Why Measure?Your metrics have a lot to tell you, especially when consistently tracked over time. Evaluate the trends with your team, and work to determine what this means for the future. Where should you be focusing your efforts? Which areas are ripe for improvement?
1. Return On Investment (ROI)Calculating your return on investment may feel obvious, but don’t bow out just yet. This grants a crucial overview of how your organization is fundraising—before you break it down into more targeted metrics. Determining your ROI allows you to see your growth, and whether you have raised money, lost money, or broken even.
Total fundraising revenue / Total fundraising expenses = ROIThere are a few different ways to utilize ROI. You can determine your return based on a particular event or over time. For example, you might find a one-time peer-to-peer fundraising event successful but notice fundraising to be lacking during the rest of the year. So your organization might need to focus more resources on annual donors in order to boost revenue – like end-of-year giving. Your monitoring frequency will depend on what you are measuring—whether it be for an event, a quarterly analysis, or overall annual growth. Not seeing the return you wanted? Adjust your strategy accordingly.
2. Average Gift AmountThis simple metric helps your organization understand your donor in connection with how much they give over time. Average gift amount will shift depending on the organization, so if you’re looking to increase donations across the board, this is a great place to determine where you currently stand. Apply this metric to a specific campaign or time of year to narrow your results.
Donation revenue total / number of gifts received = Average gift amount
3. Donor Retention RateMaintaining a relationship with your current donor base is as important as the acquisition of new ones—and more cost effective! Exploring your donor retention rate lets you know how your development department is operating. How often do donors come back to give again? Are they sticking around? For how long or is a one-and-done gift? Your donor retention rate will likely be more than one stand alone metric, as you should be exploring first-time donor retention, repeat donor retention, and what your retention rate is overall.
Number of donors who gave last year AND this year / Total number of donors = Retention rateBreaking down this metric into more specific groups will help to target your strategy. If you have a low first-time donor retention rate, but a high repeat donor retention rate, try focusing your efforts on nurturing those first-time donors to make a second gift or a recurring gift. According to the Association of Fundraising Professionals, 45% of donors come back to make a second gift on average – compare this statistic with your organization’s finding and see where you stand. This is a metric to monitor year after year, which helps to show your retention rate over time.
4. Donor Acquisition Cost (DAC)Donor acquisition is both a lengthy and costly process, but new donors hold the power to help your nonprofit grow. When fostered well, new donors can become returning donors and even recurring ones. Acquisition becomes a problem when you find your organization spending oodles but the return is low. This can be a clear indicator to revisit the strategy drawing board!
Money spent on new donor acquisition / Number of new donors = Acquisition costYou can break down this metric even further by looking at your donor acquisition cost by channel, period of time, or event.
5. Donor Lifetime Value (LTV)This metric is a critical one when monitoring long-term growth. Determining your donors’ lifetime value helps calculate projected revenue for the future to improve development and strategy. Before you can calculate your donor LTV, you need a few pieces in place. Determine your average donor lifespan (how long they stay with your organization – not how long they live!), average donation amount, and frequency of donation. These three components will work together to determine your donor lifetime value. Once you know your LTV, you can set expectations and work towards clear fundraising goals for the future.
Donor lifespan x Average donation amount x (total # donations / total # of donors) = LTVAbove all, be sure to measure what you can, when you can. Take these metrics and put them to good use to determine where your development needs the most improvement.
You’ve calculated your ROI, average gift, retention rate, DAC, and LTV!