Do you ever feel like you’re working and working, and still not raising the money you need?
You’re putting in a lot of hours, trying a lot of things, and you just can’t hit your goals.
Yeah, I think we’ve all been there.
You know why that happens?
It’s the difference in being busy and being effective.
When you’re busy, you’re doing stuff, but it may not be the right stuff, and that means you may not see results. You’re like a hamster on a wheel – you’re moving fast, but not getting anywhere.
For example, if you need to raise $25,000 and you’re planning a series of bake sales, that probably won’t work. You’ll be busy (baking a lot!), but you won’t see the return on investment that you’re looking for.
When you’re effective, you’re getting stuff done, and seeing the money come in that you need because you’re spending your time on the right things.
For example, you send out an appeal, and it’s going to the right people at the right time with the right ask. Based on your review of the results of past appeals, you’re confident this will work. And it does.
In other words, you’re paying attention to your numbers, and it’s showing.
Being a Numbers Person
I’m pretty sure that most people who work in nonprofit don’t consider themselves a ‘numbers person.’
I hear it all the time. “Now, I’m not a numbers person, so I don’t know…” or “I hate trying to read those finance reports.”
If this is you, stop. You’re using this as an excuse and it will lead you down the path to failure.
When you don’t know your numbers, you spend time on the wrong things.
It’s also very difficult to inspire a donor when you don’t have the right numbers to share.
Let’s look at 6 numbers you MUST know if you want to raise all the money you need to fully fund your budget.
1. Gap. This one may just be the most important number you need to know. It sets the stage for why people should give to your nonprofit. It provides context for your services and your results. Basically, it’s this:
Need – current service delivery = gap
Where ‘Need’ is the total number of people or animals who need your service. ‘Current service delivery’ is the amount of services you’re delivering now. And ‘gap’ is the difference. Essentially, the Gap is what’s left to be done. You can create a sense of urgency when you can explain the Gap and how desperately people need what you provide.
2. Cost per unit of service. This number shows how much you can do with a dollar. We call it your “number.” Figuring out your “number” forces you to get really clear about what exactly your nonprofit does. First, you define your unit of service. For a homeless shelter, it may be one night’s stay (along with a meal and a shower). For a food bank, it might be a pound and a half of food, which equals one meal. See how that works?
Asking for money is easier for you and the donor when you know your “number.” There’s a real difference in asking for $10 to support your nonprofit’s work and asking for $6.20 to provide one day/night of food, shelter, and veterinary care for a homeless animal.
The easiest way to calculate your “number” is to look at last year’s numbers. Divide your total expenses by the total units of service you delivered last year. For example, if you spent $151,000 and you provided 1500 animals with an average stay of 40 days, your calculation would look like this:
Unit of service = 1 day/night of care
Total units of service last year = 1,500 animals x 40 days = 60,000 units of service
Then, your number is $151,000/60,000 = $2.52
So, you can share with your donors and prospects that for $2.52 you can provide a day/night of food, shelter, and medical care for a homeless dog or cat. Seems like a deal to me!
3. ROI per fundraising activity. This one is critical for evaluating your fundraising activities to determine which ones to repeat. ROI stands for Return On Investment and it’s a way of expressing your revenue compared to your expenses. The formula is this: Profit-Expenses/Expenses.
For example, if you hold a gala and you make $50,000 and spend $10,000, then your ROI is
Profit = $50,000 – $10,000 = $40,000
ROI = profit of $40,000/expenses of $10,000 = 4
That means for every dollar you spent, you made 4 in return. That’s a pretty good ROI for an event.
The problem is that most nonprofits don’t even try to calculate ROI on fundraising events, and if they do, they don’t include ALL costs (like staff time). So they don’t have an accurate picture of what it really costs them to hold that event and what they’re really getting out of it. If they did, they might find that they’re not making any money and it’s time to ditch that event.
I recommend you calculate ROI for every fundraising activity you engage in. That means knowing exactly what you made from every event, every appeal…everything. Otherwise, you’re guessing about which activities to do again next year, which is not the best basis for making decisions about your future plans.
4. Exact revenue goal. This seems really straight forward, but lots of small nonprofits neglect it. You need to know exactly how much money you need to raise before you start fundraising. Don’t do it backwards and try to raise all you can then figure out how to spend it. Decide what services you want to deliver, then calculate what that will cost. In a nutshell, plan your year of services, then create an accurate budget for it. Your fundraising needs to cover the expense side of the budget. Of course, if you have a thrift store that generates money or another source of income, that can lower the amount you need to raise. The bottom line here is get clear. KNOW exactly how much you need to raise. “A lot” and “more than last year” are not good answers.
5. Donor retention rate. This one is key for long-term sustainability. You need to keep your eye on the number of donors you are renewing from one year to the next. When people give year after year, they’re very bought in to your mission and want to help you succeed. If they lose interest with your work, they stop giving. Then you have to go find new donors, which is harder than renewing current ones.
If you have a good donor tracking software, it will calculate your retention rate for you. If not, look at a list of donors who gave in 2015 then again in 2016, then express it as a percentage. Across the board, donor retention is 46% right now, which means if you start the year with 100 donors, you’ll end the year with 46 and you’ll have to find 54 new donors just to maintain the same level of donors and funding.
Know your retention rate, then practice good stewardship to try to increase that retention rate. Offer warm touches and inspiration to keep donors feeling connected to your organization. When they feel connected, they’ll keep giving.
6. Ideal donor base size. The question here is how many donors do you need to fully fund your nonprofit’s good work? When you know exactly how many donors you need, you can choose the acquisition strategies you need to find them. Here’s how to figure out the donor base size you need.
Let’s say you need $100,000 to fully fund your nonprofit’s work for the year and you have these fundraising strategies planned with conservatively projected revenue:
- Grants $25,000
- Special event $25,000
That means you need to bring in $50,000 from your donor base.
If you know that your donors have given on average $50 in the past year, then
$50,000 you need/$50 average gift = 1,000 donors.
If you do a really good job of stewarding your new donors and helping them feel good about giving to your organization, they may give twice during the year which means you’ll need fewer donors.
Become a numbers person
These 6 numbers are critical for your long-term success. The more you can become a numbers person, the easier fundraising will be.
So, for you non-numbers folks, here’s my best advice: learn one thing every chance you get.
That’s how I went from not understanding ANYTHING about the numbers of a nonprofit to being able to look at a monthly financial statement and see where the problems are.
Sit in on a finance committee meeting and just learn one thing. Find a mentor who can teach you a thing or two.
Knowing and understanding your numbers will make you a smarter, better fundraiser, and these 6 numbers will help you fully fund your budget.