Why some people hate Fundraising ROI's
Internal factors which affect your results
Today’s article…
…delves more deeply into Fundraising ROI’s - what they are and why some people hate them.
We’ve furnished you with a handy checklist of the things which will impact your own ROI’s and recommend you use them alongside your data (or thrust them in front of a trustee who would benefit from some ‘how fundraising actually works’ education).
Have a super week,
Tony and Caroline
Why some people hate Fundraising ROI’s…
by Caroline Danks
Picture description - a jar of Marmite Peanut Butter
A fundraising ROI is a figure which expresses the total funds raised for every £1 invested.
To get the figures, we divide the amount raised by the amount spent (and yes, this does include salaries).
So for example, if a charity spends a total of £20,000 on trust fundraising and raises £60,000, the ROI is £3 : £1.
Our report looks at the different types of fundraising and calculates ROI for each, helping us all to understand what we can expect from different types of fundraising activity, compared with another.
It’s not everyone’s favourite though
This is a divisive topic.
A bit Marmite.
Alongside the short-termism of calculating ROI across only 12 months AND reducing donors to statistics, the primary reason that some people hate this work is that it’s all too easy for people to use the figures without applying any context or nuance.
A mis-informed leader could easily set an unrealistic target based on industry averages.
I have in fact had my own benchmarking reports quoted back at me, with trustees demanding to know why their charity isn’t near the ‘average’.
FFS.
It’s really important that alongside the raw data, you consider the following factors which will be personal to you and your charity.
If you don’t do this, then I’d go as far to say that the data is nigh on useless.
If you are using the information from our reports to help you consider the fundraising future of your organisation, please apply context before making decisions about will and won’t be possible for you.
Internal considerations which impact ROI
The length of time your charity has been fundraising
ROI tends to improve over time. Lead in times mean that investment will likely be higher than the return for a period of time. You have to hold your nerve….
The range of income streams you currently have.
Some income streams deliver a higher ROI than others. If you get most of your income from grants and trusts, your income will be higher than a charity whose income is predominantly from events and community fundraising.
More diversity means less risk and more opportunity to invest / try new things, which might incur a lower ROI (but it might be seen as very much worth it for the sustainability gains).
Your capability
Who is actually doing the work? If you have a fundraising team and / or someone who is experienced and successful leading the work, then your ROI is likely to be higher than if you’re winging it / new to it or are doing the fundraising alongside multiple other demands.
Your capacity
Whilst professional fundraisers aren’t typically ‘cheap’, they do tend to be good value.
Buying in dedicated, professional support not only increases the expertise within your charity, but critically, the time available for fundraising.
Charity leadership
An effective board who understand and support fundraising will enable a better ROI. Charity people who spend too much time educating and informing a micro-managing trustee rather than actually doing the work may see less of a return.
Investment in fundraising
A fundraising team supported through learning and development opportunities will perform better than someone who is hastily scrabbling around trying to find information for that funding application.
Similarly, fundraising tends to be a long term investment and it can take many years to build s sustainable stream of income. If you’re feeling pressure to raise money in a short time period, there’s a danger of poor practices and a lack of enthusiasm / motivation (and a lower overall ROI).
Your brand
Well known charity brands have more ease in explaining their work and the difference that donations will make (though conversely, they may also have to battle against unfair or untrue opinions).
Ability to demonstrate your impact*
If you can’t clearly communicate the difference your work makes (and ideally, back it up with evidence), then you will find it hard to fundraise, especially from some of the larger trusts and foundations.
This is a source of frustration for me, as measuring your impact can be costly and many smaller charities simply don’t have the resources.
It’s a vicious cycle. More money = access to more money. Sigh…
However, if you can’t prove that you make a difference, the amount you’re able to raise is likely to be less, thus impacting your overall ROI.
*HUGE thanks to Nest Egg reader Kaya for suggesting this important addition.
Don’t panic!
For some, this list can look a little exhaustive and intimidating.
You do not have to be doing all of these things perfectly in order to achieve great things with your fundraising
There are in fact plenty of big brands who don’t have all of this stuff nailed.
Just start by focusing on one or two areas for improvement and do them really well.
If you feel like you can’t relate much to the list above, then bear in mind the following:
You shouldn’t expect an ‘average’ ROI in the first few years (unless you’re extremely well connected!)
You are likely to require sustained investment in fundraising for a period of months (at least) before seeing a return (but it will be worth it!)
Tell us in the comments why your ROI is strong (or not).
We’d love to know more about the charities you work for, their strengths and opportunities for development - tell us more…
Just wanted to add to your list of internal factors affecting ROI: the one I have the most trouble communicating to leadership is the ability to provide quality evidence of impact. I too have had ROI stats quoted at me by CEOs who refuse to acknowledge what an important factor this is.