Nonprofit leaders work hard to ensure success in their fundraising campaigns. They build relationships, strategize, execute, and then go back and measure effectiveness.
Measuring fundraising success happens when leaders can track key metrics related to their efforts. The more they gain an understanding of these numbers, the more they can set realistic, predictable goals for future campaigns.
That being said, metrics can get out of hand quickly. As helpful as they are for identifying what worked or what didn’t, the sheer number of potential measurements can quickly get overwhelming for any organization. For instance, Donor Search has outlined 26(!) different metrics.
While each one has its purpose, we know most nonprofit leaders have enough going on. Tracking a large quantity isn’t at the top of the priority list. That’s why we encourage leaders to start small, selecting one or two metrics to track and then building from there.
We’ve identified four key fundraising metrics your nonprofit can start measuring today. Below, we’ll define each metric, provide a formula for calculations, and leave you with an important reminder about fundraising.
Donor Lifetime Value
The Donor Lifetime Value (DLTV) gives you a strong idea of how much each donor will spend from their first donation to their last. It’s similar to “customer lifetime value,” a metric that for-profit organizations use to predict how much earnings can be expected for an average customer.” Nonprofits can use the number to get the same kind of estimations about their donors.
Calculating your DLTV requires a few additional numbers:
Average donor lifespan (how long a donor contributes to your organization)
Average donation amount (this tool can be helpful)
Average donation frequency
The keyword for all these is average. Most nonprofits have quite a range of donors, but the point of this metric is to have a predictable number for future estimations. Once you have identified these averages, plug them into the following formula:
Average Lifespan x Average Donation Amount x Average Donation Frequency = DLTV.
Feeling too abstract? We’ll use some simple, round numbers to illustrate the formula.
Let’s say you have an average donor lifespan of 5 years, an average donation amount of $1,000, and an average frequency of donation once per year, you can expect your DLTV to be $5,000. That’s how much, on average, a donor will contribute before transitioning out of the organization.
Having this number helps you estimate how many donors you need to attract to reach your fundraising goal. Following the example above, if the organization had a goal of $120,000, they can reasonably predict that they need to bring in 24 extra donors to hit their target.
Donor Retention Rate
Not every donor you bring in over a calendar year will continue giving. Donor retention helps you measure the number of donors who continue supporting your organization year after year, so the metric should be calculated on an annual basis.
Here’s how to calculate donor retention:
identify the number of donors who gave last year.
Cross reference that list with those who gave this year to find the retained donors.
Find the percentage with the following formula.
(Retained donors ÷ Total donors in the previous year) x 100 = Donor Retention Rate
If you had 50 total donors last year, and 20 of them continued to give to your organization this year, you’d have a donor retention rate of 40%.
Having your donor retention rate can give your organization insight into the success of your communication channels, donor recognition programs, and what types of donations are best to target in the future.
As you continue to foster valuable relationships with your donors, you will likely see your retention rate grow, and with that growth comes a reduction of donor acquisition costs. It costs less to retain donors than it does to find new ones.
Cost Per Dollar Raised (CPDR)
CPDR is similar to Fundraising ROI, but it measures the number from the opposite end.
The Donor Search article explains that Fundraising ROI measures “how much you earned per dollar spent” while CPDR “tells you how much spent per dollar earned.”
Each metric, while similar in scope, can help nonprofits in different ways depending on their unique goals: “If cost-cutting is a priority, nonprofits would likely be more interested in CPDR. If strategic planning for future fundraising efforts is the focus, fundraising ROI would be preferred.”
Here’s how you calculate your CPDR:
Money Spent on Fundraising ÷ Money Earned through Fundraising = CPDR
General Numbers to Operate By for CPDR
Charity Watch elaborates on CPDR with a complex rating system based on the cost to raise $100, giving organizations a percentage to work with.
Organizations are considered “Good” when they spend $27 to raise $100 which is equal to .27 CPDR. Anything up to $40 spent per $100 raised (.40 CPDR) is considered “satisfactory,” according to the chart.
These numbers, again, are merely figures to start with, and organizations should consider their unique circumstances when establishing their own benchmarks.
Pledge Fulfillment Percentage
A final key metric to consider is Pledge Fulfillment Percentage (PFP).
According to Donor Search, pledges are “funds promised to be paid to your nonprofit over a specific period of time.” Calculating your PFP helps you measure how many of these promised pledges actually come through.
Having this percentage will help your team immensely when it comes to financial planning and stability. Pledges typically get counted as cash in annual budgets, so when those pledges aren’t fulfilled, your organization can potentially go over budget.
Additionally, your pledge fulfillment percentage can give insight into your pledge-acquisition strategy. If you discover that few pledges actually follow through, you can adjust your planning moving forward to reduce the amount of budgetary mistakes.
You can calculate your pledge fulfillment percentage with this simple formula:
(Total pledges fulfilled ÷ total pledges promised) x 100 = Pledge Fulfillment Percentage.
The Main Thing to Remember When Measuring Nonprofit Fundraising Metrics
Each of these metrics will help you track your fundraising success, but measurements are not the most important part of fundraising. There’s another, more critical aspect to focus on: Establishing strong relationships with your donors.
Neglecting relationships is one the biggest mistakes nonprofits can make when fundraising. As you get caught up in the world of metrics and measurements, it can be easy to forget about the people behind the donations.
Here are simple ways to foster good relationships with your donors:
Provide them with updates about your organization
Find ways to keep them involved and invested
Show gratitude and appreciation with handwritten notes and special events
Keep communication open
Further developing the relationship between your organization and your donors will go a long way for future fundraising campaigns. You can measure success with metrics, but you need to build relationships to help you get and keep donors over time.