Insight

Make the most of your fundraising with simple metrics

The amount of money your not-for-profit raises in fundraising campaigns is meaningful, but so is how efficiently you’re able to raise it. Such costs can be measured using two metrics: Cost ratio and return on investment (ROI). Let’s take a look.

Find a formula

These two metrics can be used to evaluate both fundraising activities as a whole and individual fundraising events or campaigns. Concentrating not only on the big picture, but also on specific fundraising activities, allows your organization to identify stronger strategies to use more frequently and weaker ones to consider improving or ending. Ultimately, the goal is to determine which activities generate the highest return.

Cost ratio (also known as cost-per-dollar, which is fundraising expense / fundraising revenue) focuses on the expense of fundraising, while ROI focuses on the returns. The formula for ROI uses the same inputs as cost ratio but flips them; the fundraising expense, of course, is the “investment” ROI is referring to:

ROI = Fundraising revenue / Investment in fundraising
Some nonprofits use gross revenues in the ROI formula. However, many others use net revenues (revenues minus the related expenses). Either option is acceptable, but you must be consistent and measure revenues the same way for every year and campaign. After all, these metrics are meaningful only when you compare fundraising activities or trends from one year to prior years.

Calculate inputs

Fundraising expense data should include the direct costs of the initial effort, as well as later activities. Initial costs might include an investment in online advertising or a phone campaign, while subsequent costs might relate to maintaining that relationship, such as a renewal mailing.

As for indirect and overhead costs, exclude those that you would incur with or without the monitored activity (such as website or donor database costs). And make sure they’re excluded from every campaign metric. For both costs and revenues, use rolling averages that cover three to five years. This will reduce the effect of “one-offs,” whether in the form of a significant donation or an economic downturn. You’ll also avoid penalizing fundraising activities, such as a major gift campaign, that require some time to show results.

Allocate resources

Calculating fundraising metrics will help you make better decisions when it comes to allocating limited resources. But keep in mind that ROI can vary greatly by activity, and a lower ROI doesn’t necessarily mean you should cut the activity. Contact us for more information.

© 2018

Related Insights

When should you turn down an inheritance? | estate planning cpa in washington dc | Weyrich, Cronin & Sorra

Estate & Wealth Transfer Planning

When should you turn down an inheritance?

“Thanks, but no thanks.” If you expect to receive an inheritance from a family member, you might want to use a qualified disclaimer to refuse…
Partners may have to report more income on tax returns than they receive in cash | accounting firm in bel air md | Weyrich, Cronin & Sorra

Tax Prep, Planning & Strategy

Partners may have to report more income on tax returns than they receive in cash

Are you a partner in a business? You may have come across a situation that’s puzzling. In a given year, you may be taxed on more partnership…
Help when needed: Apply the research credit against payroll taxes | business consulting services in elkton md | Weyrich, Cronin & Sorra

Management Advisory Services & Business Consulting

Help when needed: Apply the research credit against payroll taxes

Here’s an interesting option if your small company or start-up business is planning to claim the research tax credit. Subject to limits, you…

Connect with us

Use the form below to send us an email. WCS responds directly to all inquiries and general questions within 24 hours of posting.

This contact form is deactivated because you refused to accept Google reCaptcha service which is necessary to validate any messages sent by the form.