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Donations keep your nonprofit organization healthy and growing, so it’s natural to want your fundraising strategies to be as effective as possible. That’s where fundraising metrics become important. Once you become familiar with them, you’ll be able to find valuable insights into your fundraising data.
In this article, you’ll gain critical information on how to improve your fundraising by reviewing your results, tracking key fundraising metrics, and comparing your performance to benchmarks. You will also learn how to calculate and use your Cost Per Dollar Raised (CPDR), also known as the fundraising ratio. Let’s get started.
Understanding fundraising benchmarks
Benchmarks are standards or references against which you can compare your nonprofit’s performance. You might compare your nonprofit’s fundraising results year-over-year to the results of another nonprofit, or to an average from across the nonprofit industry.
Metrics are criteria you can use to measure your nonprofit’s data and evaluate important factors of your overall fundraising program or a specific fundraising activity, like a campaign. Key Performance Indicators (KPIs) are, as the name implies, the most important metrics essential to evaluating your progress toward your fundraising goals.
You’ve probably heard the phrase “it takes money to make money.” While this comes out of the business world, it applies to nonprofit fundraising too. It’s important for your nonprofit to assess metrics related to spending and return on investment to determine if your programs are making back their budget. This is what makes it so important to calculate your CPDR.
What is Cost Per Dollar Raised?
Cost Per Dollar Raised is a KPI designed to answer a basic question: what value are you getting from the money you spend on fundraising? It helps nonprofits understand the relationship between the money they invest in fundraising activities and the funds brought in to support their purpose.
CPDR is calculated by dividing the cost of your fundraising activities by the funds you raise. You can find the CPDR for specific campaigns or events, as well as your overall fundraising program. Note that the costs used in this calculation should include everything needed to conduct your fundraiser. This will include an estimate of staff time expenses and costs for social media advertising, printing, and event organization.
For example, if your organization spent $7,000 in fundraising expenses for your 10th anniversary campaign and you raised $20,000, your Cost Per Dollar Raised was 7,000 ÷ 20,000 = 0.35. In other words, you spent 35 cents for every dollar raised.
Or, if last year you spent $45,000 on your full fundraising program, and raised a total of $173,000, then your Cost Per Dollar Raised was 45,000 ÷ 172,000 = 0.26. This means that you spent 26 cents for every dollar raised during the year.
Taking action on your Cost Per Dollar Raised ratio
By tracking your CPDR from year to year, you’ll be able to see the general fundraising trend for your nonprofit. You might set a goal to reduce your CPDR to a certain level and brainstorm ways to do that with your colleagues, such as by reducing expenses and increasing gift sizes.
This is where benchmarks come in. You can compare your CPDR to a similar organization’s or you can look at your nonprofit’s performance against an average for the nonprofit industry as a whole. These benchmarks are also monitored by charity watchdog groups like Guidestar by Candid, Charity Navigator, and Great Nonprofits. They use metrics such as CPDR to evaluate and rate nonprofits, giving you another reason to keep an eye on them.
Remember that tracking metrics and benchmarks should be a tool to assess and improve a well-thought-out fundraising strategy, not a goal in itself. For instance, if building your donor base is a high-priority strategy for your organization right now, you may deliberately choose to spend more to bring in new donors. In this situation, a higher CPDR during a year or two focused on growing your donor base could be a sign of success. In this case, you would also track the number of new donors acquired, since that would be the KPI for your priority goal.
Understanding your nonprofit’s success
Your nonprofit’s Cost Per Dollar Raised ratio provides a valuable snapshot into the health of your unique strategies and goals. You can use it to improve your fundraising by measuring your progress regularly, comparing it to appropriate benchmarks, and setting concrete goals.
If you are moving in the right direction, celebrate and analyze what’s working so you can expand on it. If not, explore why, make changes to correct your course, and continue fulfilling your purpose.