It’s not enough to know that your fundraising strategies are successful. You also need to know what’s causing your success, how results have evolved over time, and what aspects can be improved even more. These insights can only be gained by calculating fundraising Key Performance Indicators (KPIs). This article will unpack 10 essential KPIs for measuring fundraising success.
Use these metrics to better understand your fundraising efforts, find areas for improvement, and create a more impactful fundraising strategy.
#1: Donor Acquisition Rate
A steady stream of new donors is key to a sustainable fundraising strategy. Additionally, tracking the donors you acquire gives you an idea of what acquisition strategies do and don’t work. By improving your Donor Acquisition Rate over time, you can be sure you’re improving your ability to connect with new donors and making up for any turnover. Donor Acquisition Rate is the percentage of your total donors first acquired in a period of your choice (monthly, quarterly, annually, etc.).
Here’s the formula for Monthly Donor Acquisition Rate.
(This Month’ First-Time Donors ÷ Total Donors) x 100 = Monthly Donor Acquisition Rate
While every organization will have a unique Donor Acquisition Rate, at minimum, your donor acquisitions need to make up for your turnover. Some donor turnover is inevitable, but your organization will likely not survive if you’re losing more donors than you’re acquiring. Additionally, it’s essential to have a large pool of new donors as only about 18% of first-time donors give again the following year.
Looking for an easy-to-use fundraising analysis tool? Download KIT’s FREE fundraising analysis dashboard. This dashboard will help you track the metrics that matter and demonstrate your fundraising performance over time.
#2: Donor Lapse Rate
If your Donor Acquisition Rate measures the beginning of your fundraising funnel, your Donor Lapse Rate measures the end. Donor Lapse Rate measures the percentage of donors who haven't given again within a certain timeframe. Most organizations define a lapsed donor as those who haven’t given again for at least one year. This KPI is best measured annually to paint a full picture of those who haven’t given year-to-year.
Here’s the formula for Annual Donor Lapse Rate:
(Last Year’s Lapsed Donors ÷ Last Year’s Total Donors) x 100 = Annual Donor Lapse Rate
When using the above formula, remember to exclude your current year’s first-time donors from the formula, so you don’t deflate your lapse rate unintentionally.
Compare your annual lapse rate to previous years. If your lapse rate has decreased, try to identify which donor engagement strategies may have led to a high retention rate. This KPI is essentially an indicator of the success of your stewardship activities. If your lapse rate decreases as you implement new stewardship initiatives, your efforts are likely working.
#3: Donor Recapture Rate
While donor acquisition and lapse rate are fairly common fundraising metrics, the measurement of Donor Recapture Rate is less widespread. Donor Recapture Rate is the percentage of previously lapsed donors that have given again. Recaptured donors are probably more significant than you think! GivingTuesday found that, on average, recaptured donors represent 12.4% of all donors. By studying your acquisition, lapse, and reactivation rate, you can fully understand the success of your donor engagement strategies.
Here’s the formula for Annual Donor Recapture Rate:
(This Year’s Reactivated Donors ÷ Total Lapsed Donors) x 100 = Annual Donor Recapture Rate
Keep in mind that you may not be able to improve your donor recapture rate past a certain point, especially as your donor lapse rate will always outpace your acquisition rate. So, to fully understand the effectiveness of your reactivation strategies, look at the number of annual reactivated donors and compare it to previous years to identify trends.
#4: Second Gift Conversion Rate
One of the most difficult feats in fundraising is motivating a donor to give a second time. As touched on above, the vast majority of first-time donors never give again. Measuring Annual Second Gift Conversion Rate allows fundraisers to understand their success in engaging first-time donors.
Here’s the formula for Annual Donor Recapture Rate:
(Second-Time Donors ÷ Total First-Time Donors) x 100 = Annual Second Gift Conversion Rate
When calculating this metric, consider whether you want to track the second-time gifts of reactivated donors. It’s best practice to exclude reactivated donors. Excluding previously lapsed donors will give you a better understanding of the effectiveness of strategies directly targeted at first-time donors rather than lapsed donors. This understanding will allow you to observe the effects of second gift acquisition strategies and invest resources accordingly.
#5: Second Gift Variance Rate
While securing a second gift is crucial to fundraising success, you can also learn a lot from the size of a second gift. By fully understanding your average second gift variance, you can understand how effectively your organization motivates first-time donors to increase their support.
Here’s the formula for Annual Second Gift Variance Rate:
([Total Amount of Second Time Donations – Total Amount of First Time Donations] ÷ Total Amount of Second Time Donations) x 100 = Annual Second Gift Variance Rate
Keep in mind that this formula can also be adjusted to measure third, fourth, or even fifth gifts. Additionally, if you find that a donor’s second gift increases in size significantly above your average Second Gift Variance Rate, consider investing more time in developing a relationship with them.
#6: Monthly Recurring Donor Growth Rate
While not everyone has the resources to be a major donor, almost anyone can become a monthly donor. Monthly donors provide nonprofits with consistent revenue and are among organizations' most engaged and committed supporters. Seeing an increase in your Monthly Donor Growth Rate likely means that your donor engagement activities have successfully motivated sporadic donors to go one step further in their donor journey.
Here’s the formula for Monthly Donor Growth Rate:
([This Month’s Added Monthly Donors – Last Month’s Added Monthly Donors] ÷ Last Month’s Added Monthly Donors) x 100 = Monthly Donor Growth Rate
Use this metric to understand if your recurring donation appeals are successful. For example, if there’s a consistent increase in monthly donors added, it’s likely because a new appeal mechanism has been successful. Additionally, when measuring your Monthly Donor Growth Rate month-to-month, make sure to compare the current month’s performance to the same month in previous years. This year-to-year comparison will exclude seasonal donation changes unrelated to your solicitation strategies that occur month-to-month.
#7: Major Donor Dependency Quotient
Many organizations rely heavily on their major donors. However, if 95% of your funding comes from only 2% of your donors, you’ll find yourself in a tricky situation when one of your major donors decides to stop giving. Therefore, it’s important to track how reliant you are on your biggest donors and diversify your fundraising efforts when appropriate.
The Pareto Principle, a popular concept applicable to fundraising, states that 80% of your organizational revenue is likely to come from 20% of your donors if you’re securing major gifts and bequests properly. While every organization will have a different number of major donors, this principle can be used as a benchmark for success. To calculate your dependency quotient, you first need to sort your donors’ total contributions for a given period from highest to lowest.
Here’s a range of total annual donation amounts from a hypothetical group of donors:
$10, $15, $18, $26, $51, $61, $68, $72, $90, $101, $120, $154, $159, $168, $201, $217, $832, $1,645, $1,958, $2,379.
Second, add up the total value of the contributions. The total amount of the above range is $8,345.
Third, calculate what 80% of your total donations would be. In this example, 80% of 8,345 is 6,676.
Fourth, starting with the highest total donation amount, add up the contributions in descending order until you get a value equal to or just greater than 80% of your total donations. The sum of these amounts will identify the donors responsible for the majority of your revenue. In this example, your top four donors’ total donation amounts ($2,379, $1,958, $1,645, $832) add up to $6,814, an amount just greater than 80% ($6,676) of the total value of the donations.
Fifth, calculate the percentage of donors who donated equal to or greater than 80% of your total donations. Simply divide the number of your top donors by the total number of donors. In this case, the top four selected donors represent 20% of the total 20 donors.
Last, because the amount given by the top four donors ($6,814) is slightly higher than 80% ($6,676) of total donations, you have to find the exact percentage of donations given by these donors. To calculate this, divide your top donors’ donation total ($6,814) by the total donation amount ($8,345). In this case, the top donors’ contributions equal 81.65% of the total amount.
After all that, we know that the theoretical organization is dependent on 20% of its donors to provide 81.65% of its total donation amount. This finding aligns nicely with the Pareto Principle and means the hypothetical organization is likely focusing enough attention on major gifts and bequests relative to other appeals. Keep in mind that, in practice, this calculation would need to be made in a spreadsheet or CRM to manage a more extensive data set.
#8: Average Donor Lifespan
The most meaningful donor relationships come from years of donations and interactions. Your Average Donor Lifespan represents the typical amount of time you’re able to retain a donor and develop a relationship. By tracking your Average Donor Lifespan, you can understand how effective your cultivation and stewardship methods are at extending the amount of time a donor engages with your organization.
Here’s the formula for Average Donor Lifespan:
(Total Donor Contribution Years ÷ Total Donors) = Average Donor Lifespan
Be careful to only include years in which donors actively gave. By including years that a donor has lapsed, you’ll accidentally inflate your Average Donor Lifespan.
#9: Average Donation Frequency
To know that you’re remaining in the minds and hearts of your donors, you want to see that they are consistently engaged with your organization. One way to measure this engagement is by calculating your Average Donation Frequency. This metric measures how frequently the average donor gives within a specified time frame.
Here’s the formula for Annual Average Donation Frequency:
(This Year’s Number of Donations ÷ This Year’s Number of Donors) = Annual Average Donation Frequency
For this equation, it’s best to exclude any recurring donors, except annually recurring donors, as they will inflate your Average Donation Frequency and are likely not the donor segment you intend to measure.
#10: Fundraising ROI
It’s not always enough that a fundraising initiative raises lots of money. Initiatives also need to be a success relative to their cost. For example, a fundraising event’s overhead costs such as staff time, catering, and decorations may limit the efficiency of the event.
Here’s the formula for Fundraising Campaign ROI:
[(Campaign Funds Raised – Total Campaign Cost) ÷ Total Campaign Cost] x 100 = Fundraising Campaign ROI
By determining the efficiency of your events at the end of the year, you can make a data-driven decision about what events to pursue in the coming year and which one’s you’ll leave behind.
You can’t perfect what you can’t measure! But, by evaluating your fundraising with several KPIs, you can develop a well-rounded understanding of your fundraising success. Use the metrics listed above to understand the success of particular aspects of your fundraising and identify strategies responsible for the trends you observe. By getting more comfortable with your KPIs, you can improve your fundraising and do more for your cause.
About the Author:
Jack Showers is a Nonprofit Research Analyst at KIT. When Jack isn’t cheering for the Raptors or watching an 80s action movie, he’s studying the social sector and producing content for nonprofit professionals. As a Nonprofit Research Analyst at KIT, an AI-powered insights and reporting toolkit, he is especially passionate about helping fundraisers save time and raise more money for their cause.
The post 10 Essential KPIs for Measuring Fundraising Success appeared first on Joe Garecht Fundraising.