The right and wrong way to measure fundraising efficiency

They say you get more of what you measure.

So what should you be measuring in your fundraising program?

You should be watching response, average gift, cost per piece, total cost, gross revenue, and net revenue. Of these, net revenue is the most important. It’s the main goal of raising funds.

Then there’s the number that measures the efficiency of your fundraising. There are two ways of expressing that:

1. Return on investment (ROI)
(Revenue divided by cost)

2. Cost to raise a dollar (CPDR)
(Cost divided by revenue)

These two numbers measure the same thing — efficiency. But there’s a vast difference in their impact on your program.

When you watch ROI, a higher number is better. When you watch CPDR, a lower number is better. The way to accomplish either is exactly the same: either lower your cost or improve your return (or both!).

Here’s the important difference:

  • ROI encourages you to do better work. To invest. To spend more to make more.
  • CPDR encourages you to cut costs. To be cautious.

That’s why you should prefer ROI. Any fool can cut costs to squeeze a few pennies onto the bottom line. It takes smarts to do better work that changes the game and raises a lot more money.

What do you want to spend your time and efforts doing?


Comments

Leave a Reply

What this blog is about

The future of fundraising is not about social media, online video, or SEM. It’s not about any technology, medium, or technique. It’s about donors. If you need to raise funds from donors, you need to study them, respect them, and build everything you do around them. And the future? It’s already here. More.

Blog policies

Subscribe

Get new posts by email:

About the blogger

Jeff BrooksJeff Brooks has been serving the nonprofit community for more than 35 years and blogging about it since 2005. He considers fundraising the most noble of pursuits and hopes you’ll join him in that opinion. You can reach him at jeff [at] jeff-brooks [dot] com. More.


Archives

Blogroll

Categories


Search the blog

The future of fundraising is not about social media, online video, or SEM. It’s not about any technology, medium, or technique. It’s about donors. If you need to raise funds from donors, you need to study them, respect them, and build everything you do around them. And the future? It’s already here. More.

Recent Comments

About the blogger

Jeff Brooks has been serving the nonprofit community for more than 30 years and blogging about it since 2005. He considers fundraising the most noble of pursuits and hopes you’ll join him in that opinion. You can reach him at jeff [at] jeff-brooks [dot] com.

Blog Roll

someone’s blog