Investing in Fundraising … and Fundraisers

How much do you invest in fundraising? And is it enough?

The amount you spend usually depends on the age of your nonprofit and the types of fundraising you do. An organization that raises millions of dollars a year may spend 10-15% of its revenue on fundraising expenses. A start-up group, by contrast, may invest much more as it begins a direct mail program to acquire new donors.

All nonprofits, however, should evaluate annually their fundraising efficiency ratio (what they spend to raise a dollar). A low ratio may look appealing to the board or donors, but it could represent an insufficient investment to build a sustainable organization.

Recent studies commissioned by the Association of Healthcare Philanthropy found hospitals that spent more money on fundraising—particularly fundraisers—had better donor retention and higher revenue than those that spent less. In part, because the fundraising staff focused on major gifts and had more face-to-face meetings with donors.

Here are 3 quick ideas as you evaluate your spending:

1. Monitor your fundraising investment. Evaluate your fundraising efficiency ratio annually. For instance, a group that raises $100,000 in contributions and spends $10,000 on fundraising has a fundraising efficiency ratio of 10%.
2. Hire well and retain staff. Reduce the turnover of fundraising staff by hiring carefully and paying competitive salaries. In the studies mentioned above, the hospitals with veteran fundraisers (5-6 years on the job) raised much more than those with new hires.
3. Use administrative staff and contractors well. Don’t let your top performers get bogged down in the mechanics of a direct mail appeal. Use admin staff or outside vendors for these tasks so that major gift officers can focus on cultivating, soliciting and stewarding big donations.