDigitalPhotos.net
Are you setting smart #fundraising goals?
This weekend I received an email from a nonprofit asking if I could help them decide on an acceptable year-over-year growth goal. Was 15% right? Maybe 20%? The development team had been asked to decide on a rate of annual growth that they would stick to on an annual basis.
My guidance to this organization (and to you!) was that setting an arbitrary goal like this is a really bad idea. Instead, set goals based on the data available to you, and the smart assumptions you can make based on past experience. Review the status and health of each revenue stream, and ask yourself some critical questions about every aspect of your work.
What do you know about the donors in each area, and whether they will maintain, increase or reduce their giving in the coming year? What do you know about the costs associated with each revenue stream for your organization? Will costs decrease in the coming year (not likely, right)? Will they increase — and if so, by how much? If costs will increase this means you have to make some important decisions. What new strategies and tactics can you bring to market to grow you revenue enough that you can offset the increased costs? Are there other revenue streams that are working just as hard for you and that you could shift budget into? What new or different resources, strategies, and support structures do you need to put in place in order to succeed in the coming year?
Instead of picking goals out of thin air and committing your success to them blindly, follow this process to create goals that are specific, realistic, and achievable.
Image via startupstockphotos.com
Today’s guest post on the biggest mistake fundraisers make is from my great friend (and co-author of Rainmaking: The Fundraiser’s Guide To Landing Big Gifts), Roy C. Jones, CFRE. “For clinking money, you can shake the can. For folding money, you should go ask for it. ” — Harold Seymour, legendary fundraiser Without a doubt, failing […]
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