5 Basic Fundraising Performance Metrics to Start Measuring Today
Fundraising performance measurement is an important strategic activity because it tells you where you’ve been, where you’re at, and where you’re going. Fundraising performance measurement shows you how to best manage, allocate, and leverage your organization’s resources so you can invest in fundraising activities with the highest return.
You don’t have to be a statistician to measure fundraising performance. There are basic measures of fundraising performance that are straightforward, accessible, and yield important insight into the fundraising activities that work as well as the ones that don’t.
1. Revenue by strategy
Measuring revenue by strategy is incredibly straightforward. Simply sum all revenue generated from a particular fundraising strategy.
In this measurement, a strategy (or a tactic) is the catalyst for a gift. A strategy could be a direct mail campaign, email campaign, personal solicitation, or special event among other strategies.
Revenue by strategy is a very basic measurement, but it has two key functions.
- Revenue by strategy measures the scale of a fundraising effort. Scale doesn’t imply that a strategy is effective (we will get to that in a little bit), but it does measure the output and volume of a particular fundraising activity.
- Revenue by strategy is a variable in other fundraising performance metrics. Segmenting revenue by strategy is a foundational fundraising performance metric. It makes other fundraising measurements possible.
2. Conversion rate
Conversion rate calculates how effective your fundraising campaign, event, or activity is at encouraging donors to complete actions you would like them to be doing (a goal action). Actions may include reading an email, clicking on a link, replying to a direct mail campaign, submitting an online donation, purchasing an event ticket, visiting your website, or making a donation.
Conversion rate is the number of donors who complete a goal action divided by the number of donors prompted to complete the goal action. For example, if two people purchased tickets to your event out of the ten people prompted by your invitation, then your conversion rate from the invitation was twenty percent.
Conversion rates are based on “the numbers.” Holding all else constant, you can increase a conversion rate by optimizing your ability to convert donors to your goal action. Increasing the number of donors who complete the goal action generates more output from the conversion of your fundraising strategy. If you hold the conversion rate constant, you can also increase the output of a particular strategy by increasing the number of donors prompted to complete a goal action.
Use conversion rate measurements to improve future fundraising strategies. Use conversion rate measurements to ascertain the difference between expected outcomes and actual outcomes, then adjust your strategies to make them more effective in the future. If you have a benchmark conversion rate and if you also understand the variables that influence conversion rate performance, you can take steps to improve the performance of a specific fundraising strategy.
3. Average gift size
Average gift size is calculated by dividing the sum of revenue by the total number of gifts to record that revenue. This metric can be used over any period of time or for a particular fundraising strategy.
Average gift size, revenue by strategy, and conversion rate can be used in combination to produce powerful intelligence for budgeting, forecasting, and planning. They can be used to determine the potential of a campaign, an event, or your annual fundraising strategic plan. Once your strategy is in place, execute your strategy and measure performance of these three metrics against your benchmarks.
These three metrics are mathematically related (see below). If you know some of the variables, you can reverse engineer and back-calculate the equations to solve for unknown variables.
Use these fundraising metrics to scenario plan different fundraising strategies. This set of metrics can help your organization make smarter decisions before executing a fundraising strategy while also enhancing your ability to manage real-time performance of a fundraising strategy.
4. Return on investment
Revenue by strategy is a simple tracking mechanism that measures the scale of a particular strategy. Revenue by strategy alone doesn’t provide a solid view of your fundraising efforts’ effectiveness. Calculate a strategy’s return by dividing the revenue from that strategy by the cost to engage in that strategy. Calculating a strategy’s return will help you discover the activities, events, or other fundraising efforts that are most effective.
ROI shows the total revenue you received for every one dollar of cost associated to that strategy. ROI is a baseline metric you can use to directly compare different strategies, even if those strategies are vastly different.
5. Cost per dollar raised
Cost per dollar raised (CPDR) calculates how much money it takes to raise one dollar (e.g. $0.20 per $1 raised).
Cost per dollar raised is calculated by dividing the total cost of a strategy by the total revenue associated with that strategy. Interestingly enough, cost per dollar raised is the inverse of “return on investment.”
Cost per dollar raised should be tracked in real-time and calculated routinely at the end of each fiscal year. It can be calculated by strategy or the combined performance of all your fundraising strategies in aggregate.
CPDR is a fundraising performance metric that should be benchmarked and continually driven down (while simultaneously increasing fundraising output).
Bottom Line: Improve fundraising performance
How do you know if your fundraising efforts are succeeding? How do you know if your fundraising efforts are improving? Both of these questions can be answered using fundraising performance measurement with clearly defined fundraising metrics.
Fundraising performance measurement yields insight into what works and what doesn’t work by offering tangible, real, and evidence-based fact and proof. That evidence can be turned into actionable intelligence that will inform areas to improve your organization’s fundraising strategies. Incremental improvements over time that are informed by performance measurement are the catalyst for organizational growth!