Key Fundraising Metrics Every Nonprofit Executive Director Should Know and Measure. Nonprofit MBA Podcast 2.6
Summary: Today, I am excited to be speaking with Robin Cabral from Development Consulting Solutions. Robin L. Cabral, MA, CFRE is the fundraising coach and consultant who provides value-added interim “hands-on” remote and coaching support with razor-sharp monthly result objectives and benchmarked deliverables.
Today’s topic: Key fundraising metrics that a nonprofit executive director should know and measure
Robin usually starts her consulting by asking nonprofits about their performance metrics, how they are doing and how they measure how they are doing. Most of her clients, small to medium nonprofits, are just holding on or doing their fund-raising without monitoring and using key metrics. Robin especially assists nonprofits with data-driven fundraising strategies such as digital fundraising and digital lead acquisition.
By not measuring certain metrics like email conversion rates from newsletter signups or digital content downloads, Robin thinks nonprofits are really operating at a disadvantage because they’re really not operating at a high-performing level. They’re not analyzing how they’re doing according to their baseline to determine what’s working, what might be not working.
Determining and measuring metrics allows a nonprofit executive director to determine what they should ultimately invest more resources in or what should they stop doing. Robin believes that organizations that become more data-driven in their approach tend to raise more money and have better donor retention and better donor engagements. These nonprofits cultivate relationships with their donors that are longer-term and more sustainable.
Key Fundraising Metrics and Total Costs
Donor acquisition, or the process of bringing on new donors or potential donors to your organization via marketing and networking, costs time and money. Very similar to the for-profit world, Robin says that a nonprofit executive director should understand donor acquisition costs. What does it cost to acquire a donor and then how much of a donation did that donor give. The first question on how much did it cost to acquire the donor is critical from Robin’s perspective on determining what is working and what is not. If the money spent on staff, consultants, materials, digital platforms all costs $500 per one donor that only donates $250, then the cost to acquire that donor outweighs the donation.
In some ways, this is one area that nonprofits might be able to look to their for-profit counterparts on possible successful strategies or approaches for measuring the cost of acquisition and its returns. For-profits steadily use metrics to determine if marketing campaigns, such as direct mail, have the return on investment they need to cover total costs of the campaign. Similar metrics can help nonprofits become much more efficient and cost-effective during normal years, and especially during pandemics. At the end of the day, if the number of new donors is more costly to acquire compared to their average donation amount, then there really isn’t a great return on investment (ROI). Versus a healthy investment on a major gifts strategy that pays out larger donations.
Robin is typically hired for two reasons. To coach the executive director or to help boost fundraising and development programs. Not all organizations, especially those that smaller to mid-sized, have a dedicated fundraising staff member such as a development director. Organizations hire Robin as an executive director coach to bring on expertise, but also as a system for providing accountability and holding the nonprofit leadership to a steady, concreted forward direction.
Using the Right Expertise for Donation Growth
Robin’s expertise in understanding fundraising data and important metrics really plays a part in her work to better a nonprofit’s fundraising and development programs. She says this is where she sees that an organization has typically carried on the same old same old programs in the same ways they have always done. Using assessment such as fundraising report cards, Robin is able to identify where the baseline is, and then compare that nonprofit’s current performance against that baseline. She can then identify areas for improvements through fundraising assessments to get an understanding of where groups are and where their room for growth. She then puts together a plan of action to move the organization to a longer-term growth strategy.
An extremely important component with metrics is the database. Whether it is called a donor database or CRM, Robin tells her clients that an excel spreadsheet alone will not do. Having the right database system and using it in the right ways can really be the driver or brain behind the fundraising program. This system is what houses the data that the charitable organization will ultimately analyze. Getting the right database and learning how to use it most effectively is a really strong starting point. Overall, fundraising and understanding key performance indicators (KPIS) might not be an area of expertise that a nonprofit leader currently has in their background, and so it is certainly the expertise that Robin brings to her clients.
Fundraisers Combatting Nonprofit Financial Gaps
During COVID 19, there has been a re-emergence of financial strain on organizations, especially as pandemic aid and support dwindles down. A nonprofit’s donor base may look differently now during the pandemic and fundraising goals are more important than ever. There are a few specific observations Robin has made while consulting during the pandemic in regards to financial gaps for nonprofits.
With communities slowly starting to open up, and with some not opening up as expected, nonprofits that rely on income from providing services are having a hard time making up that income elsewhere. Robin gave the example of groups like YMCA, which depend on childcare for some of their revenue. Between remote schooling and parents keeping children at home due to safety and health concerns, organizations like the YMCA are seeing drops in program attendance and revenue. Groups like that might be re-evaluating their programs or might decide to put a halt until the pandemic settles more over a period of time.
Robin has noticed that organizations are in general tightening their spending, nonprofits included. Whether that be in fundraising costs, or consultants, training budgets, or just reduced staff in general. This tightening also leaves gaps in the expertise needed to get the nonprofit past the pandemic and its negative impact. She has also seen some growth in the grant-seeking area, as foundations have pushed a lot of money towards COVID-19 relief efforts and more nonprofit organizations feel as if this could be a readily available funding source and have a greater fundraising ROI over more costly fundraising campaigns.
Planning out of the Crisis to Meet Fundraising Goals
Stephen compared planning around the current financial strains to a former podcast host’s planning strategy. The first step is to get through triage, which is similar to an emergency room with the goal of stabilizing. For nonprofits, stabilizing during the pandemic might have been the Paycheck Protection Program grants and other type of disaster or recovery grants from the government. Then, maybe during the summer, things might have stabilized, and the organization might be out of its triage stage and can start planning again. The nonprofit can then execute its plan, evaluate, then replan over and over again after learning and adapting.
To Stephen, it seems like nonprofits are coming out of their triage phase and back into the planning phase. Nonprofits have cut programs and expenses and are now looking at planning around the dwindling support packages to find how they can fund their future programs and operations. This is great news for the public sector as fundraisers can focus more on meeting KPIS and achieving donor growth, reaching the number of donations and total donations they need to fund their programs. A current approach is a search for different funding opportunities. One major focus for many nonprofits at the moment is finding grants. Nonprofit leaders are asking themselves how to get more grants, especially compared to last year, and how to maximize their fundraising efforts.
As fundraising becomes this major focus, experts like Robin become more in demand for her experience and successes. Robin appreciated the triage comparison and noted that the best way she described herself was as a fundraising triage doctor’s office. At the start of the pandemic, clients were frantically coming to her asking for help and seeking solutions to their situations. While she has no idea what to expect during these unprecedented times, she does think that the planning piece will be important as nonprofits fundraise and philanthropic giving goes into the fourth quarter of this crisis filled year. Individual giving levels are still somewhat stable according to initial data. Nonprofits just need to connect their mission to those donor dollars.
Finding the Donor Dollars
As Robin notes, there’s money out there and people are spending that money. Many households have continued to contribute to the causes they care about. She believes that people are really understanding during these times and so nonprofits can make their case on push on it in order to raise the funds they need. This is probably the one time that charitable groups can talk about their need where donors will truly understand. Especially with existing donors that give year over year.
Robin suggests crafting a message on the negative impact that COVID 19 has had on programming and the communities the nonprofit serves. An honest message on the kind of impact to programs and services that funding shortfalls would have could go a long way in asking donors to step up to prevent further cuts. This could be a catalyzing moment in speaking to donors and improving donor lifetime value.
If a nonprofit is still trying to survive and put out fires, they can’t get into the next step. However, once a nonprofit gets back to that planning step, they can start motivating their team in the right direction and finding the opportunities to get it right and back to those metrics. It could even be an opportunity to examine certain things that are just not working now and maybe haven’t been working. Now would be a great time to eliminate those things that weren’t cost-efficient cost-effective or producing a return. This is a true opportunity for nonprofit leaders to think in a way do things differently than before and the question then is, what are nonprofit leaders going to take into the future to enhance their operations.
A great example of using the changes from the pandemic can be seen in special events. Beforehand the pandemic, special events were not the most cost-efficient ways of raising money. However, now with virtual events, organizations can reach people from across multiple states, regions, and even countries. Anyone can tune into their program from wherever they may be and learn about the organization and how to participate in what they are doing. There is great future potential in reaching more donors from different places by using these innovative and more outside of the box approaches that nonprofits have had to take during the pandemic.
Even with innovation, nonprofits still need to have metrics in place to constantly evaluate those innovations for today and into the future. There is a real opportunity for nonprofits to be real entrepreneurs with innovative solutions while using metrics to continually grow, tweak, and rework new strategies.
The Critical 4 Metrics for a Healthy and Effective Nonprofit:
1. Donor Retention Rates: How many donors is the nonprofit keeping? The national donor retention rate at the moment is somewhere in the area of around 48%. This means that nationally, nonprofits lose close to half of their donors each year unless they are able to turn first-time donations into recurring gifts.
2. Conversion Rates: How many new donors is a nonprofit acquiring and then converting from first-time donors to something more? Just by natural attrition, donor spaces are eroding at the point of somewhere between 10 to 15% per year just by the fact that donors are choosing not to give, are moving, and or passing away. Nonprofits are losing donors at that rate compounded with the 40% retention rate and one can see that if a nonprofit is not doing something about donor retention and donor acquisition, their fundraising will eventually dry out.
3.Gift Upgrades: Is the nonprofit moving donors up the giving ladder, increasing their average gift size over time? Without that increased giving, a fundraising program can get very stale.
4.Number of Gifts Per Year: Can the nonprofit develop donor loyalty and donor commitment through multiple gift types or giving programs?
If a nonprofit has a lot of one time or first-time gifts but aren’t not converting those folks into longer-term or multiple gifts, then that suggests low retention rates and how well the organization is keeping their donors. Which then means the stewardship strategies in place might need re-evaluating. There are other metrics, and some that Robin is keenly interested in these days are digital donor acquisition because it is a low-cost method of acquiring new donors. Whether online donations or peer fundraising. She looks at Google Analytics, conversion rates, welcome series performances in email series open rates, click-through rates, and several others. However, the main four listed are ones she highly suggests as a great start for any small to medium-sized not-for-profit.
About the Guest Robin, Development Consulting Solutions.
With her over 25 years of experience, she has raised millions of dollars for small to mid-sized organizations and she focuses her coaching experiences on the GROWing people, performance, and purpose model used by Performance Consultants International.
She serves as a sounding board, change agent, and extra staff person for those new to fundraising, wanting to excel in their fundraising job or role, or advance in their career. She serves both fundraising professionals and executive directors alike.
Of her many awards and accolades, Robin was recently named one of the Top 10 LinkedIn Top Voices Philanthropy and Global Development and one of the Top 100 Charity Influencers by Onalytica. Her writing has appeared in Nonprofit Pro, Massachusetts Nonprofit News, Charity Channel, Bloomerang, Donor Search, Nonprofit Expert, Donor Perfect, Nonprofit Learning Library, and many other blogs. Robin, Welcome to the Nonprofit MBA podcast.
About The Host Stephen Halasnik, Financing Solutions
Stephen Halasnik is the host of the popular, The Nonprofit MBA Podcast. The Nonprofit MBA podcast’s purpose is to help nonprofit leaders. Mr. Halasnik is the Co-founder and Managing Partner of Financing Solutions. Financing Solutions is a leading provider of Lines of Credit to nonprofits and small businesses.
Mr. Halasnik is a graduate of Rutgers University and has an Executive Masters from the MIT Birthing of Giants Entrepreneurship program. Mr. Halasnik is a best selling Amazon author and is considered a leading authority on building great, purpose-driven businesses. Mr. Halasnik lives in New Jersey with his best friend, his wife Gina. Mr. Halasnik’s number one purpose is raising his two boys, Michael and Maxwell, to be good men.
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