Metrics, Friend or Foe? (Part Four)

Boyle, Janice

By Janice Boyle

Which ones are the right ones?

The time has finally come for me to share the fundraising metrics that I have found most helpful in describing fundraising effectiveness clearly for the fundraising team and laypeople alike. It’s a simple formula, and it boils down to five words. Sustainable Net Growth, Awareness, Accuracy.

Just to take one step back, if you want to know what to measure, you have to know what your goal is (obvious, but shockingly this is rarely clear). For me, this applies to annual giving specifically (including large annual gifts), and the only ultimate goal that has ever made sense to me is “net revenue”. Again, this is what you have available to support the mission and the necessary administration of the organization. When people start talking about gross revenue, I get glassy-eyed, and start thinking about what I’m going to make for dinner.

So, for those five words.

Sustainable. To me Sustainable simply means that you can repeat your annual net revenue results with a high degree of reliability, which means risk mitigation. And where things get risky for an organization depending on private funding to sustain their operations is having to many eggs in too few baskets. The appropriate metric answers this question: what is the largest amount your organization can lose (donation not repeated) in a given fiscal year, and make it up through other means so your ability to operate isn’t disrupted. Is it a specific dollar amount, a percentage of your budget? At one point in my career, that number was $400,000. If we had a single donor at that level who didn’t return the following fiscal year, we would be able to offset the loss given our other growth rates. Any higher than that, and our net revenue would have dropped year to year. So having a single donor giving more than that increased our risk. Having our top 5 donors give that amount lowered our risk.

So the specific number or percentage will be organization specific, but ideally you want to work towards not being that dependant on one or a very small group of contributors. That also means paying attention to your 80/20 rule (80% of your revenue comes from 20% of your donors). Are you close? Are you top-heavy? (Risky) Are you bottom heavy? (Opportunity). Are the different giving segments of your donors base growing at similar rates?

Now, to figure out your 80/20 rule (and the rest of the metrics I use), I take the principle of donor centred fundraising to heart. A donor is a donor is a donor. They don’t consider themselves “special event” or “planned giving” or “direct mail” or “online” donors . Those are our artificial constructs. They simply see themselves as supporting your mission. We are the ones who put them in silos. So, I look at all donors, and their total giving in a fiscal year when doing any calculation/comparison/chart/whatever.

I also want to clarify how I use the terminology of a “major donor”, which for me is different from a major gift. The best definition I ever heard of the difference between an annual gift and a major gift is that for an annual gift, a donor can write the cheque without consulting their spouse or a financial advisor. They don’t have to think about whether or not they can afford it. They know they can. They can be frequently asked, and give frequently. A major gift is a “stop and think”gift. They would consult with their spouse, their accountant, etc. before making a commitment. They are infrequently asked and infrequently given. My highly technical terms describing the difference in giving is “smooth” versus “lumpy”.

When you are raising revenue to support annual operating (smooth) expenses, sustainable equals smooth. In my opinion, “major gifts” are strategically a bad idea to support annual operations. They are ideal for capital campaigns, special projects, seed funding, really anything that is time limited (lumpy). So I’ve never focused on “major gifts” for annual operations.

I have, however, focused on major donors. One of the things you will notice so far in the definitions, there is no defined “gift amount” mentioned. That is because for every individual, the definition for them (donor-centred) is unique. For some an annual gift is $10, for others it’s $500,000. For annual operations you want to focus on gifts that fall shy of the “stop and think” threshold for that donor. So here is how I define an organization’s major donors. Take the pyramid you created to examine your 80/20 rule distribution, or table, which has giving levels down the left, and has a column for number of donors and total giving by giving level. Have the highest at the top. So, starting at the top and working your way down, what giving level do you get to that in total represents half you annual revenue? Is it 2.5% of your donors, 10%? And what is the lowest giving level? $500, $100, $1,000. Whatever that number is, you’ve just identified what a “major donor”is for your organization. I can’t emphasize this strongly enough…IT DOES NOT MATTER HOW THEY GAVE OR WHAT THEY RESPONDED TO. And that number can change over time. Also, because we all have limited resources, that is the group you want to concentrate your efforts on first, and move as far down into the pyramid as your time and resources allow.

Net. I feel like I have flogged this one quite a bit over the last few articles, but what it means to me is two things. If net is your goal, it means you will choose lower cost fundraising strategies and exhaust their potential before higher cost strategies. Special events are quite low on the list (7 out of 10 for cost effectiveness), but are almost universally coveted with an intensity I simply do not understand. They have their place, but until you have exhausted options 1 through 6…why? And yes, I’ve heard the awareness building argument. Special events are also a very expensive way to build awareness. (Quick tip, radio advertising is cheaper and more effective!)

Secondly, it means you are always working to meet or beat industry standards for the cost of each stream. That’s it. Your overall cost/$ raised is interesting but indicative of nothing.

Growth. Given the societal needs non-profits are working to meet, there is almost always room to do more. I believe there are only two ways to grow sustainable net revenue. More donors. More giving per donor. Those are the top two numbers you should be comparing year over year.

Obviously, it breaks down a little further. How do you get more donors? Through prospecting activity (# of first timers), and keeping as many of your existing ones as possible (annual renewal rate). To grow, you have to be attracting more new donors than you are losing, and you can reduce your losses by treating your current donors better. Even when I was working with an annual donor base of almost 50,000, the segments I looked at never needed to be more complicated than first time donors, renewed donor who gave last year, renewed donors who gave before last year, and the resulting total each year.

In terms of increasing the total given per donor per year, that begs the question “how do we get them to give more often and/or larger gifts?” All your strategies should flow from trying to increase 3 metrics; number of gifts per year, average gift, average annual giving (total over the fiscal year).

Awareness and Accuracy. The higher the public awareness is of your mission, and the more accurately they understand your mission and work, the more receptive they will be to transition from a member of the general public to a supporter. There is a simple and cheap way to understand where you fit in your marketplace, and to see if your efforts are producing any change. Every two or three years, conduct an omnibus survey (you get one or two questions tacked on to someone else’s survey), and the report comes back with useful numbers. The first measurement is always a baseline, and the goal from that point is how to increase it. To measure activity in the meantime, the easiest way is to track impressions. Each type of publicity, print, radio, tv, online has an associated number of impressions assigned to it (how many people see it, hear it, read it). They publish those figures generally as part of their advertising information. Growing the number of impressions each year correlates with increasing your exposure, and logically leads to increased public awareness and accuracy.

There you go, there are my five major metrics. These metrics are my friends. If you have any questions or comments, please feel free to reach out.

And going forward, in terms of convincing those around you what metrics are the right ones for your work? It’s about recognizing the need for ongoing education for those outside our profession about how our business works. There are always new board members, new program managers, new staff, new volunteers, the education never really ends. For us it can feel repetitive and obvious. It’s not, we just live it every day. If you think about it like a renewable chore, like dishes, or laundry, you get a better sense of the required frequency. Although it doesn’t feel like a time-saver, it is. It helps keep the strategic conversations focused where they should be, and it turns your board and your peers into you first best line of defence in reviewing and challenging your plans and strategies. They ask better informed questions, prompting more creative thinking. The laypersons perspective pushes us to valuable insights we otherwise may have never considered. And everyone benefits as a result.

Janice Boyle started her fundraising career as a student caller for UBC’s annual fund. Her career has spanned the social services, education and healthcare sectors over the last 20 years in senior leadership roles. She is passionate about improving her local community, with her specialties in non-profit leadership, supportive infrastructure, and team building. She was recognized in 2011 with the Association of Fundraising Professionals’ Outstanding Professional Fundraiser Award as well as the Business in Vancouver’s 40 Under 40 Outstanding Achievement Award in 2002. She can be contacted at Janice.boyle53@icloud.com

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