Net Dollars Not Donors Part 2

Net Dollars Not Donors Part 2

This may sound heretical, but counting donors isn’t as important as counting dollars. Here’s why: donors are not of equal value. For far too long in fundraising, there has been this assumption that “more donors are better.” This would be true if (and only if) all donors have equal value. But they don’t. I think I know we got here. Once upon a time an analyst figured a donor’s long-term value. Let’s say that value was $225. Then the DD thought, “Hey, all I need is more new donors. The best way to get more new donors is to lower my acquisition ask string.” Then 5-years later, the analyst recalculates the LTV and finds it’s only $100. The DD is angry with the analyst. They just spent $100 acquiring these donors. So the net value after 5-years is $0. “You said each donor was worth $225!” You know how the what happened. LTV Is tied to first gift amount. Lower the ask, you lower the LTV. Yet still, I talk with Development Directors who think 1,000 donors with an AGS between $10-24.99 are better than 10 donors with an AGS of $25-49.99. But when you take both acquisition and cultivation costs into the equation, as the table below shows, that’s just not true. Acquiring 1,000 donors with an AGS between $10-24.99 will yield a negative net revenue of $24,000 after 5-years. Whereas just 10 donors with an AGS of $25-49.99 will yield $490 in positive net revenue. If you want to change the direction of your fundraising programs, you first must change what you are...
Net Dollars Not Donors Part 1

Net Dollars Not Donors Part 1

Somewhere over the rainbow in fundraising, two metrics were established as the gold standard: gross revenue generated and the number of donors acquired. And that’s a shame. It’s a shame because you can optimize these two metrics into organization ruin. Let’s take gross revenue. The reason it is used is because it’s simple to measure. But it has a serious drawback: it doesn’t account for what you spent to raise that money. It’s like a habitual gambler bragging about the $1,000 lottery winnings they had the night before while omitting the fact that have bought a $5 scratch ticket every week for 10 years. So their real ROI is 0.38. Wahoo! Seriously, if you are using gross revenue as your fundraising goal, you need to stop it and start using net revenue. It’s just bad stewardship to use gross revenue...
Fundraising Facts Over Fundraising Feelings

Fundraising Facts Over Fundraising Feelings

We have entered an interesting season in America. Seems like “facts” are being treated like just another opinion. And the consequence is that if facts and opinions are equals, then making your direct response fundraising decisions based on feelings is an equally valid approach. And that would be a mistake. A HUGE mistake. I was reminded of how feelings can misguide us. We completed one of our Offer Forecasting studies last month. Offer Forecasting leverages online surveys to predict whether donors will open a direct mail piece. It also measure donors’ likelihood to give to a certain offer. Before our latest Offer Forecasting study went into the field, everyone at Analytical Ones made friendly wagers on which of the nine offers we were testing would be rated the highest by the donors. Knowing the client and their donors as well as I do (I mean I’ve worked with the client for years, plus I have 20-more years of direct response experience) I was pretty confident that the offer I chose would win. And my pick came in dead last. In. Dead. Last. My business partner has a great saying when fundraising “experts” try to predict how donors will respond. She will say emphatically: “Repeat after me. YOU are not the target audience!” This why we at Analytical Ones always base our recommendations solidly on the facts. And though it may be trendy at the moment to go with your feelings, we implore you to use fundraising facts over fundraising feelings in...
The Frustration of Volunteering

The Frustration of Volunteering

This past year, my family and I have been volunteering for Lutheran Social Services to help refugees from Syria, Iraq and Afghanistan relocate to Savannah. I admire the work that Lutheran Social Services does with refugees. It’s a huge job and they do so much with so little. And because of a lack of resources, they rely heavily on volunteers. One of our jobs has been to help coordinate volunteers. And I learned something this past year. Volunteers, well, they just aren’t reliable. It’s not that they are flakey, it’s just that volunteers, even retired ones, have very busy lives. I would say the amount of time we have spent just trying to coordinate volunteers to help is many more hours than we have spent directly assisting refugees. I confess, I don’t get my “volunteer kicks” by doing administrative and menial tasks. You might be the same. And while as a business owner, I know the critical role of administrative tasks, I don’t enjoy being on the phone begging people who have “signed up” to show up. As fundraising consultants, one of our common recommendations is that the nonprofit “engage their donors with volunteering opportunities.” I now understand why the typical response from the client when they hear me say this is a sigh and roll of the eyes. It does seem the amount of staff time, effort and resources to recruit, train, coordinate and manage volunteers just isn’t worth the result. And that’s a shame. One solution is Psychic Pay. My business partner Joe Churpek blogged about this a couple of years ago, you can read about it...
The Correlation between Direct Response ROI & Net Revenue

The Correlation between Direct Response ROI & Net Revenue

Any of us that have been in the fundraising agency business have had the following meeting a least a dozen times: There are a bunch of somber looking board of director types from the nonprofit organization in the main conference room. They distrust agencies. Unlike development people who see how much money agencies bring into the organizations, the board only sees the checks that are sent to the agencies. The board’s one and only metric is ROI. Somewhere along the way, they tend to get this idea that the direct response fundraising ROI and net revenue have a 1:1 correlation. They don’t. Actually, the correlation looks more like this: We have found the optimal ROI for direct response fundraising is around 4.00. Sure it’s going to vary a bit by organization and which donors you are including in your appeal letters. But generally speaking, if your ROI is under 4.00, chances are that you are mailing too deep. Or in other words, you are spending too much on mailing and you need to be looking at your segmentation selection process. Conversely, if your ROI is above 4.00, you are likely leaving net revenue on the table because you aren’t mailing deep enough. Sure, your board might be happy with those ROIs (that GuideStar and Charity Navigator place far too much emphasis on IMHO) but the fact of the matter is, those high ROIs are hurting your ability to accomplish your mission. So please don’t manage to maximize your direct response ROI. Manage to maximize your net...