With the end-of-year period quickly approaching, it’s a good time to audit your metrics to make sure your overall fundraising strategies are working as planned. In this article, you’ll find a list of 6 core nonprofit KPIs to help you monitor the health of your fundraising program and to compare your results to others across the nonprofit industry.
The list is based on the research and data analysis of thousands of nonprofit fundraising programs by DonorTrends through their work with the Fundraising Effectiveness Project and in conjunction with Common Cause, which was presented recently in an on-demand webinar on the EveryAction website.
6 Core Nonprofit KPIs for Fundraising
We’re often asked by nonprofits, “How do we know if our fundraising program is as effective as it can be?” The following 6 core nonprofit KPIs help you answer that exact question.
1. Change in Revenue
This nonprofit KPI looks at whether your revenue has increased or decreased over a specific time period, typically measured year over year. According to the Fundraising Effectiveness Project, the nonprofit industry as a whole saw an average revenue increase of 10.6% during 2020. This was particularly true for organizations like social justice groups, food banks, religious organizations, and other nonprofits on the front lines of social services.
How to Calculate Change In Revenue
To calculate the change in revenue, start by calculating your previous year’s fundraising revenue and subtract it from the current year’s revenue. If the number is positive, your revenue has grown. If the number is negative your fundraising has shrunken.
If you find that your revenue has decreased from last year, call the team together and try to understand the factors that contributed to the downturn. In this case, the next five metrics become even more important because they will give you additional visibility into trends in your fundraising strategy.
2. Average Gift
Tracking your average gift size is an important part of budgeting and planning. It helps you understand how much your existing supporters are likely to give and how much a new donor is worth to your organization.
Donors are typically broken into three categories, including:
Major Donors – those who give $1,000 or more
Mid-level Donors – those who give between $250 and $999.
Regular Donors – those who give under $250.
In 2020, the number of donors in each of the three donor segments grew, which is in line with reports of increased giving across many nonprofit industries, including first-time donors. The number of major donors increased by 10%; the number of mid-level donors increased by 8%, and the number of regular donors increased by 15%.
How to Calculate Average Gift Size
To calculate your average gift size, calculate the total fundraising revenue you received and divide that number by the total number of individual donations you received during that same time period.
If you’re looking to increase the average gift size for your organization, there are three ways you can explore:
First Ask – this is the first time you ask for money. This can be in an email, direct mail piece, or another appeal. Test your appeals and whether asking for higher amounts converts as well as lower amounts.
Personalized Ask Amounts - the more you can do to personalize your appeals the more successful you will be in converting donations. Use the data found in your donor database software to tailor your asks to each donor. This can be done with wealth screening or income level data, as well as other demographic data and donation frequency you might already collect.
Identify Likely Upgrades - Look for ways to move donors from lower levels to higher levels. This can include creating membership circles, leadership clubs, or just by asking people who have the capacity to give more
Try segmenting your donor tracking system in a similar way with donors broken into categories by the suggested gift sizes listed above. It will help you create more realistic fundraising appeals and make it easier to spot possible upgrades.
3. Donor File Growth
This is the total number of active donors giving any gift in the current year compared to the prior year. A positive donor file growth shows that your fundraising program is growing and that you were able to increase the overall number of people donating to your organization.
How to Calculate Donor File Growth
To calculate the donor file growth, calculate the number of active donors you had last year and subtract it from the number of current year’s active donors. If the number is positive, you have positive donor file growth.
Donor file growth is very closely related to new donor retention and existing donor retention, two core nonprofit KPIs we explain below.
If the average donation is increasing it can sometimes dull the effects of a smaller donor file size. A receding donor file is a negative trend that you'll want to identify quickly. It means fewer donors are contributing and that can spell disaster, especially for small to medium-sized nonprofits whose budgets can take a massive hit if just a few major donors decide not to renew.
4. New Donor Retention
This metric measures how many donors your organization retains over any given period. The industry average across the board for donor retention is 20%. That means just one in five new donors is retained year over year. Larger organizations with more established, national fundraising programs can see donor retention numbers as high as 30%.
So much time and money are spent in acquiring new donors, but the key to retention is to maintain and foster those relationships to continue engaging your donors all year long. Sending donation thank you letters is a good first step, but community building is a nonstop effort. Check out a guest post on the Salsa Blog by Vanessa Chase Lockshin on more donor retention strategies.
How to Calculate New Donor Retention Rate
To calculate new donor retention rate, make a list of the donors who contributed to your organization for the first time over a specific period like the previous year. Then make a list of the donors who contributed the current year. Now, make a note of the names that show up on both lists. Divide the number of names on both lists by the number of names from the previous year’s first-time donor list to get the new donor retention rate. Most donor databases have template reports that make this calculation quick and easy.
Note that new donor retention rate dropped 11.6% on average last year according to the Fundraising Effectiveness Project.
5. Existing Donor Retention
Nonprofits that develop community and a culture of philanthropy among their supporters will see higher rates of donor retention. That means you keep more of the donors you develop, which is a key indicator of a healthy fundraising program.
Some membership organizations and those that focus more on monthly recurring revenue can see existing donor retention rates as high as 80%, but the industry average across all nonprofit sectors is a recurring donor retention rate closer to 60%.
Data from the Fundraising Effectiveness Project showed that existing donor retention rates dropped 2.8% last year across all sectors.
How to Calculate Existing Donor Retention Rate
It’s likely that your donor database has a template report to automatically calculate this number. If not, to calculate the existing donor retention rate, make a list of the donors who contributed to your organization in the previous year who did not donate for the first time in that year (meaning they were not new donors to your organization). Then make a list of the donors who contributed in the current year. Now, make a note of the names that show up on both lists. Divide the number of names on both lists by the number of names from the previous year’s donor list to get the existing donor retention rate.
6. Lifetime Value
The lifetime value metric tells you the value of a single donor over the lifetime of that donor’s relationship with your organization. In essence, it tells you how much a single donor is likely to contribute financially to your organization. Many nonprofit professionals will tell you this is the most important metric to measure.
For example, a lifetime value of $350 means that you expect a new donor will contribute $350 to your organization over five years. Five years is the typical timeline by which this metric is measured.
This metric is foundational to budget calculations, and to your overall fundraising strategy as it relates to determining the cost to acquire a new donor and the cost to retain existing donors.
A healthy fundraising program is one that has an average lifetime value higher than the cost of donor acquisition and retention. If the cost to acquire and retain a donor is more than the lifetime value of an average donor your fundraising program is losing money.
How to Calculate Lifetime Value
Lifetime value is typically calculated over a five-year period of time. Most donor database software will calculate this number for you automatically as you enter donations into the system. To calculate it manually simply add every donor’s contributions over the course of five years. Do that for all your donors and then calculate the average by dividing that number by the total number of donors over that same period.
The Core Nonprofit KPIs and Your Fundraising ROI
ROI stands for “return on investment” and it tells you whether your overall fundraising efforts are making or costing you money. A positive ROI means your fundraising program brings in more money than it costs. This is a good place to be. A negative ROI means that it’s costing your organization more money than the fundraising revenue it brings in. This is a bad place to be.
These 6 core metrics mentioned above all have a role in determining your fundraising strategy, and healthy numbers for all of these metrics will help ensure a positive fundraising ROI for your organization.
The reason lifetime value is such an important metric is that it is so closely tied to your overall return on investment. EveryAction’s webinar makes this abundantly clear around the 33-minute mark of the video.
Let’s consider the previously stated lifetime value of $350. And imagine your cost to acquire a single new donor is $50. That might include the cost of running online ads, making phone calls, sending direct mail, etc. Let's imagine the cost to develop and maintain that donor relationship over the next five years is another $75 ($15 per year for 5 years). The total acquisition and maintenance cost is, therefore, $125 ($50 + $75).
A simple calculation for ROI would be to divide the revenue by the cost. Here, the ROI would be 280%, which is calculated as $350/125 = 2.8. Multiply by 100% to turn that into a percentage. 2.8 x 100% = 280% ROI.
Another way to calculate ROI is to consider the relationship of net revenue to cost. This is more in line with how a financial analyst might look at return on investment and how the nonprofit industry at large would typically calculate it.
Considering a cost of $125 and a previously stated example lifetime value of $350, your fundraising ROI would be 180%. Here’s how that is calculated:
Subtract the cost from the lifetime value, and then divide that resulting number by the cost of that fundraising.
$350 lifetime value minus $125 cost = $225 net revenue.
$225 net revenue / $125 cost = 1.8.
1.8 x100% to convert to a percentage = 180%.
That means your organization sees, on average, a positive return of 180% on every new donor it acquires. A number like this would be a great number to which your nonprofit should aspire as it denotes a very healthy fundraising program.
It’s important to keep track of these core metrics which can be a good barometer of the health of your fundraising program. At a minimum, check-in on these nonprofit KPIs once a year. If capacity allows, increase the frequency to once per quarter. If the stats start to take a turn in the wrong direction, convene your team and research why the numbers have dropped and what you can do to right the ship.
To view the entire core metrics webinar, watch the replay on-demand at EveryAction’s website here.
When you get a handle on these core metrics, you might also take a look at metrics across other teams in your organization and how they all interrelate to form your overall strategy. Our article on 26 nonprofit KPIs to measure your impact is a great place to start that journey!
As always, if you have questions about your nonprofit email marketing or want to learn more about how Salsa helps you reach your audience in the most effective ways possible, reach out to a member of our team right here on the site!
If you want to unlock more strategic fundraising tips, check out these additional resources:
Nonprofit KPIs and How To Measure Your Impact - The most comprehensive post on key performance indicators for nonprofits. Download our template and learn how to measure your own nonprofit KPIs.
Nonprofit Editorial Calendar - Download our Guide on creating your own nonprofit content and download our editorial calendar you can use right away to help you plan.
Want More Volunteers and Donors? - Read our article on the Nonprofit Ladder of Engagement and learn how to engage your audience at every level of their relationship with your organization.
Ultimate Guide to Advocacy Campaigns. If you're planning an advocacy campaign our Ultimate Guide to Advocacy Campaigns is the place to start, with communication templates, relationship mapping tools, and more.