7 numbers every nonprofit should know

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How do you calculate the success of your fundraising efforts?

The answer is more than just total revenue — although that's what many nonprofits and fundraisers focus on. 

To understand how your efforts impact results and understand how donors respond (or don't), you have to know the numbers.

Here are 7 key performance indicators you can start tracking today to have a better idea if your fundraising efforts are effective.

1. Response Rate

Why it matters: It's the easiest way to measure how successful your campaign was. But don't always assume efforts with a low response rate are not effective.

How to calculate: Number of gifts received / number of letters or emails sent out.

Example: If you send out 100 appeal letters asking for a donation and 50 people respond, your response rate is 50%.

2. Average Gift Amount

Why it matters: This is the best indicator to understand the success of your donor cultivation efforts.

You'll want to compare the average gift amount of different campaigns to see what inspires people to increase their commitment. You'll also want to compare this number year-over-year to track your progress.

Take note: If you receive gifts that are outliers and significantly larger than usual you may want to exclude them to get a more accurate result. 

How to calculate: Total income / number of donations received.

Example: If your total income for a campaign is $10,000 that came from 100 different people, your average gift amount is $100.

3. Retention Rate

Why it matters: Donor retention rates in the US and Canada are abysmal. Some studies show 8 out of 10 new donors don't make a second gift. Since new donors are more difficult and expensive to attract than ever, increasing your retention rate is crucial to survive.

How to calculate: (Number of donors who gave in Year 1 and again in Year 2) / Number of donors who gave in Year 1.

Example: If 100 people gave to your organization last year, and 50 of those same people make another donation this year, your retention rate is 50%. 

4. Attrition Rate

Why it matters: Simply the opposite of retention rate, the attrition rate shows your how many donors your organization is losing.

Monitoring this number — especially by giving channel — helps you know where you need to improve your donor stewardship efforts.

How to calculate: 100 - [(Number of donors who gave in Year 1 and again in Year 2) / (Number of donors who gave in Year 1) x 100].

Note: An easier way to calculate this is to simply subtract your retention rate from 100.

Example: If you look at your giving for the last 2 years and find that 200 people responded in year 1 and 100 of those same people responded in year 2, your attrition rate is 50%.

4. Return On Investment (ROI)

Why it matters: Your ROI tells you how efficient your fundraising efforts are. While it's a good indicator at the basic level, be careful not to use it as your only measure of success.

Many organizations acquire new donors at a negative ROI. Then they steward those donors to become regular givers.

How to calculate: Total income / total cost (can be represented as percentage or ratio).

Example: If you spent $5,000 on a campaign that raised $10,000, your ROI is 200% or 2:1.

5. Cost To Raise A Dollar

Why it matters: Similar to your ROI, the cost to raise a dollar shows you how effectively you used your money to raise more of it. The lower your cost to raise a dollar the better you are leveraging your resources.

Be careful not to get too stingy here. Sometimes big investments are needed in the short term to increase giving in the long term.

How to calculate: Total cost / total income.

Example: If you spend $5,000 on a campaign that yields $10,000 in donations, your total cost to raise a dollar is $0.50 or 50%.

6. Lifetime Value (LTV)

Why it matters: Retaining donors is one of the best ways to grow your fundraising. That's why the lifetime value of a donor is one of your most important indicators along with your retention rate. It shows you the amount you can reasonably expect from a donor over their lifetime.

Of course the exact LTV of each donor is impossible to know, but the formula below gives you a reasonable estimate.

How to calculate: Average annual gift / annual attrition rate.

Example: If your average annual gift is $100 and your attrition rate is 50%, the lifetime value of your donors is $200.

7. Net Income

Why it matters: After accounting for all expenses of your campaign, how much money are you left with? That's your net income. It simply shows you if you made money, lost money or broke even.

While it's often the only metric nonprofits focus on, it should be evaluated as part of the bigger picture. You can have a positive net income and yet have an abysmal retention rate that can signal trouble.

How to calculate: Total income - total cost.

Example: If you spent $10,000 on an appeal letter and it brought in $30,000 in donations, your net income is $20,000.

 

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Mike DuerksenComment