I recently learned of a newly developed method for measuring fundraising effectiveness that goes beyond cost of fundraising. Eureka! This new framework was developed by BoardSource in partnership with the Association of Fundraising Professionals, the Better Business Bureau Wise Giving Alliance, and GuideStar.
With this post I wanted to spread the word about this new way of measuring fundraising effectiveness. I’m also interested to hear from organizations who try to use it. I’m really curious to see its potential for measuring fundraising effectiveness at nonprofits of all sizes.
All of the content included below is sourced from this link. I would encourage any nonprofit staff or board member who is interested in learning more to check out this site. They offer some easy to use toolkits including an Excel worksheet to calculate the formula and a Powerpoint presentation designed for board-level conversations.
This is the basic visual for the formula:
Here are definitions of the formula elements:
- Total Fundraising Net: The amount of money available to spend on an organization’s mission as a result of its fundraising efforts. This is the bottom line measure of fundraising success. If it’s not enough to fund the organization’s work, then the other two measures are irrelevant.
- Dependency Quotient: A measure of risk, the Dependency Quotient measures the extent to which an organization is dependent on its top 5 donors to fund its work. It’s an indicator of how vulnerable the organization could be in the face of changed priorities among its top funders. Generally speaking, organizations would seek to have a lower Dependency Quotient, indicating that they are more resilient to changes in top donor giving.
- Cost of Fundraising: A measure of efficiency, the Cost of Fundraising measures how much it costs to raise money within your organization. While some calculate it differently, we measure the average amount that it costs to net one dollar across the entire organization. Generally speaking, organizations would seek to have a lower cost of fundraising, indicating they are investing efficiently in fundraising.
For those who like more visual representations, I adapted the following from the toolkit download.
- What did you learn about your organization’s fundraising program that you didn’t know before measuring fundraising effectiveness in this way?
- Was it worth the effort put into calculating the formula?
- Will your fundraising strategies change based on what you learned from this?
- Would you be willing to be featured as a case study on your use of this formula in an upcoming blog post?
Thanks for your continued interest in the Adaptive Nonprofit blog. As always, I love hearing from you at firstname.lastname@example.org or 734-548-7710.