4 Metrics To Help Evaluate Your Nonprofit’s Fiscal Year
Are you successful? How can you tell?
Isn’t it great, to look back on a recently completed fiscal year, and say, “yes, we did it! We were successful!”
But many fundraisers can’t ever experience that little bit of euphoria. Nor can their chief executives or their governing boards. It’s not because they didn’t raise a lot of money or do a lot of great things for their constituents. It’s not because they didn’t have great events or a productive annual appeal.
It’s because they didn’t have a goal. There was no specific expectation. So they did their jobs and completed their tasks. And they feel really good about what they’ve done. But they can’t say for certain whether they were successful. What a shame!
As a salesperson, I have crystal clear sales goals established for me by my company. I have weekly goals, monthly, quarterly and annual goals. After every reporting period, I know whether I was successful. Most times I am. When I miss a goal, I know exactly where I missed and how much I have to make up to stay on track for my bigger goals. These goals assure me and my company that we will know, unequivocally, when we succeed. When we don’t, we know exactly how much we have to make up. And we can alter our strategies and tactics as necessary to do that.
Any business needs goals, so it can plan for its future, serve its customers, satisfy its investors, and be sustainable.
But as I talk to nonprofit executives, I’m surprised to learn that many of them have not been given specific fundraising goals. Some of them struggle to even articulate what their fundraising revenue was for the most recent year. So not only do they not have a goal to meet; they can’t tell whether they’re moving forward or backward. And when I ask them “how are you going to cost-justify the purchase of new fundraising software,” they have no basis to do so. (Admittedly this is a selfish concern!)
Granted, some of these important metrics are missing because their database won’t tell them, at least not easily. (That’s usually the reason I’m talking to them in the first place! It’s hard to tell how much you’ve made if your income records are scattered among a dozen spreadsheets, or in an antiquated database that makes it hard to get good data out.) But in other cases, it’s because the nonprofit simply has not planned for it.
And in some cases, we’re seeing some very unpleasant clashes of expectations among the development director, the executive director, and the board. “I thought I was being successful,” says the development director. “We think you’re not!” says the board chair. How would either of them know?
Here are a few easy steps to setting expectations and goals. These may seem very basic, but for many nonprofits, they would be a great start.
- Find out, exactly, how much you raised in the most recent fiscal year from fundraising activities.
- Find out, exactly, how much came from each of your activities – special events, direct mail appeals, personal asking. (And figure the net, not the gross, including staff time.)
- Find out how many donors gave to each activity, and what their average giving level was.
- Figure your donor retention rate: Of all your donors from two fiscal years ago, how many of those same donors gave in the most recent fiscal year? (Bonus points if you can break this down by activity.)
With these metrics in hand, at least now you can plan for improvement from wherever you are.. (Or maybe you could even plan to jettison some activities that proved to be “unsuccessful” when actually measured.)
Item #1 above will help you set your overall goal. (If we raised $X last year, we need to raise at least that much this year. Or possibly $X + some additional dollar amount or percentage. Even if this is somewhat arbitrary, it gives you something to shoot for.)
#2 helps us fine tune our tactics. Each activity this year should raise at least $X (last year’s NET amount) or $X+. Possibly, we might see that some of these activities raise so little, or their expenses are so high, that we might eliminate one to allow more effort to another that is more productive.
#3 allows us to set a benchmark for the number of donors we need to engage, and which activities create the the greatest (net!) benefit for your organization. (Bonus points for breaking down your donor base according to small, mid-level and “major” donors.)
Finally, item #4 tells us how much of our potential revenue leaked out the bottom of our bucket. Set your most recent retention rate as the minimum acceptable rate for the current year, and set a goal to add at least a few percentage points every year.
This last one is key, because every donor who gets away is lost revenue! And every donor who stays becomes part of your ongoing revenue stream that doesn’t have to be constantly replaced. Furthermore, attrition and retention are trends that compound their impact over time. Increased attrition rates create an ever bigger hole in your fundraising bucket, which becomes harder and harder to compensate for. While increased retention continually adds to your foundation of loyal donors that assure the sustainability of the organization.
So if you have never had specific, measurable fundraising goals before, take the easy route and just put some benchmarks in place as your starting point. If you can’t identify your benchmarks using your existing data, then you can probably justify the cost of new fundraising software just so you can figure that out!
In any case, to paraphrase some old adages, it doesn’t matter which way you go if you don’t know where your destination is. And if you know your destination, you can’t get there unless you know where you are now.
So know where you are now (with your fundraising) and where you want to go with it. Then, when you get there, you can truly celebrate your success!