Fall Forecast

Fall Forecast

Not to be a Negative Nelly, but do y’all remember last December? Last December we had the triple-downer of: a sharp stock market decline;a government shutdown; andgeneral political divisiveness. The net effect was one of the poorest performing fundraising Decembers of the past decade. If you’ve read the news lately, among the headlines are topics such as: stock market nervousness over the China trade-war (and September/October historically tends to be a common month for crashes);concern of a government shutdown on September 30 over the Administration’s plan to cutoff of international aid; andgeneral political divisiveness. In times of economic uncertainty, donors are hesitant to add new organizations to their giving portfolios. This could mean a rough acquisition season. However, your most loyal donors tend to step up their giving during adverse economic environments. Hopefully I’m wrong and we’ll have a stellar fall acquisition season where the money just rolls in. But on the chance that my concerns are justified, it might be good to start planning for a CYE telemarketing campaign to your best donors to fill the potential gap. I know a lot of organizations (more correctly, their BODs) hate TM. But may I suggest one piece of advice: get over it. TM works. And in economic adverse times, your organization needs to utilize all the tools available to secure the funds you need to fulfill your...
Same as it Ever Was?

Same as it Ever Was?

Last week, I was revisiting some 10-year old analyses. It was both comforting and alarming at the same moment. Comforting in the fact that your Multi-Year donors today (those who have given to you in at least the last two consecutive years) perform very similarly to the way they did 10 to 15-years ago. Then as now, Multi-Year donors are just rock-solid performers. The metrics hadn’t meaningfully changed, other than their average gift is now a little higher. That means, acquiring donors who you can move to a Multi-Year relationship is still the name of the fundraising game. However, the decline in two trends over the past decade are alarming: New donor acquisition and Second-Year retention. This won’t surprise anyone. It’s getting harder to acquire New donors and even harder to retain them. Second-Year retention was still in the 40% range back then. Probably because most New donors were acquired via direct mail. Those donors still retain well even today. But with the transition of acquiring donors in multiple channels today comes this downside: these donors acquired in other channels just don’t stick as well as direct mail donors. The big consequence to lower acquisition and poorer second year retention of course, are declining file sizes. If an organization of 20,000 active donors lost 3% of their file every year, after 10-years the active donor counts will be under 15,000. That’s scary stuff. Our only saving grace is that for most organizations, the donors who are active are giving larger gifts. These larger gifts have mitigated the falling active donor counts. This trend will not last forever. The big...
The Most Common Analysis

The Most Common Analysis

This year, we have been interviewing (and hiring) new analysts for our growing company. One of the candidates we were talking with recently asked us a great question: What is your most common ad-hoc analysis? Anyone who has worked with nonprofit organizations is likely familiar with this one. And sadly, it’s killing nonprofits: The Stop Acquisition Analysis. A healthy donor database requires a significant investment in acquiring new donors each and every year to replace the inevitable lapsing of current donors. We all have seen the LTV on new donors. An investment in new donors generally breaks even some time in year 2, and then those donors are profitable from year 3 onward. The problem is that nonprofit boards of directors are oftentimes focused solely on the current fiscal year. When budgets are tight (when aren’t they?), the first place they look to cut their budget is new donor acquisition. And thus, begins a descent into nonprofit hell. With your data and our stats tools, we can put together an analysis of what the (bleak) revenue projection looks like when you stop acquisition. The lack of new donors will cause a decline in file size. A decline in file size results in a decline in revenue followed by a decline in the organization’s budget – which of course will lead to a cut in new donor acquisition the next year. And then, the descent into nonprofit hell accelerates. One of my career goals is to see the day when the Stop Acquisition Analysis is not so popular. Until then, if you are fighting for your acquisition budget from a...
Overall Performance Metrics are Rubbish

Overall Performance Metrics are Rubbish

Your ‘healthy overall retention rate’ is a lie and you should feel bad about believing it. Well, probably. Let’s start with this. Take a look at the chart below and tell me if you’d rather be Organization Blue or Organization Orange? The choice is obvious right? Orange is killing it… WRONG! So, so, so wrong. Now let’s look at projected revenue for the same orgs: What the heck. How is this even possible? It’s not only very possible, I see it all the time. In creating the scenario above, I made each performance metric for Org Blue and Org Orange exactly the same. Their retention by lifecycle – all at the same benchmark levels, their gift sizes and frequency – held constant. Everything about the two orgs is identical except for one thing: Orange is acquiring 10% fewer donors each year, while Blue is acquiring 10% more. Why does that impact retention? Since Blue is adequately growing its file, it has a higher proportion of donors each year in transitional segments (second-year/reactivated). These two lifecycles have lower retention rates than long-term loyal donors. Meanwhile, donors in the active file for Orange are  dropping like flies because the only ones it has left who are factored into overall retention rate are the increasingly lonely, but high performing multi-year donors. These remaining loyal donors are propping up the overall metrics on a crashing file. There are two lessons here… If you like your org and don’t want to have to start a new one, keep acquiring new donors. Always. That’s the lesson from this specific scenario. But what I really want...
Postage Going Up

Postage Going Up

On January 27, first class postage is going up to 55 cents, a 5-cent increase. This is the largest increase in almost 30-years. As this article states: “The Postal Service lost $3.9 billion in 2018, attributing the losses to drops in mail volume and the costs of pensions and health care. It marked the 12th year in a row the agency reported a loss despite growth in package shipping.” $3.9 billion. That’s a big number. To put this in context the USPS lost almost a half million dollars every hour, 24-hours a day. That’s just not sustainable. We have been fortunate in this country to have had such a great postal system. It has been fast, accurate and affordable. Nonprofits have been doubly blessed by the US Postal Services’ postal subsidy for nonprofit organizations. But that is changing before our eyes. Delivery of nonprofit mail is getting slower and slower and impossible to predict. Nonprofit mail is now delivered in batches. That means when your appeal does finally get delivered, it’s hitting your donors’ mailbox at the same time as every other nonprofit’s mail. This fall I received 8 appeals on the same day. So now not only are your appeals unpredictably slow on delivery, they are facing greater competition. I can’t help but think that the nonprofit postal subsidies will likely end soon. Here’s what I recommend while there is still time: Analyze the ROI of your donor segments this fall and test first class postage in top performing segments. With access to reliable nonprofit postage, first class postage is an extravagance. However, you are paying a lot...
The Exponential Importance of Second Gift Timing

The Exponential Importance of Second Gift Timing

Check this out! This graph shows the the five-year value of a donor based on how quickly an organization converts a new donor into a second gift donor. The correlation is astounding. New donors that give a second gift within the first 3-months have LTVs nearly twice as high as those who give at the 12-month mark. This demonstrates that it is worthwhile to spend money cultivating a second gift early in your relationship with a new donor. What’s also surprising is the value of donors who convert 13-24 months after their initial gift. This is encouraging. Don’t give up on a new donor than didn’t convert in their first year. However, less surprising, new donors who wait 25+ months to convert have much lower LTV rates. All this indicates the need to have strategies in place encouraging the second gift ASAP for your newest...