5 KPIs every leader should know about fundraising
We talk a lot about data-driven fundraising these days.
As leaders and fundraisers, we know we should be using data to inform our decisions. As frontline fundraiser Melisse Skelton summarized so eloquently in 6 reasons MGOs should embrace metrics, metrics are the foundation of relationship-based fundraising. They hold fundraisers accountable, improve the donor experience, and accelerate the pace of revenue growth. They also are the simplest way that nonprofit leaders track the health and growth of their fundraising programs in order to decide where to focus and invest next.
The question is: What key performance indicators (KPIs) should we be looking at to drive revenue growth? With a mountain of data to sort through—and more coming our way every day—it can be hard to know where to focus, and even harder to really hear the story that the numbers are telling us.
At Aperio, we believe that simple is powerful. By narrowing in on a handful of metrics, you can keep a pulse on the direction of your fundraising program and gain the insights you need to establish priorities, allocate resources, and determine next steps.
In my experience, there are the five key performance indicators that every leader should zero in on:
Donor base reach
Year-over-year donor retention
Portfolio quality
Number of meaningful interactions
Pipeline coverage ratio
Here’s how to get started…
1. Donor base reach
The place to start your assessment of your fundraising program is: How many people are we reaching?
A good starting datapoint is: How many constituents are in our database? Database size is a number that nonprofits focus on a lot because we have come to equate more donors with more revenue—especially in special events and peer-to-peer fundraising. It’s easy to believe that for our programs to grow, we continually need to secure new donors.
The real question should be: How many constituents are we reaching? For example:
How many people you are marketing to?
How many are donating annually?
By understanding your reach within your database, you can begin asking yourself: Are we reaching enough people? Are we reaching the right people? Are we truly engaging the supporters we’ve worked so hard to acquire? Are they interacting with your content?
You may find that there are major barriers to reach that you need to remove, such as missing contact information or historical communications suppressions. By removing these barriers, you can unlock significant new potential in your database.
As your program matures, your database reach will increase—through a combination of smarter engagement of your existing base and new donor acquisition.
2. Year-over-year donor retention
Simply put, donor retention is the percentage of donors who continue to support your organization beyond their first gift.
Year-over-year donor retention is the percentage of last year’s donors who also gave again this year. In other words, it’s the number of donors that you successfully engaged, stewarded, and asked again for a renewal or upgraded gift. (Check out this article on how to calculate it for your organization.)
Year-over-year donor retention will never be 100%, but in most organizations, it can and should be much higher. On average, nonprofits retain about 45% of donors year-over-year. That means we make our case to existing supporters in a way that inspires 45% of donors to renew their gift. That means 55% of donors do not renew. Let that sink in for a minute….
Not only is it a lot of work to replace over half of your donors each year, but it’s expensive too.
Most organizations’ acquisition channels are: direct response, special events, and peer-to-peer. What these channels have in common is that they are our most expensive fundraising channels. The cost to raise a new dollar is typically 40-60 cents when you honestly factor in staff time. Those are expensive dollars. Unfortunately, then, we get so focused on the next mail piece or the next event or the next fundraiser, that we overlook ways to bring the donors we have already acquired into the family in meaningful and sustainable ways.
The question we always ask organizations that are hot on acquisition is: What are you acquiring them for? If you are not willing to invest in the systems and people to engage, inspire, and ask donors for renewals, there is no point in acquiring donors. The ‘profit’ on a first gift is minimal (or even negative in some channels). The real value of a donor comes in their lifetime of giving.
When you do the math for your organization, you’ll see that every percentage point increase in year-over-year donor retention represents significant revenue—and a reduction in the cost to raise a dollar because retention is less expensive than acquisition.
3. Portfolio quality
Portfolio quality is the ratio of people you are managing through a high-touch experience compared to the number of people who merit that level of experience.
A ‘portfolio’ is a shortlist of people assigned to a specific member of your team for proactive relationship management, customized mission experience, and personalized (ideally, face-to-face) solicitation. Portfolios are comprised of both donors who are giving large gifts already and those who have the potential to do so in the future.
Once you’ve gotten a sense of your donor base reach and your year-over-year retention rate, you can start assessing: Who are the highest-potential donors, and how are we managing those relationships?
That’s where segmentation comes in. You can read our step-by-step instructions on segmentation here—but, really, ‘segmentation’ is just a fancy word for ‘organizing your lists’. A key first step of segmentation is wealth screening and/or analyzing your donor base to identify the list of people who are already giving at a high level or have the potential to do so in the future.
This is list is your ‘portfolio pool’—the number of people who are worth providing a high-touch experience due to their growth potential. These are the 20% of donors that will drive 80% of your revenue.
Your ‘portfolio pool’ is then assigned out to staff members. We recommend that a portfolio be 150 prospective donors per FTE, with no more than 10-20 per executive or Chief Development Officer.
If you’re like most organizations, you will have a larger ‘portfolio pool’ than you can assign out. Staff capacity typically limits our ability to fully explore all the potential in our database.
By tracking your portfolio quality—the number of donors in portfolios divided by the total ‘portfolio pool’—you’ll keep tabs on untapped database potential. You’ll be able to make informed decisions about where to focus staff time and when to add additional relationship-based fundraising roles.
4. Number of meaningful interactions
It’s hard to advance relationships if you are not talking to your donors. The more you connect with your donors—through meetings, phone calls, emails, etc.—the deeper your donors’ engagement in your mission and motivation to contribute philanthropically.
The number of meaningful interactions refers to the number of conversations with portfolio donors that move relationships forward.
Most organizations track meaningful interactions in their CRM and focus in on interactions that spark two-way conversations, such as meetings, phone calls, and emails with replies.
What makes an interaction ‘meaningful’ is that it is authentic and specific to the donor. An interaction, by definition, implies that it’s not just your fundraisers talking at donors, but also the donors having a chance to share their perspective as well. Your fundraisers will be most successful when they plan out these interactions. Every donor is different, so we have to map out the touchpoints for each person individually—and then work that plan!
Set stretch goals for yourself and your team for these meaningful interactions, such as the number of donor meetings per month, and then talk about your progress continually. Look over the ones you’ve completed and celebrate them. Talk about which ones you’ll prioritize next to get the team thinking forward. Not only will this hold your fundraisers accountable to their plans for donors, but you’ll see meaningful interactions moving relationships closer to asks for support. And, as we know, the more we ask, the more likely we are to translate those asks into gifts.
5. Pipeline coverage ratio
Speaking of asks, the last KPI is your ask pipeline coverage ratio, or: How do your planned solicitations stack up against your revenue goals?
We all know from experience that not every donor we ask will say yes or say yes right away. So, if we want to raise $1 million, we need to ask for more than $1 million.
The ratio of the amount we ask for compared to the amount of our goal is called the pipeline coverage ratio. If I plan to ask for $3 million to raise my $1 million goal, my coverage ratio is 3x. A healthy coverage ratio is in the 3-5x range.
We encourage organizations to get specific about ask plans. In your database, go through each of your portfolio donors and map out: What will I work toward asking this donor for this year? By when will I ask? At this point, what do I expect in terms of gift size and date?
Those datapoints will evolve as the relationship and the solicitation progresses. The portfolio holder and their supervisor should know the details, such as: How many asks are there? Are they on track to take place in the timeline we’re aiming for? Are any overdue and needing attention?
But every leader should know: Do we have enough asks in the works to achieve our goal?
As an industry, we are fortunate that it is becoming easier and more efficient every day to access the data we need to achieve our goals. As leaders, it’s our role to get out of the data soup and zero in on the handful of KPIs that tell the story of our fundraising program in numbers. By knowing these numbers—what they mean, what they are today, how they are trending—we can begin to see the forest through the trees. We gain the insight we need to do more than hope for revenue growth, but to truly drive it.