Fundraising Benchmarking is the process of comparing your nonprofit’s performance metrics to industry bests, or the best practices of peer organizations. By analyzing normal and average results across the nonprofit sector, fundraisers can more effectively evaluate their past performance, and set appropriate goals.
This Benchmarking tutorial focuses on four common fundraising performance measures:
- Dollars Raised
- Average Gift Amount
- Response Rate
- Retention Rate
Fundraising performance varies dramatically between different nonprofit industries, by the types of fundraising activities engaged in, the size of an organization, and the demographics of the donor file, to name just a few. This post will focus on benchmarking for small organizations ($2m or less) with Individual Giving programs that include both Major Donor fundraising and mass solicitation of regular donors.
Several key 2014 charitable giving reports have yet to be published, but we do know that both overall giving and online giving has increased, and that the rate of increase in many industries has slowed to reflect a new stability undisturbed by the economic crisis and extraordinary disaster-relief events that caused sharp spikes and valleys in previous years. Blackbaud’s 2014 Charitable Giving Report finds that overall giving to Small Organizations (under $1m) was up 5.8%–and online giving was up 10.6%. Overall giving to Medium Organizations ($1m-10M) was up 1.3%, with online giving up 9.7%.
Third Space Studio has published a “micro-study” of small nonprofits called the Individual Donor Benchmark Report, in which participants reported increases in revenue of 14% between 2012 and 2013. This group also reported fundraising from Individual Donors increased 18% in the same time period [visit Third Space Studio’s website to participate in this year’s survey].
Using Benchmarks to set Goals: How does your overall fundraising for 2014 compare to 2013? What percent of your current fundraising revenues comes from Individual Donors? When you set an annual fundraising goal for Individual Donors, is this based on the amount you need to raise in order to meet your budget, or is it derived from how much you can realistically increase giving from your current donors and prospects? Are projected increases thoughtfully distributed between (a) increasing gifts from current donors, and (b) acquiring new donors? And finally, do expenses realistically reflect the effort required to personally manage Major Donors, or to increase automated systems and mass-communication to Regular Donors?
Average Gift Size
As nonprofits move to decrease their dependency on foundation funding, more effort is being spent on raising funds from individuals, and many Individual Donor programs are segmented into two groups, Major Donors and Regular Donors (which might also be called members, annual donors, or small gift donors). Some organizations define a Major Donor as giving $500 per year, others have a $1,000 gift threshold, or $5,000. The gift size a nonprofit uses to differentiate Major Donors from the Regular Donors will depend on the capacity of its donor file, the number of development staff, and the specific fundraising strategies used. Regardless of the threshold gift amount used, different Benchmarks should be applied to these two groups.
Major Donor Benchamarks: The Pareto Principal is an excellent starting point for segmenting your individual donor file. You’re probably familiar with the adage that 80% of results come from 20% of effort, and in fundraising this is even more extreme. According to the 2014 Fundraising Effectiveness Project Survey Report, 88% of funds came from 12% of donors. How much are your top 12% donors giving?
The number of Donors-plus-Prospects your organization can cultivate and solicit as Major Donors depends on the capacity of your development staff. Here are some general guidelines for how many donors fundraising staff and volunteers can effectively manage (from this point forward, the term “Donor” refers to actual donors plus major donor prospects):
- An executive director with administrative help can personally cultivate/solicit 20 donors.
- A Director of Development with management, marketing, content creation and administrative duties can personally cultivate/solicit 50 donors.
- If your organization is lucky enough to have a full time development officer, he or she can personally manage 100 to 125 donors.
- A board member, with help from staff, can manage 5 to 10 donors.
So, based on your organization’s resources, how many Major Donors can your team manage? Based on current giving levels, what size gift must a donor make in order for the organization to personally cultivate/solicit her? Organizations with small development teams might be shocked to realize how high their Major Donor gift threshold should be in order to focus appropriate staff resources on this group!
The Direct Mail ROI Calculator is an easy-to-use tool designed for direct mail campaigns, but which can also be used to experiment with different Major Donor thresholds. Simply substitute “How many pieces are you mailing” with the number of Major Donors in your file; “program costs” equals the portion of each staff person’s salary spent on personal fundraising (for example 20% of the Executive Director’s salary, plus 60% of the Director of Development’s salary); “response rate” is the percent of solicitations awarded; “conversion rate” is the percent of commitments fulfilled; “how much do you expect each buyer to spend” is the average Major Donor gift amount you are projecting. Interesting, right?
Regular Donor Benchmarks: This donor segment remains a significant contributor to a nonprofit’s bottom line, so even after a Major Gifts program has been implemented, so keeping this group nurtured, renewing and growing will ensure a healthy, stable individual donor program and prospect pipeline.
Third Space Studio’s Benchmark participants reported an average of 16 Major Donors giving an average gift of $5,752, which came to about 51% of their total Individual Donor giving (these statistics varied greatly—download the report for more detailed analysis). In the same time period, Regular Donors’ gifts averaged only $112, but with 536 of these donors on average, this group comprised 49% of the participants’ Individual Donor giving!
Donor online response rates are a huge force in the nonprofit sector, and they especially affect the Regular Donor segment. The 2014 NTEN/M+R Benchmarks report studied 53 of the country’s largest nonprofits and analyzed over 2 billion email messages. Though the groups in this study are a far cry from our case-study nonprofits of $2M and under, the quantity of data analyzed provides useful insight into how donors’ online behaviors are changing. [Sign up to receive the 2015 NTEN/M+R Benchmarks report, scheduled for publication April 22].
According to last year’s report, email lists grew 14% in 2013, indicating that donors are more readily providing their email addresses, and nonprofits are conscientiously collecting them. Also, nonprofit monthly website traffic was up 16% in 2013 over 2012 levels. But even as email lists grow, open rates dropped 4% to an overall 13% open rate, and click-through rates for email fundraising messages were down 13%! Response rates for fundraising messages were down 11% from 2012 to an all-time low of 0.07%, and even advocacy response rates declined 25% to 2.0%.
A response rate of 0.07% sounds pretty gloomy, and the downward trend is noteworthy, but in general, as the numbers of email addresses (and appeals) increases, the amount of funds raised via response to email is also increasing. In fact, small organizations are significantly out-performing the large non-profits in online giving measures, with even the most conservative measures showing online giving growing at twice the pace of giving overall.
Third Space Studio’s Benchmark participants reported that online fundraising contributed only 16% of total current individual fundraising in 2013, but these groups reported an average of 79% increase in online fundraising in the same year; indicating both opportunity and momentum for growing online giving as an individual donor strategy.
Using Benchmarks to set Goals: Are traditional donors converting to online donors, and if so, are they maintaining their traditional gift levels? Does your online giving tool offer donors the option of covering the processing fee for their gift, helping your organization net the full benefit of that gift? In addition to tracking email response rates and click-through rates, can you the conversion rate on your landing page? Sometimes small and usually free fixes to your landing page or online giving experience can seriously impact online giving response rates.
It is generally the case that retaining current donors costs less than acquiring new ones, so a very cost-effective strategy for improving fundraising results is to thoroughly mine your current and lapsed donor file. The work-horses of donor retention tools are the LYBUNT & SYBUNT reports (Acronyms for “Last Year But Unfortunately Not This Year & Some Year….” ). These reports usually come “out of the box” with a donor software product, but even if you’re using a spreadsheet to track donor data, these numbers are straightforward and easy to crunch.
Using the LYBUNT/SYBUNT reports to proactively solicit lapsed and lapsing donors is an essential first step in donor retention. Donor retention can be very scary to fundraisers who see their hard-won donors disappearing without explanation, despite care, cultivation and timely solicitation. This section takes a look at the general state of donor retention in terms of donors and dollars, and also helps guide thinking about how to use these Benchmarks to understand and improve your donor retention rates.
A Whitepaper published in 2013 by Blackbaud reported overall retention rates for repeat donors (donors who have given more than once) fluctuated between 53% and 70% depending on the industry. Retention rates for first time donors dip down to 35%, and even as low as 20% in some industries! This means that, on average, nonprofits lose almost 1 of every 2 donors every year.
Not only are nonprofits losing half of their donors every year, the impact on real dollars is even more striking. The 2014 Fundraising Effectiveness Project Report summarized 2012-2013 data from 3,576 survey respondents and compared their “Gains,” which are the dollars received from new, upgraded and recaptured lapsed donors, to “Losses,” which are dollars not earned due to lost and lapsed donors. In 2013, every $100 gained was offset by $92 in losses through gift attrition.
And unfortunately, the smaller organization, the greater the losses:
- Nonprofits raising over $500,000 or had an average net gain of 10.5%.
- Those raising between $100,000 and $500,000 had an average net gain of 1.9%.
- Those raising under $100,000 had an average net loss of -2.4%
The good news is that after a 10 year slide, retention rates in 2014 reversed course and improved over previous years’ rates. The other ray of light amidst these dark statistics is that New Donors are both the greatest source of net gain, and the greatest source of net loss—which means, nonprofits that can implement a powerful and effective new donor retention program can significantly impact overall retention performance.
Using Benchmarks to set Goals: What is your current retention rate for repeat donors and new donors? Is there a gift-threshold where this retention rate suddenly increases? Decreases? If 15% of your donors simply cannot be retained (due to moving, death, illness, financial changes), what is an attainable—but aspirational—retention rate goal for your organization? What can you do today to significantly increase new donor retention rates?
Data Geek alert: The Association of Fundraising Professionals (AFP) has collaborated with a Donor Software Workgroup to develop a downloadable, Excel-based “Growth in Giving Initiative (GiGi) Measurement Tools” to help nonprofits measure and evaluate their fundraising programs against a set of over 100 performance indicators, including retention and net gain/loss. Read the reports and download the tools here.