Fundraising Analytics for Beginners
If you are a Development Director, looking for what you should be tracking can feel overwhelming. For some, it can even cause panic! These analytics can feel like critiques of you, rather than helpful tools to benefit the organization. If you’re feeling this way, take a deep breath. You can achieve clarity in what you should be tracking, and it can actually bring more freedom to you in your development position.
If you are the CEO or Executive Director of an organization looking to better analyze your development efforts, it’s important to let your Development Director be part of this conversation! It’s much more likely to be something they can buy into and implement well if they are part of the process.
Analytics can cause so much fear because it can feel like it will expose any failures for all to see. But the key here is that analytics is not the pathway to expose or even avoid failure. In my favorite TED Talk by Dan Pallotta, he states “The fear of failure kills innovation.” Nonprofits are often not allowed to fail, and that will stunt growth and creativity. It is important for us to measure our development efforts because that is how we can chart our growth over time, as well as develop and strengthen our strategy. It allows us to figure out what works and what doesn’t work, and what could work better if we make adjustments.
Fundraising Analytics for Beginners
The key to begin measuring your fundraising efforts is to start small and build. There are a million things you could measure, but it’s important to start by measuring the most important items. If you try to take on everything at once, you’ll end up scattered, burnt out, and forget about measuring anything development related altogether. The two areas I would recommend any nonprofit begin measuring to get started are:
1. Return on Investment (ROI) on campaigns and events
2. Donor retention rate
Today we are going to talk about ROI
Return on Investment or ROI regarding fundraising appeals and events is a great place to start your journey with fundraising analytics. I believe that when you are looking at the effectiveness of a campaign or event you need to evaluate both quantitative measures (numbers – can be counted or measured) and qualitative measures (more descriptive, difficult to measure using numbers). A basic outline of what you could measure is as follows:
A) Income Generated
B) Expenses Paid
C) Staff Hours
D) Net Income (A-(B+C))
E) ROI ((Total raised – Total Spent or Net Income) / Total Spent) x 100
A) Event Raised $100K
B) Venue, décor, etc. cost $25K
C) Staff paid for 80 hours at $35/hr plus taxes = ~ $3K
D) Net income is $100K - ($25K + $3K) = $72K
E) ROI would be calculated ($72K / $28K) X 100 = 257% ROI
Now what you can do is come up with a grading scale. First you have to decide what level of ROI is needed for a campaign or event to be strong. According to Charity Watch, a good expense ratio to aim for is 35 percent or less. That means that if you raise $100, you should only be spending $35 or less. This would equal an ROI of 185%
Measuring qualitative measures is just as valuable as quantitative measures. We don’t just want to raise money, we want people to buy in. We want supporters. We need fans. We need people that are going to be so excited about what we’re doing that they can’t stop sharing the good news. So don’t forget to consider some of the qualitative results of campaigns and events as well.
A) Feedback from donors and other stakeholders – what did people say about the campaign or event? Were donors through the roof, raving about how impactful the message was? Even if your event didn’t make a huge net return its first year, that type of emotional impact and connection to the program is still a win. Now, that doesn’t mean you should lose a ridiculous amount of money on an event to keep people entertained. It means that you can’t just kill something because you don’t immediately see the financial return. There are intangibles that you need to pay attention to. People need to buy in before they support financially, and that doesn’t always happen immediately. You can also turn this into a somewhat quantitative measure by issuing a survey.
B) Who attended – if you got a good attendance at an event, and some key people you want to get involved came. GREAT! Write it down. Track it. You can also turn this into a quantitative measure by making a goal for each event about the number of key people you wanted to attend and the percentage that came.
Second, what designates a weak or strong qualitative return? This is going to be a bit subjective and you’re going to have to decide where you fall on the scale.
Now you can use a matrix to determine the success of your event. Let’s say that for an event or campaign to continue next year, it has to land in one of the two categories, such as A or B.
Now that you’ve run your event or campaign through the grading scale, it’s time to have a discussion. Get with your Development Committee. This is also where the relationship between finance and development matters. I recommend including your CFO or finance person in this discussion. It’s important for finance to hear the whole discussion, not just the numbers. Make sure everyone is on the same page about if this is something we continue.
Ask what worked, what didn’t work, what you would change and what you wouldn’t change for next year. For example, maybe you want to keep your event because people enjoyed it, but you need to cut down on expenses in some areas. Or perhaps you need to call on some volunteers to assist so that you can cut down on the staff hours that go into it. Maybe it went great, but you have some ideas on how to raise even more funds. If you skip this part, you likely won’t improve and scale.
It’s important for the right people to be involved in this process of evaluation - and this includes your board.
Here’s one reason why:
Everyone has a pet project (or a pet fundraiser). People will often want organizations to take on events because their friend of a friend wants to host something or thinks it would be a great idea. Remember - just like the importance of your finance person seeing the whole picture - it’s important for the board to see the whole picture. If your event really doesn’t have the return you’re looking for, and it took way more man hours to implement than your organization can sustain, then it’s time to have a crucial conversation. The CEO needs to be willing to stand in the gap here. What makes this discussion a lot easier if on the front end the board agrees to your measuring system (that way it’s not personal). It’s not that we didn’t like your fundraising idea, it’s that we graded it, and unfortunately it isn’t sustainable.
People often have new and seemingly great ideas for events. However, what isn’t always seen or acknowledged is the back end management behind them.
One of the number one ways to drive away your Development Director is to overload them with events they can’t get rid of that aren't producing the necessary return.
We need to get EVERYONE on the same page and pursuing our highest value opportunities. Let me reiterate that this doesn’t mean we don’t take risks, and it doesn’t mean we always nix something that doesn’t perform in its first year. But we do need to allow our Development Directors to take the lead on this conversation and giving honest feedback about if a campaign or event is worth keeping.
And Remember - You want what you find in your fundraising analytics to drive
For the organization
Fundraising analytics can feel intimidating. Development Directors often feel unfairly scrutinized and solely responsible for raising all of the funds for an organization. This conversation needs to go beyond just measuring your fundraiser, but helping your organization as a whole grow and mature. Good luck on your fundraising analytic endeavors!