Most nonprofits are often evaluated on two measurable objectives:
- Program Efficiency: How efficiently does an entity accomplish their mission? Program efficiency is a measure of the amount spent on a program as a percentage of total spending.
- Fundraising Efficiency: How effective is the nonprofit at raising philanthropic dollars for their program? Fundraising efficiency is a bit trickier because there are multiple ways to raise philanthropy, with varying costs.
The most common methods of fundraising from individuals are broken down below:
- Direct response: Nonprofit sends a printed or digital letter asking for support.
- Event related: This can include a variety of events (dinners, galas, auctions, golf events, 5k races, etc.) whose purpose is to raise money for a charity.
- Major donors: High-net-worth individuals are cultivated to support a cause.
- Planned giving: Some donors believe so strongly in the mission that they consider the nonprofit as a member of their “family” and include them in their estate plans.
Other sources of support include foundations, corporations and government.
There are blended methods of these approaches, but they all require investment of resources to develop and mature. Typically, the average amount of the philanthropy a nonprofit receives would be ranked from the smallest gifts (direct response) to the largest gifts (planned gifts). Planned giving philanthropy requires the longest investment but can yield the largest return on investment.
Since each investment of fundraising dollars can be perceived as “taking away from the mission,” it is critical that nonprofits make wise investments with their fundraising resources.
Making the most of your donor data
Your most precious and critical asset is your donor data! It is vital for your mission, your donor relationships, your current financial support and your future financial stability. Nothing is more important than understanding and effectively utilizing this asset!
Effective utilization begins with good record-keeping and acknowledgment of donor gifts regardless of your fundraising practices. Yet to be effective, you must analyze and use your donor data so that you adjust fundraising methods to efficiently achieve the strongest current and future revenues. Your analysis will reveal specific donor groups or individuals who are priorities for closer relationships and who may require unique contact and messaging.
Beyond the giving patterns of your donors (years of giving, largest gift, cumulative giving, etc.), there are several essential characteristics that will enhance every part of your development program. Retrieving these data points may require a “data overlay,” but the resulting value is well worth the expense. The following data characteristics are critical to your mission:
- Capacity (wealth): The capacity will identify those donors who are candidates for major gifts or large planned gifts as part of any capital campaign. The number of high-net-worth donors will guide you in personnel assignments and hiring. Those with lesser capacity can continue to be solicited by direct mail or online messaging.
- Gender and marital status: Knowing donor’s gender will help you craft messaging that resonates more strongly with individual donors, while the marital status may help with effective communications and the preparations for direct contacts to build personal relationships.
- Age: Finally, the age of a donor opens the door for specific messaging about both current and deferred planned gifts, such as a donor’s gift from assets (stocks and real estate) at any age and/or the donor’s ultimate gift plans.
Once reliable data points are part of the donor database, additional analysis is worthwhile. Using Artificial Intelligence (AI) to analyze your donor data can provide significant insights on investments of resources over multiple fundraising sources. A nonprofit with a donor base of greater than 25,000 should not only be letting AI do the work of understanding their best donor profiles but also of determining the importance of specific individual relationships to their donor base.
Sharpe Group uses both data overlay and AI technology combined with “best-in-class” consulting to partner with clients to formulate the best customized strategy and marketing approach for harvesting large gifts for a client’s mission and program.
By Bob Mims, Senior Consultant & CFO and Lewis von Herrmann, Senior Consultant
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