5 Telltale Signs Your Fundraising Strategy Needs a Makeover

As your nonprofit continues to grow and expand services to your community, you’ll need to keep an eye on the key performance indicators (KPIs). These indicators illustrate the state of your nonprofit and isolate any weaknesses in your various strategies.

The great news is that once you’ve isolated those elements in your strategy, you can better make adjustments to give your game plan a makeover.

This guide walks through some of the key performance indicators related to your fundraising strategy. When any of these metrics are off, it’s a telltale sign that your fundraising strategy needs some work.

Warning signs that your nonprofit should watch out for include:

1. Decreasing Donor Retention Rates
2. Decreasing Donor Acquisition Rates
3. An Unbalanced Donor Pyramid
4. Difficulty with Meeting Operational Costs
5. Unhappy Stakeholders

You don’t have to go at this alone! There are also some elements you should probably not attempt to work through alone due to biased results, but we’ll dive deeper into that later.

If you want help walking through your nonprofit’s KPIs to identify and strategically address weaknesses, check out Aly Sterling Philanthropy’s guide to hiring a fundraising consultant. But first, let’s get started to learn more about the warning signs that indicate a weak fundraising strategy!

1. Decreasing Donor Retention Rates

One of the first important KPIs to keep an eye on as a nonprofit is your donor retention rate. A decreasing donor retention rate is a strong indication that some improvements need to be made to your overall fundraising strategy.

Acquiring new donors is generally much more labor-intensive and expensive than retaining past donors. When your donor retention rate is low, your nonprofit will likely need to work at least twice as hard to make up the lost funds spent acquiring tons of new donors.

If your nonprofit analyzes your performance indicators and notices that your retention rate is dipping over time, it may be time to review your efforts to steward and cultivate donors.

Some of the strategies you may take to retain your donors include:

• Track interactions with your nonprofit for future reference.
• Segment donors into lists to better personalize communications.
• Share donor impact with supporters to encourage continued support.
• Offer multiple engagement opportunities for donors.
• Host stewardship events for your donors.
• Engage with supporters on social media.
• Always remember to thank your donors for their continuous support.

When your nonprofit makes a conscious effort to retain your past donors, you do more than simply save money on outreach. Retaining past donors tends to cultivate larger donation amounts than acquiring new donors. This is why major gift officers work with historic donors to cultivate major gifts.

2. Decreasing Donor Acquisition Rates

At this point, you’re probably asking yourself, “With so much at stake with retention, is donor acquisition important at all?” The answer is yes.

Donor acquisition is another incredibly important part of your fundraising strategy because you will never retain 100% of your nonprofit’s donors.

There are some natural reasons that your nonprofit’s supporters may stop giving. Therefore, no matter how great your retention strategy is, you’ll still need effective donor acquisition.

Specifically, one of the major areas to focus on in terms of acquisition is the younger generation. It’s important to have a wide range of ages in the donors in your donor database. If you notice that many of the donors you’re retaining are older, you may consider hosting some more tech-friendly fundraisers to build up your younger generation of donors as well.

For example, here are some acquisition strategies you can take to appeal to a younger audience:

• Mobile-responsive web design. Make sure your users researching your organization from their smartphone can see all of the important information you present with a mobile-responsive website.
• Online fundraising campaigns. Small fundraising campaigns such as crowdfunding campaigns are a great way to acquire introductory information from supporters to initiate a conversation and begin an engagement.
• Volunteering opportunities. Younger donors may not have the funds to give substantial gifts just yet. Therefore, strengthening their engagement through other methods will pay off in the long-run.

Once you’ve initiated conversations with new donors, you’ll need to circle back to the retention strategies we discussed earlier. Keep those younger donors engaged with your nonprofit to grow a long-lasting and growing engagement.

3. An Unbalanced Donor Pyramid

The donor pyramid, although not perfect, is a good representation of how donors should interact with your nonprofit. Generally, occasional donors and event registrants account for a large number of a nonprofit’s donors, so this group forms the base of the pyramid. Next comes annual and recurring donors, then major gift and planned gift donors.

Keep in mind that donation amounts also increase as you move up the pyramid.

One of the major concerns your nonprofit should consider when it comes to the donor pyramid is the section of major gift donors. Major gifts may only come from a few of your donors, but they make up the majority of your nonprofit’s annual income.

Therefore, if your donor pyramid is unbalanced with too much of your income generated from the bottom half of the pyramid, you may need to focus on your major gift cultivation strategies.

Two of the best practices we’ve identified when it comes to donor cultivation include:

• Focus on the entire lifecycle of your donor. Many nonprofits only focus on their mid-range donors and on boosting them to the next level. While this is a great strategy, be sure to back up one step and also boost low-level donors to achieve that mid-sized donation range. They may one day become major donors too!
• Dedicate a major gifts officer. Because this person will be in charge of establishing relationships with your prospects, prospects will appreciate the consistency of a single friendly face to communicate with at your organization.

Cultivating major donors through effective stewardship techniques and activities is a wonderful step to improve your entire fundraising strategy. However, it’s also an incredibly important step when it comes to fundraising for major campaigns.

When your nonprofit conducts a feasibility study (a guide for which is linked here), you’ll identify major gift prospects who are interested in giving during the first quiet phase of the campaign. From there, you’ll be more likely to achieve your major campaign goals.

4. Difficulty with Meeting Operational Costs

The previous three metrics are those that you’ll likely find while checking out reports generated from your nonprofit’s fundraising and CRM software. However, another report you should consider when you analyze your nonprofit’s KPIs is from your accounting software.

Check to see how well your organization is covering your operational costs, especially when it comes to employee compensation.

When your nonprofit is unable to or struggles to meet the needs of your employees, from hiring to training to compensating, it’s a good sign that your fundraising methods aren’t quite up-to-par to maintain the functionality of your operation. When you struggle to meet the internal needs of your organization, it likely also means your nonprofit is struggling to meet the needs of your mission.

Plus, it’s easy to get into a cycle of improper financial management, which can draw heavily from your hard-earned funds. The cycle goes like this:

1. A weak fundraising strategy leads to a struggle to compensate employees.
2. Low compensation leads to unhappy employees and resignations.
3. Then, you need to hire and train new employees, which further strains the bank for hiring and training, taking away key funding to market your fundraising strategy.
4. The lack of marketing leads to a weak fundraising strategy, and so the cycle repeats.

If your organization is looking for more information about how to manage these costs, especially nonprofit employee compensation costs, check out this article by Astron.

5. Unhappy Stakeholders

Beware the unhappy stakeholder!

Your board members, major prospects and others who hold a stake in your nonprofit can provide valuable insight into the weaknesses in your fundraising strategy and your other nonprofit strategies.

Unfortunately, it’s very difficult to measure the happiness of your nonprofit stakeholders through the various reports you generate.

Instead, the only way you can really understand what your major stakeholders are thinking is to ask them.

Remember in the introduction when we told you about potentially biased results while working through some of these strategies? This is one where you really need to look out for it.

If you ask your major donors or board members about your nonprofit outright, they’re likely to feel pressured to keep the conversation positive as to not offend you. This means they’re more likely to hide their true feelings and skew your results, inhibiting your potential for growth.

There are two main strategies your nonprofit can practice to maintain anonymity in the questioning of stakeholders for better results:

1. Send an anonymous survey. This is effective when your nonprofit has a wider range of people you want to contact. For instance, if you want the input of mid-range donors in addition to major ones.
2. Hire a fundraising consultant. A fundraising consultant will conduct interviews with your nonprofit’s major stakeholders. Because they are an unbiased third-party, stakeholders are much more likely to express their true feelings with an experienced nonprofit consultant.

Keeping stakeholders happy is important for maintaining an effective fundraising strategy. Make sure they know they’re a priority for your organization.

If your organization isn’t raising as much money as you’d have originally hoped, dive deeper into your key performance indicators. When you see signs like the ones above (as well as other weaknesses), consider them opportunities for improvement.

When you address the specific concerns and KPIs for your nonprofit, you’ll see more a more effective fundraising strategy altogether.

 Author Bio

Aly Sterling is the president and founder of Aly Sterling Philanthropy.

Aly’s expertise includes fundraising, strategic planning, search consultation and board leadership development for the well-positioned nonprofit.