Nonprofits, by their definition, are primarily funded by the public. That means they’re always fundraising. It helps a nonprofit to know:
How much did it cost to raise $1?
Nonprofit fundraising can get complex, time-consuming and expensive, sometimes unnecessarily so. Therefore, if you manage a nonprofit’s fundraising activity, take this very seriously.
In a past life, I founded a nonprofit and acted as Executive Director for 3 years. Being a data-guy and not a trained Executive Director, I attended North Park University’s Executive Director’s Bootcamp through their Axelson Center for Nonprofit Management. The late Jimmie Alford, founder of The Alford Group, gave a presentation on nonprofit fundraising and he insisted that we know how much it costs to raise a single dollar. This was enlightening and alarming! Nonprofits can come up with brilliant fundraising ideas but Jimmie gave us a way to measure if they’re cost-effective. Jimmie strongly warned that special events are the absolute worst for fundraising. They’re valuable for networking and bringing constituencies together that otherwise would never meet. Events are also great for celebrating an organization’s successes. But events shouldn’t be held primarily as fund-raisers. You might cover your expenses and make money but if it cost 95¢ to make $1, there’s got to be a more compelling reason than the raising of money.
I gave Jimmie’s lesson some thought and made a quick spreadsheet.
In the graphic below, you’ll see the quick layout of an Excel spreadsheet that tracks expenses and incoming donations that are related to a hypothetical direct mail campaign to 500 people. Campaign results:
- Generated: $2026.02
- Spent: $1099
- Net gain: $927.02
- Cost to raise $1 (Donations Total ÷ Costs): 54¢
Was 54¢ appropriate? Too much? Surprisingly little? That’s for the nonprofit the determine.
Some activities are a net loss and that can be ok because there’s value in being in front of people, maintaining relationships and letting constituents know that the organization’s mission is alive. Such intangibles should be considered when planning an event or activity. However, for true fundraising (as opposed to maintaining relationships), there are questions about effectiveness.
In the example above, 500 pieces of mail were created and sent out. Would a Saturday morning phone campaign have been cheaper, more effective and taken a lot less time? What if the phone campaign had resulted in a net of just $600 and the only cost was a few volunteers making a few calls?
The point is that good nonprofit fundraising and nonprofit data management include information quantifying the effectiveness of your activities. They also include having clear goals around fundraising and the intangibles like maintaining relationships with constituents.
I did similar analysis after an actual fundraiser. One surprise was that we would have absorbed a net loss had it not been for 1 huge donor. So, keep your eyes open and be sure you know how much it cost you to raise a dollar.
P.S. This next blogpost Nonprofit Fundraising: Tracking the Details takes the dashboard further.
We look at the Response Rate, Count of Donations, Returned Mail, etc.
All of this helps measure success and informs future decisions around fundraising.