Calculating the Cost of Fundraising
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To more effectively fundraise, nonprofits must calculate the return on investment of every fundraising activity. Here's how.
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Calculating the Cost of Fundraising
- 1. Calculating the Cost of Fundraising How Effectively Are You Raising Money? ©Social Velocity
- 2. What’s your most successful money raising activity? How do you know?
- 3. Financing is... A long-term strategy for bringing enough money in the door to achieve your mission. How much should we raise to accomplish our goals? How much can we accomplish with what we can raise?
- 4. Board, Staff, Donors Money Strategy Infrastructure Sustainability Funding Sources Programs Message Fundraising Financing Worn out Excited, engaged Annual, programs Long-term, all costs Inadequate Fully funded Weak Few Strong GrowingFlat or declining Diverse, Robust Community changeNeed
- 5. TWO FORMULAS
- 6. Don’t Be Afraid of The Math Simple math: just +, - , x, and ÷ Ball park estimates are fine Analyze trends, not minutia
- 7. Two Key Formulas Net Revenue $ Raised – ALL Expenses Cost to Raise $1.00 ALL Expenses ÷ Net Revenue
- 8. Net Revenue Direct Expenses Printing, entertainment, food, space Indirect Expenses Staff Time # of hours worked on activity X hourly rate Hourly Rate = (Salary + Benefits) / 2,080 hours Board Time # of hours worked X value of volunteer hour
- 9. Why Include Staff & Board Time? Opportunity Costs Limited board & staff resources Put to highest/best use Understand cost of time
- 10. Tracking Staff Time Don’t get bogged down in EXACT numbers Use free/cheap time-tracking software Harvest, QuickBooks, smart phone apps OR, think in terms of: % of a person’s job, and % of the year “Our Development Director spends 25% of her time in the 4th quarter of the year on our event”
- 11. Cost to Raise $1.00 Determines financial return of each activity Compare fundraising activities Annual Gala costs $0.97 to make $1.00 Direct Mail costs $0.75 to make $1.00 County grant costs $3.45 to make $1.00
- 12. Gross vs. Net Revenue Gross Revenue The money you brought in Net Revenue The money you brought in minus the cost to bring it in Gross revenue is meaningless Paints only half the picture Doesn’t allow comparisons Ignores THE BOTTOM LINE
- 13. Intangible Value of Events? “Goodwill” or “Raise Awareness” Vague and un-measurable, not targeted Pick a target audience(s) & create a specific, measurable call to action “Cultivate New Donors” Create a non-revenue generating event “Thank Board and Donors” Create a non-revenue generating event
- 14. Which Event? Cultivation Event Revenue Generating Event Primary Goal Get a target audience(s) interested in learning more about your org Low cost to raise a dollar Audience People who can do a lot for your organization in the future People who will write a check right now Follow up Customized to each person None Future revenue potential Large Must wait a year Potential money left on the table None Much
- 15. CASE STUDIES
- 16. $100K Gala Annual fundraising dinner Two $10,000 sponsors One $5,000 sponsor 30 tables at $2,500 each
- 17. $20,000 Grant Prominent local foundation 2 years, $10,000/year Quarterly reporting required Some modifications to existing program
- 18. % of one day’s customer receipts go to organization Organization must staff the event Gross Revenue of $21,000 Benefit Day
- 19. Comparing CTRDs $100K Gala = $0.94 Vs. $20K Grant = $0.82 Vs. $21K Benefit Day = $0.12 Gala brings in more GROSS revenue, but is less PROFITABLE than the grant. Grant and Benefit Day bring in the same gross revenue, but Benefit Day is more profitable.
- 21. Invest: Much less than $1.00 These are your most profitable activities Evaluate: Around $1.00 Could you make these more profitable? Abandon: More than $1.00 Let these go! Create 3 Lists
- 22. List all invested stakeholders Board members that love the activity Donors or sponsors of the activity Volunteers for the activity Staff running the activity Determine how powerful/disruptive each is Meet one-on-one with the most powerful Brainstorm how to re-channel passion How to Abandon Activities
- 23. Getting Started List all money generating activities Calculate Net Revenue & CTRD for each Add each activity to one of the 3 lists Begin abandoning unprofitable activities
- 24. Learn More… Calculating the Cost of Fundraising On Demand Webinar Download Here (Includes more formulas, explanations, questions)