Fundraising Benchmarks for Small Nonprofits ($2M and Under)

By Joanna Joslyn, Project Manager & Principal Consultant, Joslyn Creative

View the original blog here.

Fundraising Benchmarking is the process of comparing your nonprofit’s performance metrics to industry bests, or the best practices of peer organizations. By analyzing normal and average results across the nonprofit sector, fundraisers can more effectively evaluate their past performance, and set appropriate goals.

This Benchmarking tutorial focuses on four common fundraising performance measures:

1. Dollars Raised
2. Average Gift Amount
3. Response Rate
4. Retention Rate

Fundraising performance varies dramatically between different nonprofit industries, by the types of fundraising activities engaged in, the size of an organization, and the demographics of the donor file, to name just a few. This post will focus on benchmarking for small organizations ($2m or less) with an Individual Giving program that includes both Major Donor fundraising and mass solicitation of regular donors.

Benchmark #1: Dollars Raised

Blackbaud’s 2014 Charitable Giving Report finds that overall giving to Small Organizations (under $1m) was up 5.8%–and online giving was up 10.6%. Overall giving to Medium Organizations ($1m-10M) was up 1.3%, with online giving up 9.7%.

Third Space Studio has published a “micro-study” of small nonprofits called the Individual Donor Benchmark Report, in which participants reported increases in revenue of 14% between 2012 and 2013. This group also reported fundraising from Individual Donors increased 18% in the same time period [visit Third Space Studio’s website to participate in this year’s survey].

Using Benchmarks to set Goals: How does your overall fundraising for 2014 compare to 2013? What percent of your current fundraising revenues comes from Individual Donors? When you set an annual fundraising goal for Individual Donors, is this based on the amount you need to raise in order to meet your budget, or is it derived from how much you can realistically increase giving from your current donors and prospects? Are projected increases thoughtfully distributed between (a) increasing gifts from current donors, and (b) acquiring new donors? And finally, do expenses realistically reflect the effort required to personally manage Major Donors, or to increase automated systems and mass-communication to Regular Donors?

Benchmark #2:  Average Gift Size

The gift size a nonprofit uses to differentiate Major Donors from the Regular Donors will depend on the capacity of its donor file, the number of development staff, and the specific fundraising strategies used. Regardless of the threshold gift amount used, different Benchmarks should be applied to these two groups.

Major Donor Benchmarks: The Pareto Principal is an excellent starting point for segmenting your individual donor file. You’re probably familiar with the adage that 80% of results come from 20% of effort, and in fundraising this is even more extreme. According to the 2014 Fundraising Effectiveness Project Survey Report, 88% of funds came from 12% of donors. How much are your top 12% donors giving?

Regular Donor Benchmarks: This donor segment remains a significant contributor to a nonprofit’s bottom line, so even after a Major Gifts program has been implemented, keeping this group nurtured, renewing and growing will ensure a healthy, stable individual donor program and prospect pipeline.

Third Space Studio’s Benchmark participants reported an average of 16 Major Donors giving an average gift of $5,752, which came to about 51% of their total Individual Donor giving (these statistics varied greatly—download the report for more detailed analysis). In the same time period, Regular Donors’ gifts averaged only $112, but with 536 of these donors on average, this group comprised 49% of the participants’ Individual Donor giving!

Benchmark #3: Response Rates:

Donor online response rates are a huge force in the nonprofit sector, and they especially affect the Regular Donor segment. The 2014 NTEN/M+R Benchmarks report studied 53 of the country’s largest nonprofits and analyzed over 2 billion email messages.

Email lists grew 14% in 2013, and nonprofit monthly website traffic was up 16% in 2013 over 2012 levels.

But even as email lists grow, open rates dropped 4% to an overall 13% open rate, and click-through rates for email fundraising messages were down 13%!

Response rates for fundraising messages were down 11% from 2012 to an all-time low of 0.07%, and even advocacy response rates declined 25% to 2.0%.

A response rate of 0.07% sounds pretty gloomy, and the downward trend is noteworthy, but in general, as the numbers of email addresses (and appeals) increases, the amount of funds raised via email is also increasing. In fact, small organizations are significantly out-performing the large non-profits in online giving measures, with even the most conservative measures showing online giving growing at twice the pace of giving overall.

Third Space Studio’s Benchmark participants reported that online fundraising contributed only 16% of total current individual fundraising in 2013, but these groups reported an average of 79% increase in online fundraising in the same year; indicating both opportunity and momentum for growing online giving as an individual donor strategy.

Using Benchmarks to set Goals: Are traditional donors converting to online donors, and if so, are they maintaining their traditional gift levels? Does your online giving tool offer donors the option of covering the processing fee for their gift, helping your organization net the full benefit of that gift? In addition to tracking email response rates and click-through rates, can you use the conversion rate on your landing page? Sometimes small and usually free fixes to your landing page or online giving experience can seriously impact online giving response rates.

Benchmark #4: Donor Retention

It is generally the case that retaining current donors costs less than acquiring new ones, so a very cost-effective strategy for improving fundraising results is to thoroughly mine your current and lapsed donor file. The work-horses of donor retention tools are the LYBUNT & SYBUNT reports (Acronyms for “Last Year But Unfortunately Not This Year & Some Year….” ). These reports usually come “out of the box” with a donor software product, but even if you’re using a spreadsheet to track donor data, these numbers are straightforward and easy to crunch.

A whitepaper published in 2013 by Blackbaud reported overall retention rates for repeat donors (donors who have given more than once) fluctuated between 53% and 70% depending on the industry. Retention rates for first time donors dipped down to 35%, and even 20% in some industries! This means that on average, nonprofits lose almost 1 of every 2 donors every year.

Not only are nonprofits losing half of their donors every year, the impact on real dollars is even more striking. The 2014 Fundraising Effectiveness Project Report summarized 2012-2013 data from 3,576 survey respondents and compared their “Gains,” which are the dollars received from new, upgraded and recaptured lapsed donors, to “Losses,” which are dollars not earned due to lost and lapsed donors. In 2013, every $100 gained was offset by $92 in losses through gift attrition.

The good news is that after a 10 year slide, retention rates in 2014 reversed course and improved over previous year rates. The other ray of light amidst these dark statistics is that New Donors are both the greatest source of net gain, and the greatest source of net loss—which means, nonprofits that can implement a powerful and effective new donor retention program can significantly impact overall retention performance.

Using Benchmarks to set Goals: What is your current retention rate for repeat donors and new donors? Is there a gift-threshold where this retention rate suddenly increases? Decreases? If 15% of your donors simply cannot be retained (due to moving, death, illness, financial changes), what is an attainable—but aspirational—retention rate goal for your organization? 

Join us for the Quality of Life Summit March 24th at the McDonogh School in Owings Mills, MD. 

 

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