Robin L. Cabral, MA, CFREDevelopment Consulting Solutions

Calculating Your Key Fundraising Metrics

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Inside Look...This guide will cover the following topics:

Understanding the Importance of Fundraising Cost Effectiveness

Where to Begin?

Developing Your Measurement Tools

Analyzing Strategies

Using Data for Revenue Forecasting

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Welcome!

Evaluating the effectiveness of an organization’s fundraising

program may, quite simply, be one of the most overlooked

tasks in fundraising. But, it is extremely important in order

to improve your development efforts and, thereby, the long-term

health of your development program.

There are common, measurement tools and resources available for

the nonprofit industry. If this evaluation process is completed and

the tools are utilized correctly, it can help transform your funding

program. The end result will be a greater focus with your develop-

ment efforts and higher returns.

This resource emphasizes the importance of fundraising cost effec-

tiveness, provides clear direction on where to start, and outlines the

detailed process for how to properly measure your effectiveness.

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01.Understanding the Importance of Fundraising Cost Effectiveness

In order to get buy-in across the organization so all parties are vested, it is

crucial to recognize and understand why it is so important for the fundrais-

ing process to be cost effective. Nonprofits have to answer to the public.

Appreciating this fact and gaining the knowledge to measure your effective-

ness, as well as how to compare your organization to the industry, will mean

understanding the implications for all of this on your fundraising process.

There are expectations on an organization to manage their funds efficiently.

Donors want to know that their contributions are being used appropriately

and wisely, thereby having an impact. They want their generosity to make

a difference. Many studies show that prospects will give, and even increase

their giving, if they have confirmation that their gifts are being managed

properly. Also, it is believed that the decision to give is influenced by the rep-

utation of an organization. In other words, the word of mouth from other

donors, those being served, volunteers, etc. are a major influence.

Ensuring that the proper analysis is in place helps to provide security to

donors and prospects in the form of measurable results and confidence in

the organization’s ability to manage effectively. Therefore, measurement tools

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demonstrate a good investment of resources for your organization. And, in

turn, the outcome provides evidence of a better return on the investment of

your donors

Be careful of the overhead myth though! There is a misconception that low

fundraising costs means that the organization is being managed efficiently

and well. That is not necessarily true. The end goal is to have a vibrant and

impactful development fund that is accomplished cost-effectively.

It is also helpful to understand where your organization stands in relation

to the industry. While there are no national industry standards, there have

been some studies of individual solicitation methods. It was concluded that

each method performs at different levels of effectiveness and efficiency. For

example, Donor Acquisition would be expected to perform differently than

Retention. The same goes for Major Gifts vs. Annual Giving. So, these various

solicitation methods should be treated accordingly with regard to evaluating

results.

Studies found, though, that there is a general consensus as to what is a reason-

able cost for fundraising activities. After three years of operation, bottom line cost-benefit ratios for a mature fundraising development program should be as follows:

• Annual Fund - $.40 per $1 raised

• Major Gifts - $.20 per $1 raised

• Benefit events - $.50 per $1 raised

All nonprofits are not the same

though, so it is not reasonable

to expect the same fundraising

abilities for your organization as

for all others. Each nonprofit is

unique with differences in mission

BE CAREFUL!

There is a misconception that low fundraising costs means that the organization is being managed efficiently and well. That is not

necessarily true. The end goal is to have a vibrant and impactful

development fund that is accomplished cost-effectively.

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and vision, history, the programs and services they offer, their donor base and

level of reliance on private versus public monies, their people (leadership, staff,

volunteers, etc.), their strategies, cost tracking methods, solicitation methods,

or whether the organization is new to development or has an established,

mature process.

It is imperative that you assess the priorities of your organization before starting this process. You’ll want to take a look at the culture and structure of

your organization. Consider the nature of what you do. How do you currently

manage the process of day-to-day operations, as well as evaluating your fund-

raising results? Do you have a process in place? What type of benchmarks

do you use to compare any analysis, if this is completed. How involved is

senior management in the process? Is the CFO preparing the fundraising

budget? Is the Board involved? Specifically, consider what output analysis is

being conducted, if any. (More to come below on specific analysis and tools

– see section on Developing Your Measurement Tools.) Finally, what type of

reporting does your organization have in place to communicate results?

CONSIDER THE FOLLOWING:

• Mission, vision, present and future plans

• Relevancy and quality of programs and services

• Ability to manage operations and financial affairs

• Establish detailed reports on costs and results of EACH solicitation method

• Measure annual performance

• Compare performance across years

• Examine amount of time expended and results achieved

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A thorough calculation of your fundraising effectiveness begins with some

critical, initial steps. It’s necessary to develop and establish certain key plans,

budgets, and reports, and specific analysis must also be conducted. Finally,

once established, the reports and processes must be reviewed periodically -

annually, bi-annually, and monthly.

INITIAL SET-UP (AND ANNUALLY, THEREAFTER*):

• Conduct an internal audit of your fundraising development process.

• Determine the strengths and weaknesses of your current program.

• Review past results.

• Develop an annual fundraising plan (initial set-up*).

• Develop an annual budget (initial set-up*).

– Review and create a budget for each solicitation activity.

– Include direct, indirect and overhead costs in each of these budgets.

• Develop a baseline (if doesn’t already exist).

02. Where to Begin?

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REVIEW BI-ANNUALLY:

• *Once established, review your development plan and budget on a bi-annual

basis.

REVIEW MONTHLY:

Review certain, critical gift metrics on a monthly basis. These would include:

• Number of donors

• Solicitation activities and results (e.g., direct mail, membership, events, etc.)

• Gift income

– Purpose of gifts (e.g., unrestricted, temporarily restricted, and permanently

restricted)

– Sources of gifts (e.g., trustees, corporations, etc.)

• Average gift size

Getting your organization set-up for the process is the important first step in

assessing the health of your program. It is vital that management, your staff,

Board, volunteers and all necessary parties are vested in this process.

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So, you understand that costs should be managed well to be effective.

Metrics help to highlight opportunities for increased productivity and prof-

itability. These calculated results can define performance and identify areas

of improvement. Reviewing and analyzing these results can help an orga-

nization to then design a program that will help them to achieve unrealized

potential.

There is also a need for nonprofits to justify their budgets for their fundraising

profit center. This means proving efficiency and effectiveness. It also involves

forecasting how much more money can be raised with investment into the

program.

So, with this in mind, it is necessary to recognize the measurements that need

to be assessed. But, remember! Comparative analysis between nonprofits

is not fair. Therefore, performance measurements should be tailored to your

nonprofit.

03. Developing Your Measurement Tools

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Before you begin determining the

metrics that make sense for your

organization, make sure you have

a good handle on your expenses.

Understand your financials. Know

your expense categories. You’ll need

these numbers before proceed-

ing. The main expense categories

are Direct Costs, Indirect Costs and

Overhead Costs. Some examples of

these would include:

DIRECT COSTS:

• Printing

• Postage

• Entertainment and Dining Fees

• Travel Expenses

• Telephone Expenses

• Office Equipment

• Donor Recognition

INDIRECT COSTS:

• Staff Salaries and Benefits

• Administrative Support

• Technology Fees

• Employee Development

• Gift Processing

• Newsletters and Brochures

OVERHEAD COSTS:

• Utilities

• Insurance

• Mortgage or Rent

You’ll want to be aware of the comprehensive list of metrics available, but

then you’ll need to identify and develop the performance indicator tools

relevant for your nonprofit. Performance metrics range from basic to more

advanced measurements. Following is a high-level, complete listing of the

metrics broken down into three main groups:

UNDERSTAND YOUR FINANCES

Before you begin determining the metrics that make sense for your organization, make sure you have a good handle on your expenses. Understand your financials. You’ll

need these numbers before proceeding. The main expense

categories are Direct Costs, Indirect Costs and Overhead Costs.

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GROUP A: BASIC UNITS OF MEASUREMENT

• Mailed Pieces (#)

• Gifts Received (#)

• Event Participants (#)

• Gross Income Received ($)

• Campaign or Activity Expenses ($)

GROUP B: COMMON UNITS OF MEASUREMENT

• Campaign Participation (%):

(Calculation: # of Participants

Invited/Total Solicitations)

• Donor Upgrades (%)

• Frequency of Donor Upgrades (%)

• Donors with Decreased Giving (#)

• Donors Giving Remained the

Same (%)

• Board Participation (%)

• Volunteer Participation (%)

• Average Gift Size ($): (Calculation:

Revenue/# of Participants)

• Multiple Gifts Annually (#)

• Net Income ($): (Calculation:

Gross Income – Expenses)

• Average Cost Per Gift ($):

(Calculation: Expenses/total # of

Donor)

• Cost of Fundraising ($):

[Calculation: Expenses/Revenue]

• Rate of Return (%): [Calculation:

((Net Income/Expenses)*100)]

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GROUP C: ADVANCED UNITS OF MEASUREMENT

• Donor Retention Rate (%)

• Rate of Transition (%):

[Calculation: First-time Donor to

Repeat/Regular Donor]

• Percent of Donors Who Increase

Gift Size (%)

• Gift size ($)

• Cost Per Donor

• Donor Value ($)

• Lifetime Value (Long-term Donor

Value) ($)

• Reactivation of Lapsed Donors (#)

• Online Gift Percentage (%)

• Email Conversion Rate (%)

• Email Opt-Out Rate (%)

• Social media conversions (%)

• Relationship Building and

Satisfaction*

• Board Relationship Nurturing*

• Staff Performance*

• Average MAJOR Gift Size*

• Frequency of Donor Contact*

• Asks*

• Conversion Rate*

*See note below regarding Other

Advanced Indicators.

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Now, following defines and provides more explanation about the above units of data measurements.

GROUP A: BASIC PER-FORMANCE INDICATORS

The “Basic” units of data measure-

ment are:

• Mailed Pieces (#) = The number

of mailed items sent to select

database groups or the number of

direct requests.

• Gifts Received (#) = The number

of gifts received by mailing or the

number of donors responding

with gifts.

• Event Participants (#): The

number of audience members in

attendance.

• Gross Income Received ($): The

amount of income received,

excluding expenses or the value of

gifts and contributions received.

• Campaign or Activity Expenses ($):

The cost of expenses associated

with fundraising mailing,

including copywriting, design,

mailing services and postage or

any other associated fundraising

budget costs that were spent.

GROUP B: COMMON PERFORMANCE INDICATORS

Units of data measurement used

more commonly across nonprofits

are:

• Campaign Participation (%) = The

number of replies received as a

percentage of all of those invited

to participate.

• Donor Upgrades (%)

• Frequency of Donor Upgrades (%)

• Donors with Decreased Giving (#)

• Donors giving remained the

same (%)

• Board Participation (%)

• Volunteer Participation (%)

• Average Gift Size ($): (Calculation:

Revenue/# of Participants)

• Multiple Gifts Annually (#)

• Net Income ($): (Calculation: Gross

Income – Expenses)

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• Average Cost Per Gift ($): (Calculation: Expenses/Total # of Donors)

• Cost of Fundraising ($): The bottom-line measure of overall profitability and

productivity (Calculation: Expenses/Revenue)

• Rate of Return (%): Direct relationship between investment and profit.

[Calculation: ((Net Income/Expenses)*100)] Note: Aim for return to increase

annually.

NOTE:

This is the most neglected measurement, as the focus is usually on gross revenue. However, net income demonstrates true success after

you calculate expenses including staffing time.

GROUP C: ADVANCED PERFORMANCE INDICATORS

This group includes four major categories of indicators. These are: Donor

Loyalty, Donor Acquisition, Online Gifts and a catch-all category for all other

advanced indicators – Other Advanced Indicators.

DONOR LOYALTY:

• Donor Retention Rate (%)

• Rate of Transition (%)

• Percent of Donors Who Increase

Gift Size (%)

• Gift size ($)

DONOR ACQUISITION:

• Cost Per Donor ($) = The cost your

development program pays to

convince a donor prospect or non-

donor to become a donor.

• Donor Value ($): The amount

of money each of the individual

donors in your database has

donated to the organization.

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OTHER ADVANCED INDICATORS*:

• Relationship Building and

Satisfaction

• Board Relationship Nurturing

• Staff Performance

• Average MAJOR Gift Size = The

average giving capacity in terms of

dollars of top donors.

• Frequency of Donor Contact

• Asks = The number of asks made in

a given period.

• Conversion Rate = This action could

be many things, ranging from

attending an event to responding

to a direct mail letter.

• Lifetime Value (Long-term Donor Value) ($) = The total net

contribution a donor will give over

his or her lifetime (i.e., how much

a donor might be worth to the

organization over time).

• Reactivation of Lapsed Donors (#): Donors who have given at least

once in the past and give again

after lapsing.

ONLINE GIFTS:

• Online Gift Percentage (%)

• Email Conversion Rate (%)

• Email Opt-Out Rate (%)

• Social media conversions (%)

*Some of these measurements are more ambiguous and have less defined

calculations. Review and discussion would likely need to accompany the

analysis of these factors.

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SAMPLE APPEALS COMPARISON REPORT

This appeals summary explanation sheet is for the board and staff to determine the reasonable costs of the fund development activities as well as determine which methods are most cost-effective and efficient for the organization.

This summary is a proven methodology for setting & evaluating performance standards.

LEGEND

# of pieces - # of pieces mailed to select group of the database or number of direct requests

# of gifts - # of gifts received by mailing or number of donors responding with gifts

Gross income – Income without expenses calculated or values o f gifts and contributions received

Expenses – mailing expenses including copywriting, design, postage or amount of fundraising budget spent

Net income – Expenses minus gross income

Participation rate – # of participants divided by total solicitations

Average gift – Divide revenue received by participants

Average cost per gift – Divide expenses by participants

Cost of fundraising – Expenses divided by revenue

Net ROI – Net income divided by expenses; multiplied by 100 for percentage rate of return

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04. Analyzing Strategies

Once you’ve determined your metrics and calculated the results, the next

step is to analyze the data. At the same time, you are also analyzing the

existing strategies of your organization and the solicitation activities that are

conducted.

Reasonable cost guidelines for solicitation activity are*:

• Direct Mail (Acquisition): $1.00 to $1.25

• Direct Mail (Renewal): $0.20 to $0.25

• Special Events: $0.50

• Volunteer-led Personal Solicitation: $0.10 to $0.20

• Corporation and Foundation Grants: $0.20

• Capital Campaigns/ Major Gifts: $0.05 to $0.10

• Planned Giving $0.20 to $0.30

*All costs are per $1.00 raised.

Excerpted from Fundraising Responsibilities of Nonprofit Boards by James M. Greenfield, published in 2002.

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Individual analysis should consider…

ANNUAL FUND

• What does an organization do with its newfound friends?

• Has there been an upgrading of donors through the investment of time and

attention?

MEMBERSHIP

• How many prior members renewed? What percentage?

• What was the average membership gift amount?

• How many members increased or upgraded to a higher level?

• How many new members were recruited?

• How many new members were added to each membership level?

• What was the average gift amount of the new members?

• How many members failed to renew?

• What were the total costs of the membership drive and the cost of fundraising

compared with dues received?

• What changes are needed for the next drive?

Each component of the program should also be analyzed. If the reasonable

cost guidelines are met, then consider the strategy a keeper. If NOT, then

evaluate why. Don’t eliminate an activity solely on these guidelines, especially

if you have other “goals” in mind for a particular strategy. But, recognize this

during the planning process as you modify your plan.

THE MAJOR COMPONENTS INCLUDE THE FOLLOWING:

• Annual Fund

• Membership

• Telephone

• Major Gifts

• Special Events

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MAJOR GIFTS

• Analyze basic details

– Number of donors

– Gift amount

– Average gift size

– Gift upgrades

• How many donors were not visited?

• How many prospective donors did

not give?

SPECIAL EVENTS

• Count the number of people

attending.

• Determine who attended.

• Determine the effectiveness of each

strategy and its execution.

• How many guests attended and

then became donors?

TELEPHONE

• Compare telephone results with other Annual Giving performance.

– Determine which was more successful.

– Demonstrate a level of effective telephone contact for prior donor renewals/

upgrades.

• Compare the letter-call-letter sequence with a letter-only or phone-only

method.

– Study results from prior donors and lapsed donors (where telephone often

works best).

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SOLICITATION ACTIVITY REASONABLE COST GUIDELINES

• Direct mail (acquisition): $1.00 to $1.25 per $1.00 raised

• Direct mail (renewal): $0.20 to $0.25 per $1.00 raised

• Special events: $0.50 per $1.00 raised

• Volunteer-led personal solicitation: $0.10 to $0.20 per $1.00 raised

• Corporation and Foundation Grants: $0.20 per $1.00 raised

• Capital campaigns/ Major Gifts: $0.05 to $0.10 per $1.00 raised

• Planned Giving: $0.20 to $0.30 per $1.00 raised

It is also useful to analyze the entire program. Complete a collective analysis of

the fund development program. Three years of data analysis is more telling than

just one year. Longer-term comparisons, such as ten year comparisons, provide

substantial data. Results should be expected to increase year over year. You

should see improvements in the cost of fundraising and the return percentages.

Be sure to compare apples to apples, and figure in events such as large capital

campaigns. Finally, analyze performance against budget projections.

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Adequate details are now available to predict results for each solicitation, espe-

cially if you have three or more years of data. So, you can now make invest-

ment decisions regarding how to best invest your fundraising budget. You’ll

want to invest in programs with a high expected rate of return and net income

that more than justify the decision to commit the same, or increased, budget

resources to solicitation activities.

WHERE TO INVEST?

Choose solicitation activities for which there is, has been or expects to be

potential growth and where there is anticipated net income potential to be

realized. Ideally, you’ll want activities that have proven strategic development

in numbers of renewed and upgraded donors, acquisition long-term value,

and where acquisition and retention go together. A strategy for which the

organization considers the need a priority and there will be a pressure for

cash is significant. Consider your people resources here as well. Solicitation

activities for which there is/has been/expects to be an improving quality and

personalization of your development office and for which the present staff has

proven capable is beneficial.

05. Using Data for Revenue Forecasting

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There are certain variables, specific to your organization, that need to be taken

into account as well. Consider the following questions:

• Does your organization have changing institutional priorities?

• Consider the participants - donors, volunteers, staff, etc. Do you expect any

changes in the number of people working for your cause?

• Are there external conditions, such as the economic climate, that you

anticipate possibly changing and that would be outside of your control?

• Does your organization face competition from related nonprofits that may

impact its ability to fundraise?

All of these things will impact your strategic decisions.

SAMPLE GIVING REPORT

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Conclusion

The above provides you with some concrete details on how to evaluate

the health of your development program and calculate its effective-

ness. Establishing a baseline, and then developing measurement tools,

allows you to analyze strategy and predict revenue reliably. I hope that you

will find this to be a valuable resource in getting started with this process.

This is one of the most forgotten, yet extremely important, tasks in fundrais-

ing. Use the resources laid out here to leverage these tools to get started and

ensure a successful and effective development program for your organization.

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Robin L. Cabral, MA, CFRE and Principal of Development Consult-ing Solutions, is the one and only

outsourced development professional with close to twenty-five years’ experience providing value-added interim develop-ment staffing and consulting services with razor-sharp monthly result objectives and benchmarked deliverables. She has raised millions of dollars for small to mid-sized organizations.

She works with small to mid-sized non-profits that want to position themselves to build capacity and generate MORE fundraising prospects, BETTER donor relationships, and BIGGER fundraising dollars.

Meet the Author

Thanks for Reading! For more from Robin L. Cabral, MA, CFRE, follow

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