Getting started with any new fundraising strategy can be unnerving, but a solid understanding of fundraising performance metrics can help point you in the right direction.
Fundraising is the most crucial function of many nonprofit organizations. Through the commitment of benevolent donors, nonprofits are provided with the resources they need to fulfill their mission and make an impact on the world.
And while nonprofits will always have an abundance of donors who have an affinity for their organization, fundraising isn’t a cakewalk. The process of raising funds is never-ending; it requires experience and comprehensive knowledge of your donors to be successful.
Certain fundraising methods or strategies that may have worked several years ago are now outdated, forcing nonprofits to adapt. Jumping into new strategies can be risky business before consulting the mounds of data at your disposal.
Check out these critically important fundraising performance metrics to help you design and evaluate an expertly-crafted fundraising strategy.
Common Fundraising Performance KPIs
Key performance indicators (KPIs) are designated metrics that demonstrate how an organization is meeting its goals and objectives. For nonprofits, these metrics can vary since no two organizations are alike — defining success will depend on established goals. However, several metrics are generally universal in their value for nonprofits.
1. Donor Growth
Whether it’s year-over-year or analyzing other spans of time, nonprofits need to know whether their donor base is growing or shrinking. Donor growth should provide insights as to whether donor acquisition efforts are working, year over year.
Annual donor growth rate is calculated by taking the total number of donors (not donations) from the most recent year ‘minus’ the total number of donors from the previous year, and then dividing the difference by the previous year’s total. Eg, if there were 860 donors in 2021 and 800 donors in 2020, the calculation would be (860-800) / 800 = 60/800 = .075. Multiply by 100 to get percent. A negative result indicates a decline in donors.
2. Donor Retention Rate
Tracking donor retention rates is imperative because existing donors are incredibly valuable. It costs far less to cultivate a relationship with existing donors than to acquire new ones. For nonprofit organizations, the majority of gifts come from existing repeating donors rather than from first-time donors. Donor retention KPIs will often run parallel to overall fundraising KPIs.
Calculating donor retention can be complex, depending on a variety of variables. For detailed information on accurately calculating donor retention, check out Omatic’s eBook on this very topic.
3. Fundraising ROI
Return on investment isn’t exclusive to the for-profit world. Nonprofits must also track the return on money spent to acquire donations. This metric will demonstrate how efficiently your investments in fundraising are working to achieve your fundraising goals.
Fundraising ROI is calculated using the ‘net’ revenue in the numerator. Taking the total amount raised for a particular year/period/campaign ‘minus’ the total amount spent to raise those funds in the same year/period/campaign provides net revenue. Then divide the net revenue by the amount spent. Eg, if you raised $860,000 and spent a total of $220,000, your ROI would be ($860,000 – $220,000) / $220,000 = $640,000 / $220,000 = 2.91. Multiply by 100 to get percent. Common fundraising ROI benchmarks are within one standard deviation of 300%
Fundraising ROI can be applied to specific fundraising programs or initiatives as well as to your organization’s development program as a whole. For example, if you want to find the ROI on your new donor acquisition program, use the new gift total raised (for a particular year or period) and the amount spent to raise those dollars as the variables in your calculation.
4. Cost per dollar raised (CPDR)
CPDR is one of the most fundamental fundraising metrics and can be described as the inverse of fundraising ROI. The goal is to understand the explicit efficiency of your fundraising activities, programs, and campaigns.
CPDR is calculated by dividing the amount spent on a fundraising initiative by the amount raised. If you spent $220,000 to raise $860,000, the CPDR would be $220,000 / $860,000 = .256. Multiply by 100 to get the amount in cents. In this case, the CPDR is 25.6 cents to raise a dollar.
5. Pledge Fulfillment Rate
There is always the possibility that a pledge-donor won’t follow through with their payment. Tracking pledge fulfillment rates can offer a better understanding of why a pledge-donor doesn’t give or what tactics can ensure they fulfill their pledge commitment.
Pledge fulfillment rate is calculated by first totaling all of the pledges made for a specific period or campaign, then calculating all the payments against those pledges. Divide the payments by the total pledged amount, then multiply by 100 to get percent. For example, if a certain campaign raised $200,000 in pledges and at the end of that campaign, you received $176,000 in payments on those pledges, the fulfillment rate for that campaign would be ($176,000 / $200,000) = .88 or 88%.
6. Donor Lifetime Value
Donor lifetime value aims to quantify how much funding you can expect to receive from a donor over the course of their relationship with an organization. It can be used to both predict longer-term revenue and set goals for improving retention rates. Research has shown a number of ways to calculate Donor Lifetime Value, but here is a relatively simple calculation for new donors:
- Start with the average new donor’s donation amount for the most recent year (which might include multiple gifts).
- Calculate your new donor attrition rate for the most recent year. Attrition is 100% ‘minus’ your new donor retention rate (eg, 100% – 64% retention rate, results in a 36% donor attrition rate). You could also use a 3-year or a 5-year average new donor attrition rate.
- Divide the average annual donation about by the attrition rate. If your new donor average gift amount is $100, then $100 / .36 would result in an average lifetime value of $278 for new donors. The implication here is that a new donor can expect to donate $278 over the lifetime of their relationship with the organization.
Remember that average annual donation and attrition rates will change year over year, hopefully improving each year; so Donor Lifetime Value may change each year as well.
The fundraising performance metrics listed above are among several that you can use to help identify and evaluate new strategies. It’s important to remember that every nonprofit will have its own methods of defining success, and so will apply different metrics to different initiatives. Your organization has loads of data that can assist you in making important decisions regarding your fundraising strategies. Once you identify the metrics that are most appropriate for you, plug that data in and start investigating the outcomes.
Where to Start Your Analysis
A lot of what you want to know is in the data associated with your donors. By analyzing your donor data, you will discover who are your most valuable, loyal, and recurring donors. Such analysis will shed some light on how your organization can improve fundraising by further segmenting these donors into the most relevant categories.
Here are just a few examples of how to maximize the value of your donor data:
- Identifying donors who consistently give the same amount every year, and how can you engage or incent them differently to give more
- Re-engaging donors who were active in the past, but who have lapsed in their giving or become relationally disconnected in recent years
- Using specific giving history data to customize pledge reminder letters for individual donors
- Using demographic data (income, education level, age, etc.) to identify which groups should be the focus of outreach efforts or specific campaigns
By analyzing the complete archive of donor data, nonprofits can implement efforts to deepen relationships with active, current, and lapsed donors. Using the fundraising performance metrics discussed earlier can help point you in the best direction to re-engage former constituents as well as apply lessons learned when acquiring and retaining new donors.
Applying Insights to New Efforts
We’ve established that donor data analysis is imperative, but it can be a complicated, manual affair if your data doesn’t reside within a single donor database. Many nonprofits house their donor data across multiple systems; in a recent study. MIP Fund Accounting found that 75% of nonprofits use four or more tools to collect, manage, and store data.
Consider the case of Dexter Southfield School in Brookline, MA; their goal was to target school alumni to increase fundraising revenue. Once the school integrated its mountain of data from different sources, the team obtained a unified view of the donor and prospect data. Their analysis became more straightforward and they were able to discover new opportunities. For a single athletics initiative alone, the school raised roughly $12.6 million by targeting alumni hockey players and offering them an opportunity to purchase a seat in the new ice rink.
Beyond examining donor information, nonprofits should also look at fundraising campaign data to be more successful in future efforts. Start by finding the answers to questions about specific campaigns.
- Were our goals met?
- Why or why not?
The aim is to see how certain campaigns performed against several of the vital fundraising KPIs discussed above. Assessing these metrics together can drive new thinking about what works, how efficiently it works, and if experimentation is worth a try.
Fundraising Performance Metrics in Raiser’s Edge
There’s no debate regarding the value that fundraising performance metrics can have, but nonprofits must put their learnings into practice. In the process of planning to pivot away from an existing strategy or creating a new strategy from scratch, it can be difficult to know where to look for the data for calculating performance metrics.
As one of the best solutions for managing donor data, Blackbaud Raiser’s Edge and Raiser’s Edge NXT have several functions worth exploring for fundraising analysis.
Often overlooked within Raiser’s Edge are the Demographic and Statistical Reports. These allow users to filter by fields and columns and view a breakdown in each of those areas. For example, you could choose to view a given gift population by selecting the following:
- Constituent Code
- Constituent Solicitor
If you want more breadth, the same reporting function can assist in drilling down to compare and analyze key pieces of data for performance and goal creation. By selecting a field area, you can view:
- # of constituents
- # of donors
- # of gifts
- total given
- average given per donor
- percent of participation
- percent of total given
There will still need to be cogent analysis conducted by a human analyst to understand these calculations along with cause and effect. Nevertheless, these functions provide some facile arithmetic shortcuts you can employ to save time.
No matter how granular you want to get or what fundraising performance metrics matter most to your organization, data collection and analysis should be extremely high priorities. If you’re going to test new strategies to help guarantee the success of future fundraising efforts, data comprise the ‘raw materials’ you need to drive your organization to exceed its goals.
One of the first steps is to take a page from Dexter Southfield School’s playbook. By establishing a strategy to integrate all your data from different sources scattered across your organization, and by employing the most effective and efficient integration platform (to support ongoing data exchange), your main donor database software system will always be current and complete. That means that your fundraising performance metrics will be the most valid, and the data you use for fundraising activities informed by those metrics will be the most useful.
Emphasizing the value of your nonprofit’s fundraising data is the first step in creating a formal process for analysis. By examining those fundraising performance metrics, your organization will have a foundation on which to build new campaign strategies. Doing so won’t just raise more money for your organization; with data-driven analysis and decision-making, you have a real opportunity to create lasting, meaningful relationships with donors and constituents.
Stu Manewith, CFRE contributed to the 2022 Update version of this blog post.