Tag: Metrics

The Danger of Focusing on One Metric

Steven  |  Report
Secret meeting.

A friend who’s a Fundraiser recently shared a story with me.  It was about a nonprofit who received a pitch from a consultant that he would increase their average gift size.

Sounds great, doesn’t it?  What nonprofit wouldn’t want all of their donors giving more?

So the nonprofit hired the consultant.  And their average gift size went up! 

Sounds great, doesn’t it?

Too bad what also happened is that their response rates went down.  And their retention rates went down.  So despite the increase in average gift, the organization is raising less total money than they used to be.  And they have fewer donors.

That doesn’t sound great.

This is a great illustration of the danger of focusing too much on one fundraising metric.  All the main metrics are important, but none of them exist in a vacuum.

It’s relatively easy to increase any one metric.  Need higher response rates to your direct mail?  Include a freemium!  (Your response rate will go up… but your package now costs more.)  Want to increase the ROI on your next campaign?  Don’t send direct mail, only send email!  (Your ROI will go up because you’ve lowered costs by so much, but you’ll raise less money overall.)

The trick is understanding the whole system and the tradeoffs made with every tactic.

Any time someone wants to optimize one metric, always be wary.  Ask what the consequences will be to the other metrics.

And always remember: the only metric you can use to pay for programs is Net Revenue.

Three Easy-to-Understand (but Hard-to-Do) Steps to Better Fundraising

Steven  |  Repeat
Three Steps.

This post is meant to be a primer for how to use measurement to improve your fundraising. 

The concepts are easy to understand, but it’s real work for smaller nonprofits to install the systems and track the results.

I’m sharing this because, at the beginning of the fundraising journey for a Fundraiser or nonprofit, these things are non-obvious.  When you’re starting off in fundraising, it can feel like a situation where you “send a few things out and see which way the wind blows this year!”

But the more you know, the more you realize this fundraising life is a deeply-understood system.

OK.  There are three main stages to this…

# 1 – Measure the Metrics

You want to measure the performance of each piece of fundraising you send out.  This means tracking metrics like: gross revenue, net revenue, percent response, ROI, click-through rates, conversion rates, etc. 

That list is not meant to be exhaustive.  The idea is that there are standard metrics for email, direct mail, major donor proposals, radiothons, etc., and you want to figure out and track the standard metrics for the types of fundraising you do.    

Organize your results.  (We offer a free spreadsheet to help you get started.)  You’ll quickly see that some fundraising activities are more effective than others. 

#2 – Measure the Results Annually

If you think of each year’s-worth of fundraising as an experiment, you want to know the results of each year’s experiment.

Your results can be measured with metrics like: donor retention rate (overall and by segment), revenue retention rate, the “cost to raise $1” for each of your primary income streams, your total net revenue available for programs, etc. 

Organize your results so you can see year-over-year trends.   

#3 – Learn the Levers

The next step feels like magic: you look at the info from the first two steps and quickly notice which fundraising activities make the biggest difference.

You see things like, “When we do more of X, less money comes in.”  Or, “When we do less Y, we keep more of our donors.”

Let me give you two real-life examples (both of which I’ve seen many times).  I’ll share what the organization noticed when they looked at their results, and then what they found when they looked back at their year:

  1. An organization noticed that they had raised about the same amount over the course of the year with what felt like less effort.  The looked back and noticed that they had cancelled their e-news early in the year.  Previously, they believed their e-news was a necessary part of their fundraising activities.  Today they’ve realized that the time they were spending on their e-news could be better spent in other areas. 

  2. An organization was pleased to find that they had raised more year-over-year, and that their donor retention rate had increased from 55% to 60%.  They looked back and saw that they had sent two more appeal letters, and four more e-appeals, than they’d sent in previous years.  The organization realized they could be asking their donors to help more often, and that doing so would have a positive effect on their fundraising. 

Once you track your fundraising activities, and review the effects of them each year, you see what works and what doesn’t.  Do that for a lot of nonprofits, for a lot of years, and you build a depth of knowledge about what levers work best in different situations.

I realize it’s tough for people at the beginning of their fundraising journey to know what to do, let alone actually find the time to do all of it. 

That’s exactly why this blog exists.  We’re trying to share everything we’ve learned over the years about which levers to pull, and which levers to stop pulling, so that your fundraising journey is a little faster and a little smoother.

(Fun Fact: the original name for Better Fundraising was “Better Fundraising For All.”  That’s because we believe that all of this information should be shared with all the small- and medium-sized nonprofits who can’t afford a big agency, instead of being kept as part of some “secret sauce.”)

For today, figure out which of these three steps your organization should be working on.  And figure out the next actionable step you could take.  Now, we’re all in the middle of year-end fundraising at the moment, so you might not get to it in the next couple of weeks.  But write it down and set aside some time in your calendar to make it part of your plan for 2024. 

Take just a few steps forward, and you’ll be surprised at how much more effective you’ll become.

The Easy Thing

Steven  |  Repeat
measure

Measuring the easy thing is the easy thing.

It’s easy to measure how we feel about an appeal. It’s easy to measure whether any complaints came in. It’s easy to measure whether someone made a typo in the mailing.

It’s harder to measure things like the cost per piece, the gross yield per thousand, or your retention rate for major donors.

Ultimately, everything you send out in the mail or email is fundraising. Measuring the effectiveness is the hard thing, and the important thing.

It’s easy to measure whether an organization sent out an e-news or not. It’s more important and more difficult to measure whether the e-news helped.

What to Measure, and What to Evaluate, in Fundraising

Steven  |  Repeat
Three gauges.

This post is written for smaller nonprofits.

The goal is to show you what data to track, and then what to evaluate, in your fundraising.

Most small nonprofits don’t realize it, but every single thing they ever send to their donors is a test. It’s a test to see whether their donors respond or not. So these nonprofits are performing all these tests, and creating incredible data about what their donors like and dislike – and not paying attention to it.

My goal today is to give you a great start into what to track, and then what to evaluate, so that you learn as much as possible from all these fundraising experiments you’re performing.

And you’re not learning just for learning’s sake. You should be doing this because you will raise more money faster.

Example for You

Say you’ve sent an appeal letter at Thanksgiving for the last five years. If you track the right information every year, you will know which of those Thanksgiving appeals was most effective with your donors.

Then you can “repeat” and improve your best-performing Thanksgiving letter. That’s how save time and raise more money each year.

What We TRACK [LIST]

Here’s a list of the primary metrics we recommend tracking. (Of course there are more if you get into the details. These are the primary ones.) If you track these, you’ll be able to properly evaluate the performance of your main fundraising efforts…

  • Mail: # Sent, # Gifts, Total Expense, Gross Revenue
  • Email: # Sent, Open Rate, Click-through Rate, # Gifts, Gross Revenue
  • Event: # Invited, # attended, # who gave, Total Expense, Gross Revenue
  • Major Gifts Programs: # major donors, # gifts, Total Expense, Gross Revenue

I should mention that this assumes you have donor software that tracks every gift.

What We EVALUATE

If you track the right metrics, you can calculate and then evaluate the right metrics.

You can use the info above to calculate the metrics you should be using to evaluate the performance of your fundraising impacts.

For each of the types above, here’s how we evaluate performance. The metrics are listed more-or-less in order of importance…

  • Mail: Net Revenue, ROI, % Response, Average Gift
  • Email: Net Revenue, % Response, Open Rate, Click-through Rate
  • Event: Net Revenue, Average Gift per person, % of attendees who gave
  • Major Gifts Programs: Net Revenue, major donor retention rate, revenue retention rate

Like I mentioned earlier, you can go waaaaaay deeper into metrics for all of these. But today’s post is for the organization that wants to really understand and evaluate their fundraising – so that they can get better faster.

And if you want to see what this looks like in action for direct mail, grab our free proforma excel template for data tracking.

What We Don’t Measure

Now, you might notice that there are several things that we didn’t recommend measuring:

  • Complaints
  • Board Member reactions
  • Program Staff feedback

Of course, if Board members and program staff spot factual inaccuracies, you absolutely need to take their feedback. But as for whether they like it or not, or whether they think it will work, or whether they would prefer that you use different words, we don’t measure that.

Why? They are experts on your organization and your cause. They know far more than donors. But your fundraising should be aimed at donors, not experts! Your fundraising should use words and concepts that motivate donors to give gifts, not motivate in-house experts to give gifts.

#donorlove is in the data

One of the best things a small nonprofit can do is to establish a culture of tracking and evaluating everything fundraising.

In my experience, the organizations that do that tend to grow faster. They tend to raise more money. They also tend to have stronger relationships with their donors. Why? Because paying attention to what donors respond to is a pure form of #donorlove!