These are good times to be a fundraiser if you are a data junkie. More and more service providers are issuing studies based on their client base, and the accessibility of online survey tools makes it possible for numerous reports to be developed on trends in our profession. Understanding data is critical for managing a cost-effective fundraising program, so having access to so many reports can be a windfall—but it can also be overwhelming.
While I am a big proponent of reading everything you can in order to stay current in the field and trigger new ideas and approaches, I know that the challenge with benchmarking data is that sometimes it’s just too far removed from your reality to be helpful. For example, a study of the fundraising investment habits of nonprofits raising multiple millions of dollars may be difficult to translate to the nonprofit raising less than $100,000. This doesn’t mean we can’t learn from these reports, but we have to be careful to consider the context and adapt as needed to our own reality.
Benchmarking is defined as evaluating something compared to a standard. In other words, you can benchmark against an industry standard, the standard of organizations similar to your own or even simply against yourself. And for smaller organizations, that latter benchmarking initially may be the best use of limited time.
English author Terry Pratchett expanded on the old proverb about the importance of knowing where you’ve been to inform where you’re going when he said:
“If you do not know where you come from, you don’t know where you are, and if you don’t know where you are, you don’t know where you’re going. And if you don’t know where you’re going, you’re probably going wrong.”
In my experience, this is certainly true in fundraising. I confess there have been times when I was living out the humorous quote, “I don’t know where I’m going, but I’m making good time!”
So, what’s a good way to approach the fantastic (and seemingly never-ending) supply of reports that provide benchmarks for fundraising? Here are my suggestions.
1. Read them with an eye for learning what typical trends are in the industry among organizations that may or may not be similar to yours. This is more than a “misery loves company” exercise. You will be better prepared for the challenges you may not yet be experiencing, but more importantly, you’ll get ideas on what you should measure.
2. Measure what matters. In my opinion, too often the problem with statistics is that there are simply too many of them. We press a button and pages and pages of reports come out, but we’re too busy to really pay attention to their messages to us. Instead of setting yourself up for perpetually being behind, commit to monitoring some key statistics that will help you rather quickly determine the health of your fundraising program and where you can improve. At a very minimum, look at these key measurements:
• Overall attrition (and conversely, retention) rate. It’s hard to know how to respond to a problem if you don’t know what the problem is. Industry-wide, the attrition rate is about 46 percent, according to the Fundraising Effectiveness Project. That’s good to know, but it’s critical to know your organization’s retention rate. That’s the first step to strategically discovering ways to improve retention.
• Net annual growth in the number of active donors. You’re going to lose donors organically through death, disinterest, change in financial circumstances, etc. Replacing those donors is necessary for maintaining your current position; increasing your total number of donors is essential for growth.
• Cost per acquired donor and second gift rate by source. It’s great to acquire new donors, but you have to do it in a way that is both cost-effective and beneficial in the long-term. Just because an activity brings in 500 new donors doesn’t make it a success if your cost to acquire those 500 names was unreasonable and only a handful ever give again. Names are not your goal; loyal donors are.
• Lifetime (or long-term) donor value by source. Over a period of time—lifetime if your numbers are accurate, or as many years as you can confidently trust your data—what sources produce donors who are the most valuable to your organization? This is an important measurement to make sure you are investing in truly productive fundraising programs, not simply “what you’ve always done” or activities your organization likes, but can’t really make profitable.
• Net value of each individual activity. When you are allocating your budget, you should invest more in activities that have the highest net value while testing smaller amounts in potential “rising stars.” Be sure to take into consideration staff costs. An activity that raises a lot of money, but consumes inordinate amounts of human resources may not be the best investment (or you may need to brainstorm ways to make it less labor-intensive or scale it back). It’s easy to fall in love with an activity or gravitate to something because “everyone else is doing it.” But strong fundraising programs are led by people with an eye always on the bottom line.
3. Set strategy based on what is working for your organization and where you see potential based on the experiences of others. If you know that overall retention industry-wide is 46 percent and that your retention is 40 percent, for example, set a goal to move your retention to the industry norm. Then strategically plan for how you are going to get there over a reasonable amount of time. Continually measure your progress against your goal. The only true failure is to not invest in strategic efforts to improve a benchmark. You can’t force your donors to do what you want, but you also can’t expect them to change their behavior if you aren’t testing new strategies to encourage them to do so.
Even if data isn’t your passion, it’s becoming increasingly critical for a fundraising program that is cost-effective for the long haul. But this old dog reminds you to not allow yourself to get so focused on the benchmark reports of others that you neglect establishing your own benchmarks for your organization and then using them to set strategies to stimulate positive change.
Originally published in NonProfit Pro.