Recognizing the relationship between investment in fundraising and the return on that investment is essential for nonprofits in the face of the tough economy and heightened pressure on them to improve all aspects of their fundraising in terms of productivity, efficiency and value, a new white paper says.
“Evaluating return on investment provides great advantage for moving a nonprofit organization’s development office, its management and the board forward in aligning the business of fundraising with their overall philanthropic mission,” says Measuring Fundraising Return on Investment and the Impact of Prospect Research: Factors to Consider, prepared by WealthEngine.
The paper says nonprofits can and should establish “return-on-investment” and “cost-to-raise-a-dollar” benchmarks for the various fundraising activities that are designed to produce contributions, including donor acquisition, donor renewal, special events, major gifts, planned giving, capital campaigns, and grantseeking.
Nonprofits should separately manage the returns on investment for each of those activities, the paper says, “because of their distinctly different purposes, varied sources of funds, and/or individual performance characteristics, while at the same time factoring all activities into overall performance metrics for the organization.”
Prospect research, the paper says, is a key part in the fundraising operation of all nonprofits because it provides the basis for “successful identification, cultivation, solicitation, and stewardship strategies,” and can help organizations raise more money over the long-term
Measuring the return on investment for each individual fundraising activity is critical, the paper says, because development offices, board members, donors and volunteers want greater transparency into the costs and outcomes of fundraising.
Prospect research also can serve as a key indicator for assessing the impact each fundraising function can have on the organization’s overall fundraising, the paper says.
“All of these metrics, taken individually and combined, can help the organization better understand the economic benefits achieved by their various fundraising efforts and recognize how investing in one activity versus another may yield better results,” it says.