If you put 10 fundraisers (bonus points if they’re consultants) in a room and ask them to list the crucial fundraising KPIs every nonprofit should measure, you’ll get 8,982 recommendations. And very likely different formulas for each.
Yeah, that math doesn’t work, but it does kind of feel like that when measuring fundraising results, doesn’t it?
Here’s the big secret of measuring fundraising success and the metric(s) that matter most:
You should measure the metrics that best tell you how you’re doing towards your goals and what you need to do to reach them.
Your goal might be more focused on acquisition than retention and renewal, so you need to focus on acquisition rates, response rates, opens and click-throughs, and anything that tells you how your message reaches the intended audience and who’s taking action.
Or you might be focused on building more major gift support, which means upgrades, donor velocity, and lifetime value will be among your top five Key Performance Indicators.
The key to setting a goal is knowing how you will measure it. Once you know your goals, you will know what you should be measuring.
But why isn’t measuring total dollars raised enough? That’s all that matters for the budget!
Story time. Did you know that trees can rot from the ground up? It’s true. Those beautiful green leaves rustling in the summer breeze can be gorgeous from above. You can’t see from the top that the forest floor lacks enough water, sunlight, nutrition, and care to give the trees the support they need. You can stare at a gorgeous green leafy canopy and soon wonder why the whole forest died.
It’s the same thing with looking only at the total dollars raised. There’s a very big difference between a $5 million annual goal that’s made up of very large foundation gifts or major donors versus a $5 million annual goal that’s made up of all levels of giving from all types of supporters.
The second one is more robust, and more sustainable, and it’s going to keep the roots of generosity nurtured and developed for a longer time.
So, with that in mind, what are the top-tier metrics to consider in building a robust, sustainable, engaged giving program?
1. Donor Retention Rate
Why It Matters: Donor retention rate is the percentage of donors who continue to give to your organization year after year. High retention rates indicate a strong relationship with your donors, indicating satisfaction and trust. Retaining donors is more cost-effective than acquiring new ones, making this metric essential for sustainable growth.
How It Informs Fundraising Performance: A high donor retention rate suggests that your engagement and stewardship efforts are effective. It also indicates how “bought-in” to your mission, your donors are if they’re giving year after year. Conversely, a low retention rate can signal issues in donor satisfaction or communication strategies, prompting a need for re-evaluation and improvement.
How to Calculate:
Donor Retention Rate = Number of donors who gave this year and last year x 100
Number of donors who gave last year
For example, if you had 500 donors last year and 300 of those donors gave again this year, your donor retention rate would be 300/500 x 100 = 60%
A Note On Retention: Not all gifts were solicited to be renewed—like capital campaign gifts, special giving/events, etc. If you can, factor those out of your donor retention measurements. Also, think about how you’ll factor soft credits into your retention measurement. If a donor gave a personal gift one year but a gift from their family foundation in the second year, they might appear as unrenewed because they came from different accounts (e.g., the family foundation is a separate record, and the gift is “soft credited” to the individual but hard coded on the foundation.
2. Donor Churn Rate
Why It Matters: Your donor churn rate measures how your file of supporters is growing or shrinking over a specific time period. In general, your donor churn rate will prompt you to evaluate other metrics to determine what’s causing the churn, especially if it’s lower than expected. It’s a good, quick snapshot of how your fundraising is performing overall.
How It Informs Fundraising Performance: Churn incorporates all levels of giving and goes beyond retention to capture the reactivation of lapsed donors and newly acquired donors—basically, any donor coming into or out of your lists.
Measuring churn can help identify activities that may need tweaking or adjusting and give an overall picture of your fundraising’s performance.
How to Calculate: Determine the period for which you want to calculate the churn rate—typically, a longer period gives a better picture, so you’re usually measuring churn on a six-month to annual basis.
Count:
- How many donors you had at the beginning of the period
- The number of donors you lost during that period
- The number of new you acquired and/or the number of past donors you reactivated
Churn Rate = (Lost Donors / (Total Donors + Acquired/Reactivated)) x 100
For example, from January 1 to December 31, you have 1,000 donors. Of those, 625 are renewed from the previous year. You lost 430 donors from last year because they did not renew. The remainder of this year’s donors are 205 renewed donors and 170 newly acquired donors.
Your Churn Rate = (430 /(1,000 + 375)) x 100
(430 /1,375) = 0.31
0.31 x 100 = 31%
Now the question becomes, “What is a good donor churn rate?” It depends on your renewal rate.
Focusing on renewal and retention will improve your churn rate, and measuring it year over year will give you an idea of what is historically appropriate for your organization and how to measure it in relation to your goals.
3. Average and Median Gift Size
Why Average Gift Matters: Average gift size is the average amount of money donated per transaction. This metric helps you understand donor-giving patterns and the effectiveness of your appeals and campaigns.
How It Informs Fundraising Performance: Tracking the average gift size allows you to evaluate the impact of your fundraising efforts. A rising average gift size might indicate successful major gift solicitations or effective donor engagement, while a decline could signal the need for reassessment.
How to Calculate:
Average Gift: Total Donations/Number of Gifts = Average Gift
Note: Do not confuse the number of gifts with the number of donors, especially if you have several donors who give more than once in a given time period.
Why Median Gift Matters: A “median” number is right in the middle of a series of numbers. For example, in the sequence 4,7,12,3,8, the median is 12.
Measuring the median gift with the average gift gives you a quick snapshot of the overall range of giving and how your campaign is affected by larger versus smaller gifts.
If your average and median are far apart and the average gift is much higher than the median, you have a fairly balanced response with a good number of major gifts and donors on the low end making up the base.
If your average and median are very close together in value, it means you’re receiving a lot of gifts in the same range. This may be an indicator that there’s room for increased asks, upgrading, etc.
Finding the Median: Sort your gift list from largest to smallest and count the number of gifts—find the number in the middle, and that’s your median. Some programs and databases, like Excel, have a median formula built in.
4. Donation Growth Rate
Why It Matters: Donation growth rate measures the year-over-year percentage increase or decrease in donations. This metric indicates the overall health and momentum of your fundraising efforts.
How It Informs Fundraising Performance: A positive growth rate signals successful fundraising strategies and donor acquisition efforts, while a negative growth rate may highlight potential challenges or areas needing attention.
How to Calculate:
Donation Growth Rate = Total Donation Amount This Year – Total Donation Amount Last Year/Total Donations Last Year x 100
If last year’s total donations were $100,000 and this year’s total is $120,000, the donation growth rate would be:
$120,000 – $100,000/$100,000 = 0.2 x 100 = 20%
5. Cost Per Dollar Raised (CPDR)
Why It Matters: Cost Per Dollar Raised is the amount of money spent to raise each dollar. It’s a measurement of the efficiency of your fundraising activities and is used to balance which activities have a more positive return on investment.
There is caution, though, when measuring CDPR. It can be interpreted to “get your CDPR as low as possible” so that the lower the CDPR, the higher the return on investment. That can be a misleading goal as you find yourself investing less and less in work that will yield a very positive return or balancing strategies that are loss leaders, at first (e.g., donor acquisition), with higher return activities (e.g., major gifts).
Because nonprofits are so different and have different needs and experiences, there is no set standard for what a CDPR should be. It’s been generally accepted that a CDPR of around $0.20 is indicative of an effective program.
It is helpful to measure the CDPR of specific tactics and the overall fundraising function. As mentioned above, you may be amid large-scale direct mail and digital acquisition, which is running at a $1.00 or $1.20 CDPR (i.e., it costs $1 to raise $1). Still, your major gift, foundation, and corporate giving are running significantly less, so the overall departmental CDPR is around that $0.20 benchmark.
It’s also important to measure everything that goes into fundraising, including salaries. You may find, for instance, that once salaries and other ancillary costs like reimbursement for gas/mileage, etc., are factored into a special event, the net dollars raised are positive, but the CDPR makes it a less efficient practice overall.
CDPR can also justify the need to invest more resources in fundraising. You could calculate the costs and find that your CDPR is $0.05, which indicates that it may be time to invest more resources into fundraising that will continue to produce positive outcomes.
How to Calculate:
Cost Per Dollar Raised = Total Fundraising Expenses/Total Donations Raised
If you spent $30,000 on fundraising and raised $150,000, your CPDR would be:
$30,000/$150,000} = $0.20
“What gets measured gets managed.” Unfortunately, management theorist and teacher Peter Drucker never actually uttered this famous quote, but what he did say was:
“It is the relationship with people, the development of mutual confidence, the identification of people, the creation of a community. This is something only you can do. It cannot be measured or easily defined. But it is not only a key function. It is one only you can perform.”
Peter Drucker
Fundraising metrics matter because they give you a view into how your community— your donors—are responding to your outreach efforts, but when evaluating what metrics are most important to you, remember two key things, and you can’t go wrong:
- Measure what helps you reach your goals – focus on the metrics that tell you how your tactics and strategies are working;
- Remember that all data, and therefore the metrics that derive from it, represent real, live, caring humans, and the whole point of measuring how they respond is to further missions and deepen relationships—or, in Drucker’s words, “the development of mutual confidence, the identification of people, and the creation of a community.”
Be sure to check out Clay’s previous posts on data:
