Calculating the Cost of Fundraising
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Transcript of Calculating the Cost of Fundraising
Calculating the Cost of Fundraising
How Effectively
Are You Raising Money?
©Social Velocity
What’s your most successful money raising activity?
How do you know?
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?
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
TWO FORMULAS
Don’t Be Afraid of The Math
Simple math: just +, - , x, and ÷Ball park estimates are fineAnalyze trends, not minutia
Two Key Formulas
Net Revenue $ Raised – ALL Expenses
Cost to Raise $1.00 ALL Expenses ÷ Net Revenue
Net Revenue
Direct ExpensesPrinting, entertainment, food, space
Indirect ExpensesStaff 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
Why Include Staff & Board
Time?Opportunity Costs
Limited board & staff resources
Put to highest/best use
Understand cost of time
Tracking Staff Time
Don’t get bogged down in EXACT numbersUse 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”
Cost to Raise $1.00
Determines financial return of each activityCompare fundraising activities
Annual Gala costs $0.97 to make $1.00Direct Mail costs $0.75 to make $1.00County grant costs $3.45 to make $1.00
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 pictureDoesn’t allow comparisonsIgnores THE BOTTOM LINE
Intangible Value of Events?
“Goodwill” or “Raise Awareness”Vague and un-measurable, not targetedPick 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
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
CASE STUDIES
$100K GalaAnnual fundraising dinnerTwo $10,000 sponsorsOne $5,000 sponsor30 tables at $2,500 each
$20,000 Grant
Prominent local foundation
2 years, $10,000/year
Quarterly reporting required
Some modifications to existing program
% of one day’s customer receipts go to organization
Organization must staff the event
Gross Revenue of $21,000
Benefit Day
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.
MAKING DECISIONS WITH DATA
Invest: Much less than $1.00These are your most profitable activities
Evaluate: Around $1.00Could you make these more profitable?
Abandon: More than $1.00Let these go!
Create 3 Lists
List all invested stakeholdersBoard members that love the activityDonors or sponsors of the activityVolunteers for the activityStaff running the activity
Determine how powerful/disruptive each isMeet one-on-one with the most powerfulBrainstorm how to re-channel passion
How to Abandon Activities
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
Learn More…
Calculating the Cost of Fundraising
On Demand Webinar
Download Here(Includes more
formulas, explanations,
questions)
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