Calculating the Cost of Fundraising

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Calculating the Cost of Fundraising How Effectively Are You Raising Money? ©Social Velocity

description

To more effectively fundraise, nonprofits must calculate the return on investment of every fundraising activity. Here's how.

Transcript of Calculating the Cost of Fundraising

Page 1: Calculating the Cost of Fundraising

Calculating the Cost of Fundraising

How Effectively

Are You Raising Money?

©Social Velocity

Page 2: Calculating the Cost of Fundraising

What’s your most successful money raising activity?

How do you know?

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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?

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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

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TWO FORMULAS

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Don’t Be Afraid of The Math

Simple math: just +, - , x, and ÷Ball park estimates are fineAnalyze trends, not minutia

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Two Key Formulas

Net Revenue $ Raised – ALL Expenses

Cost to Raise $1.00 ALL Expenses ÷ Net Revenue

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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

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Why Include Staff & Board

Time?Opportunity Costs

Limited board & staff resources

Put to highest/best use

Understand cost of time

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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”

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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

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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

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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

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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

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CASE STUDIES

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$100K GalaAnnual fundraising dinnerTwo $10,000 sponsorsOne $5,000 sponsor30 tables at $2,500 each

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$20,000 Grant

Prominent local foundation

2 years, $10,000/year

Quarterly reporting required

Some modifications to existing program

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% of one day’s customer receipts go to organization

Organization must staff the event

Gross Revenue of $21,000

Benefit Day

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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.

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MAKING DECISIONS WITH DATA

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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

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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

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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

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