It’s not how much you raise. It’s how much you keep.
When meeting with non-profit clients for the first time, I am often surprised by how many development officers are still talking about how much money they raised with their last fundraising appeal or event.
Of course, everyone wants to be able to report that they raised more money or gross revenue with this year’s annual appeal or gala than they did last year, but shouldn’t we all be more focused on net revenue or how much money went to delivering on our mission?
Too often, analysis reveals that while more money was raised, more money was also spent. Sometimes resulting in less net revenue than the previous year.
Assuming your organization’s mission isn’t to conduct fundraising activities, how can you ensure that you’re netting more with your fundraising efforts, so you can DO more toward your mission?
Measuring results begins with calculating the net revenue of past efforts, so that when comparing this year to last year, you’re comparing apples to apples. To do that, a decision has to be made about what to include in the cost side of the equation. Most non-profits include the direct costs associated with the appeal or the event. Direct costs include all the materials required for the fundraising activity. They include things like printing, postage, space rentals, food, drinks, entertainment, labor, etc. But, to get an accurate understanding of how much you netted, indirect costs of volunteer hours and overhead staff time should also be included.
Costs associated with planning a major fundraising event over the course of 6 months.
|Board Members||50 @ value of volunteer hours $20.25 (industry standard)||$1,500|
|Total Time Costs||1,350 hours||$38,375|
Combined with the calculation for cost to raise a dollar, the calculation of net revenue makes it clear which activities are most effective. Knowing which activities are generating higher net revenues and low costs to raise a dollar allows the organization to properly allocate limited resources to activities that help you raise the funds that you need to deliver on your mission and succeed.
With the insights that come from the net revenue calculation, you’re now ready to start working to improve your results.
As we’ve shown, net revenue is a calculation with two sides: the amount you raised and the amount you spent. To increase net revenue, you can work both sides of that equation. The ideal situation is that you raise more money and reduce the amount you spend to do it!
While that may sound idealistic, working both sides of the equation is how we improve net revenue for our clients at Phoenix Innovate. We use data derived through analysis and research to better motivate donors to give AND to reduce waste.
For more information on data-driven fundraising, see our article entitled: "You need to know your donors to engage them."