When a company is trying to realize more revenues from sales, there are two factors that affect the outcome: price and volume. To make more money, either more people will buy the product, or people will pay more for the product, or some combination of the two. The same principle applies in fundraising: either more people will give to your nonprofit or people will give at higher amounts, or some combination of the two. There are only two variables: amount of donations and number of donors. We must look at both the amount of dollars raised and the number of donors giving in order to maximally influence our results. The goal, of course, is to have the highest amount of donations from the greatest number of donors.
Measuring Dollars Raised
Total dollars raised is probably the most common way people measure fundraising success. How often have you been asked, “How much money did the golf tournament bring in?” or “How much did the spring appeal raise?” How do you answer that question? There are two ways.
Most often when people have ideas about what fundraising activities they want to try in the next year, they are basing the amount of dollars that can be raised using a gross income figure. You hear something like, “ABC organization raised $100,000 through their apple festival. Why don’t we do one too?” Gross income is total revenues raised. Board and development committee volunteers are often lured by these numbers. Fundraisers often use this number when they want to prove their worth, like in job interviews and performance evaluations. The numbers can be impressive when you use gross income as the basis for your fundraising success. But gross income does not give the whole picture. We all have met fundraisers who raise a lot of gross income, but their organizations still lose money.
To really know if you raised money or not, you need to take into account the costs to raise the money and talk about net income. Net income is total revenues minus costs. Net income shows a more accurate picture of the amount of dollars raised. I once interacted with an organization that raised $1 million every year through their gala. Woohoo, right? No. It actually cost them $1.25 million to put on the affair. That means they lost $250,000 on the event. Every year! No wonder the organization was in financial trouble. I can give example after example of this occurring. If you want to start delving into why your fundraising program raises so much money but you are still having financial problems, look at your costs to raise the money. Look at your net income.
When you look at the dollars raised, you want to look at how your fundraising program did overall within a year as well as how much each fundraising channel brought in. That way, you can compare the financial performance of each activity to each other and start to get a feel for what is working for you and what is not. There are other factors involved in creating a fundraising plan and schedule of activities, and you shouldn’t make decisions just based on net income. For example, you may be trying to raise community awareness or provide a venue where your donors can network with community influencers. If this is the case, you want to look at whether the activity meets those other goals too.
Measuring Donations Garnered
To really plan on growing your fundraising income, not only do you need to look at amount of money raised, you need to look at the number of people giving. To raise more money, you either need to get your current donors to give more or you need more donors to give, or some combination of the two. There are no other ways to influence your giving totals. So, don’t only look at the amount of money raised and the amount of money raised per channel. Also look at how many people are giving overall and through what activity. This will give you some idea of what fundraising activities are the most popular, a preliminary indication of where your potential for attracting new donors is.
Getting your donors to give one time is not the whole story, though. You want them to give that second, third, and ongoing gift too. We talked about donor retention in Donor Retention: Getting People to Give Again and Again.
Data Collection, Recordkeeping, and Reporting
As opposed to keeping all your data in an Excel file, to store data and generate reports, I recommend you invest in a good fundraising or donor management software. There are many useful reports you can pull with a good fundraising software program. One low-cost option I have used is Eleo. For more sophisticated database management, many fundraising professionals we know invest in DonorPerfect. E-Tapestry is another popular sophisticated software. There are tons of others out there with a wide range of prices. Whatever software you do choose, make sure it has all the functionality you need along with good donor tracking capabilities. You want to be able to know how many years a donor has been giving and in what amounts. Have they increased or decreased their giving? Or did they stop giving suddenly? You need to know how you’re doing in donor relations to be able to design the interventions you need to get the best results. You want a donor software package that not only meets your needs now but will also suit you as your fundraising program grows. Get demos from several software companies and talk to other users to find the right program for you. And check into hidden costs, such as how much will it cost to convert your current data. Also look into whether there are any specific modules you might need, such as membership, event management, or grant management, that have extra costs.
When you run your annual and year-to-date donor and donation reports, at the very least compare this year’s this year’s budgeted goals to this year’s actual goal performance and this year’s actual performance to last year’s actual performance. You want to examine year-to-date comparisons so that you can see how you are progressing toward your goal and make adjustments as necessary. You can go back even further, say five years, to see long-term trends. Long-term trends help you see your rate of growth over the years. Use the average rate of growth over the years to forecast your upcoming year’s rate of growth. The best predictor of future performance is past results.
Bringing It Together
Net income is the only indicator of true funds raised, not gross income. Look at revenues raised by fundraising activity as well total raised annually. Track number of donors by channel to get a preliminary indication of where to pursue new donors. Invest in a good donor management software system.
How are your activities doing net versus gross income? What is your most lucrative fundraising channel? What channel realizes the most donors? Leave a comment and let me know.