Monday, August 24, 2009

Fundraising Return on Investment

By Norman Olshansky: President NFP Consulting Resources, Inc.

You are an executive or key volunteer leader of a nonprofit who has been in your position less than a year. You know the honeymoon is over. One of the many issues you want to address is the concern that so much of your fundraising time, energy and resources are spent planning fundraising events. It seems like the mission of your agency has shifted, and staff as well as volunteers spend more time planning parties than delivering service.

Fundraising events can and do play an important role in many not for profits. However, too many organizations do not fully understand how to maximize their fundraising efforts.

This may seem like blasphemy to some, but events should primarily be utilized to attract new donors, cultivate existing donors and volunteers, say thank you to your donors, volunteers and staff, or to provide community education. For most organizations, events (with a few notable exceptions) should not be undertaken if they are expected to provide a good financial return on the organization’s investment of time and resources to produce the event.

According to the AAFRC Trust for Philanthropy, 78.3% of all charitable contributions come from individuals. It is also well known that 80%-90% of all funds raised from those individuals are from the top 10% of donors. In other words, major giving is where it’s at. This is not to preclude the importance of broad based memberships and giving at all levels, but rather to focus your fundraising energies on the best return on investment (ROI) of time, staff, volunteers, and other resources, facilities, etc.

Fundraising Costs and Return on Investment – National Averages



Direct mail to general lists
(non donors) Cost 115% ROI 15%
Special Events Cost 50% ROI 50%
Planned Giving Cost 25% ROI 75%
Direct mail
(prior donors) Cost 20% ROI 80%
Foundations/Corporations Cost 20% ROI 80%
Major Gifts Cost 5-10% ROI 90-95%

National Average,
all methods: Cost 20% ROI 80%
(Based on: James Greenfield, Fund Raising: Evaluating and Managing the Fund Development Process)



The chart indicates that you would need to spend $1.15 in order to raise $1.00 through direct mailings to general lists. To solicit major gifts, you would spend 5 to 10 cents to raise $1.00.

When calculating ROI, keep in mind the indirect costs associated with fundraising. For example staff costs are not just for those who are directly involved with fundraising. Other staff and administration typically are involved as well, albeit to a lesser extent. The costs associated with staff and volunteer time, facility usage, overhead expenses, as well as out of pocket direct costs should all be factored into determining ROI.

From an ROI perspective, it costs less and produces more income to raise major gifts than to use other methods of fundraising. While a variety of methods should be used in each organization, all too often, nonprofits tend to utilize, to a disproportionate degree, those methods which produce the lower returns, (events and direct mail) rather than those that are more effective (major gifts).

Special events can build excitement, engage people, provide enjoyable opportunities for volunteers but they typically cost too much to produce to justify the amount of money they raise. As a result, most organizations are reducing the number of events they hold and are putting more emphasis on major gifts and planned giving.

Using the return on investment approach to analyze fundraising performance is an excellent way to engage leadership and staff on how best to plan your future fundraising activities. You will find that Board members who have for-profit business experience will likely better understand such an approach to planning and resource allocation.

8 comments:

  1. As a DOD, what would an appropriate ROI for a major gift officer? How would that ROI increase according to their years on the job?

    ReplyDelete
  2. Hard to give a number since there are lots of factors related to the experience of the DOD, the quality of the prospect pool, the amount of other responsibilities carried by the DOD, the amount of support given to the DOD to implement their work (staff, database, travel, research) etc. In general you would expect that with more experience a DOD should have a better ROI but as you can see, the variables involved prevent one from coming up with a measureable number or %. Hope this is helpful. Sorry I did not see your comment until now.

    Norman Olshansky

    ReplyDelete
  3. greetings to all.
    I would first like to thank the writers of this blog by sharing information, a few years ago I read a book called costa rica investment in this book deal with questions like this one.

    ReplyDelete
  4. Hello .. firstly I would like to send greetings to all readers. After this, I recognize the content so interesting about this article. For me personally I liked all the information. I would like to know of cases like this more often. In my personal experience I might mention a book called Generic Viagra in this book that I mentioned have very interesting topics, and also you have much to do with the main theme of this article.

    ReplyDelete
  5. Erectile Dysfunction FAQ's

    Impotence, or penile erectile dysfunction, in men is not as rare as one would think it is.
    In fact, one out of ten men around the world is affected by this condition. It is not exclusive to old men either. Impotence is caused not just by physical factors,
    but mental factors as well.
    Exercising on a regular basis and eating healthy food will increase your ability to sustain prolonged physical effort and we all know that sex is effort.
    Smoking, frequently drinking large quantities of alcohol, taking recreational drugs and lack of exercising will sap your stamina and also slow down the flow of blood.
    Penis exercises can be used for maintaining fitness, preventing or controlling premature ejaculation and increasing the length and girth of the penis.
    by penis enlargement pills you can overcome these problems and not only that you can also enlarge, extend also to strengthen your penis and premature ejaculation will not exist anymore for you.
    visit http://www.factspenisenlargement.com for more info.

    ReplyDelete
  6. Thank you for suggesting those wonderful tips. Who thought that a special fundraising can balance our newly-introduced outsourcing payroll method? We’ve been tackling it on our board. Yes, everything on our new style on payroll. Idaho’s ruling has been good to us and your post is a big contribution. We even used a projector for the rest of the heads in our boardroom could see you blog! Yes, felt like watching a great movie! Thanks!

    ReplyDelete
  7. Hey! Keep it up! This is a good read. I will be looking forward to visit your page again and for your other posts as well. Thank you for sharing your thoughts about non profit fundraiser in your area. I am glad to stop by your site and know more about non profit fundraiser.
    Fundraising professionals, who have been employed with not-for-profit organizations as fundraisers or as fundraising consultants, for at least sixty (60) months, can become certified as a Certified Fund Raising Executive (CFRE). The CFRE credential is administered by CFRE International, an independent 501(c)6 whose sole mission is dedicated to setting standards in philanthropy through a valid and reliable certification process.
    Cincinnati Arts Association (CAA) is a not-for-profit organization that oversees the programming and management of the Tri-state's finest performing arts venues – the Aronoff Center for the Arts and Music Hall - and is dedicated to supporting performing and visual arts.

    non profit fundraiser

    ReplyDelete
  8. Really enjoyed reading this - you have included some great tips on fundraising. I've recently discovered Tony Charalambides great fundraising blog - you should check it out!

    ReplyDelete