Whether your organization has a long history or is a newly established 501c(3), it’s vital to conduct regular evaluations of your fundraising infrastructure and data. Below are key best practices that will set your nonprofit up to maximize fundraising throughout the year.
How many do you have in place today?
Infrastructure “Must-Haves”
Below are your fundraising infrastructure essentials for operational excellence:
- Charitable Registrations. This is a legal requirement in at least 40 states if you intend to solicit donations. Every state has specific requirements, and you should consult regularly with legal counsel to make sure you’re complying with current regulations. Charitable registrations also enhance transparency and accountability, increasing public trust and expanding your fundraising opportunities.
- Gift Acceptance Policy. These guidelines lay out what types of donations you will accept and the procedures for handling these gifts. These policies are crucial because they help you manage donor expectations, ensure you’re only accepting gifts that further your mission and purpose, and mitigate potential legal and financial risks.
- Customer Relationship Management (CRM) System. By consolidating data into a single platform, a CRM ;enhances operational efficiency, allowing you to track interactions, manage communications and analyze donor behavior more effectively. This can improve donor sentiment, engagement and retention. Additionally, a CRM can provide valuable insights via detailed analytics and reporting, including predictive analytics, helping you make informed decisions.
- Case for Support. This is a comprehensive document that spells out your organization’s mission, vision and goals. It provides a compelling rationale for why donors should support you. It should define short- and long-term priorities as well as inherent challenges you may be facing.
- Development Committee. Fundraising is a collaborative effort. Your Development Committee plays a pivotal role in operational excellence by overseeing and guiding your fundraising initiatives, including developing and implementing strategies, setting goals and engaging with potential donors. The committee helps build and maintain donor relationships, ensuring a steady flow of resources. It should operate under a formal charter to ensure effective engagement at all levels.
- Donor Segmentation. This is the process of dividing your donor base into small subgroups based on shared characteristics, such as demographics, donor behavior or engagement preferences. Segmentation is crucial because it allows you to tailor your stewardship activities to specific donor attributes, resulting in more personalized and effective outreach.
Understand Your Metrics to Drive Strategy
Understanding fundraising metrics is essential to form deliberate strategies to improve the efficiency and effectiveness of your efforts. These are the key components you need:
- Key Performance Indicators (KPIs). Identify relevant metrics that align with your organization’s goals.
- Regular Data Collection. Implement a consistent routine for data collection. Consistency is key for tracking trends over time and making meaningful comparisons.
- Trend Analysis. Look beyond the surface numbers to identify trends and patterns. For example, look at your organizational activities and messaging sent during a period of lower-than-average donor retention.
Top 5 metrics to focus on
There are numerous KPIs to evaluate your organization’s fundraising effectiveness and success. If your time is limited, here are five high-priority metrics to focus on:
- Donor Retention Rate. Measures the percentage of donors who continue to support your organization year after year. High retention rates indicate strong donor relationships and satisfaction.
Formula: (Number of Previous Year's Donors Who Gave this Year / Number of Previous Year's Donors) x 100%
- Average Donation Amount. Provides insight into your typical donation size, guiding strategies to increase donor contribution value.
Formula: Total Donation Revenue / Total Number of Donations
- Cost Per Dollar Raised (CPDR). Measures the efficiency of your fundraising efforts by calculating the cost to raise each dollar. Lower CPDR indicates more efficient fundraising.
Formula: Fundraising Expenses / Fundraising Revenue
- Donor Lifetime Value. Shows the total amount of money a donor is expected to contribute over their relationship with your organization, taking into account the average donation frequency and donation amounts. It can inform fundraising strategies aimed at maximizing donor value.
Formula: Average Gift Amount x Number of Gifts per Year x Average Donor Lifespan
- Donor Acquisition Cost. Measures the average cost to acquire a new donor. This helps you evaluate the efficiency of your donor recruitment efforts.
Formula: Total Campaign Cost / Number of New Donors
How Well Does Your Nonprofit Fundraising Rate?
Is your nonprofit set up to maximize fundraising, or are you missing some of these checklist essentials? If you’re lacking some critical components, Armanino can help you implement the tools, resources and strategy to reach your operational and fundraising goals. Find out how our Nonprofit Strategic Development consultants can help you build a data-driven approach to make your fundraising more intentional, efficient and profitable.
