Effective fundraising is critical for many not-for-profit organizations to fully fund their programs and execute the mission. But how do you know if your fundraising efforts are effective, and you are using the best strategy? Analyzing key fundraising metrics can provide valuable insights to help you optimize your approach and get the most out of your fundraising investments.
Key Fundraising Metrics to Track
There are several important metrics that can shed light on the effectiveness of your fundraising activities:
- Cost to Raise $1 (CRD): This tells you how much you’re spending to bring in each donated dollar. Calculate it by dividing your total fundraising expenses by total funds raised. Industry benchmarks vary by fundraising channel, but in general, aim for $0.20 or less for grant writing, $0.20 or less for direct mail renewal, and $0.10 or less for major gifts.
- Donor Acquisition Rate: This measures how quickly you’re growing your donor base, calculated as (Number of new donors this year – Number of donors last year) / Number of donors last year. Aim to meet or exceed the previous average.
- Donor Retention Rate: This tells you what percentage of donors give again. Calculate it as Number of repeat donors this year / Total donors last year. An optimal rate is around 80%. Focus more on keeping existing donors, as it’s six times more costly to acquire a new donor than retain one.
- Return on Investment (ROI): Calculated as Net Revenue / Cost of Fundraising Activity, ROI is a common metric of overall fundraising effectiveness. Its inverse, CRD, provides additional insight. Be sure to properly allocate joint costs between fundraising and program expenses for an accurate picture.
Benchmarking and Trend Analysis
Compare your metrics to industry benchmarks for not-for-profits of comparable size, as larger organizations benefit from economies of scale. Also look at two to three-year trends in your own metrics, as cultivation efforts may raise costs initially before yielding results. Other trends to examine include changes in number and average size of donations, and number of new/recaptured donors.
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Optimizing Your Fundraising
Armed with these insights, you can make data-driven decisions to optimize your fundraising. This may mean focusing more on high-ROI, low-CRD efforts like major gifts and grant writing. Or increasing donor retention efforts like personalized outreach and engagement. Opportunity cost is also key – would an appeal mailing net be more than an expensive gala? Let the numbers be your guide.
Effective fundraising is both art and science. While the “art” comes from telling your story and building relationships, the “science” comes from rigorous analysis of your fundraising metrics. Combine the two for the maximum fundraising that powers your mission.
Let’s Discuss Your Fundraising Goals
Interested in improving your fundraising effectiveness and efficiency? Our not-for-profit advisory team is here to help. Schedule a consultation with one of our expert advisors today to discuss your goals and explore how we can help you achieve fundraising success. We look forward to putting our knowledge and experience to work for your mission.