Fundraising Metrics

From my In-Box This Week

Hi David,

We’re running our yearly donor metrics report and running into some questions. In the past our metrics only included individuals (not businesses, foundations, bequests, etc) and included renewals and special appeals. We did not include income from other sources, such as events or special project partners.

We had this data divided into two categories, sub-1000 and $1000+ donors. We’re feeling that this year we need to look at slightly different metrics for the $1000+ group because the data is so variable. For example, we received a handful of major gifts that we do not plan to get year over year and hopefully there will be more cases of this in the future.

Do you have any suggestions for analyzing the $1,000+ sources of income since it is so variable? I searched for “metrics” on your blog but didn’t see anything. I did find Douglas Shaw online and really like his proposed metrics: Metrics That Matter.

 

First of all, I appreciate the question. The writer is correct in pointing out that metrics are glaringly missing from my blog to date. We can fix that!

Second, in any discussion of metrics, how they will be used is an important question to ask right up front. So I’ll start this post with the following observations:

  • You want people to give you money every year as part of their personal philanthropy. This desired loyalty is independent of the denomination of their giving – you want people who give you $100 to give you $100 every year. And you want people who give you $10,000 to give you $10,000 every year, too. Therefore the metrics you choose should be the same or similar for every donor group.
  • Numbers are only as good as their interpretation, and this implies that they are only useful in comparison to other numbers. A 60% renewal rate might be dismal against an 80% historical rate. It might be acceptable if you had a large influx of new members last year. It might be fantastic if your renewal rate last year was 35% and you were trying out new strategies for your letter sequences.

Be careful of the difference between not liking a metric and not liking the result of the metric. If you have highly variable results at the $1,000 level, maybe that tells you something about how stable a group they are, or where your time needs to be spent. In other words, you may not like the result, but that’s not the metric’s fault.

Given those premises, here is my general strategy for using metrics to evaluate your fundraising program:

  1. Make sure you collect data in the same manner each year. This applies most especially to the time period in question.

I use and strongly recommend a 12-month evaluation window (not 18 or 24-month), and I count individual check writers (as opposed to household adults). Theoretically, you should be able to use any date, but most people use December 31. I use January 9. That is usually enough time to catch any 12/31 checks that may or may not have been actually written the first week in January.

Also, I note that Shaw recommends a rolling 12-month evaluation, where you run numbers every month to measure performance in the most recent 12-month period. If you have time…

  1. Use donor segments. The writer above uses two segments: $999-minus and $1,000-plus. For many organizations, this is completely appropriate. I tend to use more than just two. When I look at analytic information for Development Audits, I look at segments of $249 and less, $250 to 999, $1,000 to 9,999, and $10,000 and greater. Sometimes I look at $99 minus as another subset. I create a data set for the aggregate total and I create a data set for each individual segment .

Here’s the rationale: As hard as it might be for us to accept, the difference between $100 and $250 has very little to do with financial capacity and a lot to do with psychology. So people who are beginning to see your organization as worthy of gifts greater than $100 are getting more and more deeply involved with you. By the time they are giving $250, you should be looking at them as $1,000 prospects, and treating them that way – again, not because they can afford it, but rather because they love you.

Similarly, there is a BIG difference between donors who give you $1,000 each year and donors who give you $10,000 each year.

  1. Take out government, foundation, and corporate grants and gifts, regardless of denomination.

Regardless of current humor trends, these entities are not “people, too” and loyalty will not ever be something you should count on. In fact, a better way to look at such gifts and grants is as fee-for-service transactions. As such they would be subject to metrics different than those related to individual donors. Number of grants greater than $5,000 for example. First time grants, repeat grants, and percentage funding that can be used for general operations. Renewal rate and upgrading movement really won’t apply.

  1. I remove all non-gift data: purchases of merchandise, event tickets, and so on. As an interesting side note, I tend to include in-kind gifts of real property – in other words, not time. I do not include purchases of that property. So if someone gives you a bottle of wine valued at $40 for your silent auction, and someone else buys it for $60, I credit the wine donor with the $40 gift only. The second person was simply buying a bottle of wine.
  1. I also tend to remove major gifts and grants from individuals that are clearly non-renewable: bequests, gifts of land or other real property, large gifts restricted to land purchases or endowment, and so on. These gifts might be subject to the kind of metrics used for foundations and corporations – I simply list them separately. (Note that I said I remove the gifts. I don’t remove the donors.)

Now, given all that, here’s what I actually do:

  1. Count the number of gifts and the total money raised for the baseline year reporting period – for example in 2014 (from 1/9/2014 to 1/8/2015). Count the aggregate total to be sure, but also count each individual segment. Did you make your fundraising goal(s)?
  2. Count how many of those donors gave again the following year, in 2015 (from 1/9/2015 to 1/8/2016). This gives you a Renewal Rate.
  3. Now count how many donors gave money in 2015 who did NOT give in 2014, but had given in the couple of years before that – say in 2013 or 2012. These are your Lapsed Members. You could keep going back, but I usually cut it off at three years ago. If someone gives money this year and they also gave 20 years ago, they are effectively a new member to me.
  4. The remaining donors who gave last year will all be New Members.
  5. To do a full analysis, you will need five years of such data. Then you can look at the following metrics:

Renewal Rate: For most organizations, 70% is a good number to shoot at. If your renewal rate is less than 70%, you might have a great number of new members coming into the database (new members renew at a much smaller percentage). You also might need to look at alternative renewal strategies, like additional letters, phone calls, and so on.

If your renewal rate is greater than 80%, you might look at whether you have enough new members coming into the system. Organizations with very high renewal rates often have very loyal supporters who are not being replaced when they do leave.

Average Gift: I’ve seen average gifts anywhere between $60 at the low end and $600 at the high end. What’s more important than your specific number is how that number might be trending over time. I haven’t found too many organizations where a $250 average gift isn’t possible with more aggressive upgrading.

Upgrading: Count how many donors are giving more money this year than last year and how many are giving less. What you are looking for is for the first number to be greater than the second number. Duh!

Board Members: What percentage of the total giving is being given by the Board members? Admittedly, this is tricky, and I would be hesitant to apply any particular standard to the result. That said, I believe you (and your donors) can draw some useful conclusions from the data.

When boards give more than 20% of the total, it is impressive. When boards give less than 10%, it is also impressive, but not necessarily in a good way. And when the trend is negative, the board might be growing increasingly out of step with the needs of the organization.

There are two other metrics I look at when the data is really clean. If possible, I want to know the First Year Renewal Rate and the Fourth Year Renewal Rate. The first year renewal rate is easy: Of the donors who made first gifts in 2014, how many gave again in 2015? I’m usually looking for around 40%. For most organizations, it is dismal so don’t be too upset if your rate is 30% or less.

As an interesting exercise, calculate the percentage of your current membership who are in their first or second year of membership. Many organizations are surprised to learn that 2/3rds of their members are brand new. Knowing that might usefully influence the tone and content of your newsletter and electronic media!

The fourth year renewal rate requires keeping careful records over a much longer period of time. Of the donors who made first gifts in 2012, how many also made gifts in 2013, 2014, and 2015. 10-15% is pretty normal. 20% is really good.

I would be interested in your feedback here. Do you have metrics you use that I can share with others? Are there interpretation questions? What is your average gift overall? How do you evaluate your corporate/foundation grant-writing program?

 

Cheers,

-da

 

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Fundraiser’s Almanac
Here’s what I’m thinking about for February. What are YOU thinking about?

  • Taking the Time to Write Well – We too often sacrifice quality of writing for quantity and speed. In doing so, communication suffers and we enjoy it less. Email is a burden. Reports are skimmed, if they’re read at all. And everything we produce is high-stress, last minute, eleventh-hour, right before the deadline. We need to anticipate more. Get ahead of the curve. Let our writing steep more. Write in such a way that our audiences will read it. Being more effective communicators.
  • Writing Thank You Letters – Write and design your Thank You letters to be “fridge worthy.”
  • Writing Renewal Letters – Renewal letters are pretty short and sweet. You should plan an initial letter and up to three follow-up letters spaced about 4-5 weeks apart. Because you know already who should be renewing this year and when, and because you can write letters now that will work as first letters the remainder of the year, you could actually produce all your renewal letters for 2016 right now, and get that part over with. Then set them up by date in a box and put them in the mail during the year when the dates come around.
  • Writing Appeal and Recruitment Letters – It’s not too early to start working on ideas for spring and fall appeal content either.

 

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I am launching a feasibility project to test whether several different organizations with similar missions (land trusts, for example) and separate service territories can work together to increase membership for all. In other words, can they collaboratively negotiate list rental, design, and even mailhouse services to achieve an economy of scale not possible working independently? If you know of something like this being tried before, I’d like to hear from you. Are there examples of similar tests? Success stories? Disasters? I’d even be interested in attempts that were abandoned for any number of reasons. Many thanks for your assistance.

 

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Will I see you at a conference this spring? This spring I’m heading to state conferences in Wisconsin, Colorado, Connecticut, Maine, New York, and Pennsylvania. I’m also planning to attend the River Rally in Mobile, Alabama. Will I see you there?

 

Photo by Annie Spratt courtesy of Stocksnap.io.

3 Comments

  1. David, thanks for this insightful and immediately actionable post. Question for you in regards to usefulness of numbers being tied to the ability to compare them year over year. As you know, land trusts often struggle to produce digestible financials for their donors that demonstrate organizational performance in a way that is not skewed by easement valuation. What metrics might you suggest for including in a annual report, for donor audiences especially?

    • Thank you for your question Brandy. The most useful fundraising information for donors (and for board members, too) is information about money raised that is either unrestricted or is completely used in the year given. I list separately those large gifts that cannot or clearly won’t be repeatable: bequest gifts, gifts of land and easements, and so on. For example, I might use a bar graph to compare money available for operations and program expenses from month to month or year to year, but I would list these outlier gifts separately.

  2. Good blog post, David! 🙂 Maybe I’ll bring some of our metrics to the retreat and we can talk then.