Measuring Impact: 5 KPIs Your Nonprofit Needs To Be Tracking
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By Craig Grella
As a fundraising professional, you're naturally focused on increasing fundraising dollars, growing your organization and pushing your mission forward. To successfully achieve those objectives, you need ways to effectively measure progress toward them. That's where data comes in.
In a technology-driven world, it comes as no surprise that organizations are becoming data-driven, using the information they gather to refine their strategies and make more informed decisions. Each industry has its own metrics for assessing performance, often referred to as "benchmarks" or "key performance indicators." No matter what you call them, these numbers identify valuable growth opportunities and can help you pinpoint inefficiencies in your organization.
To be more specific, a key performance indicator (KPI) is a number that measures one specific aspect of your organization. It indicates how effectively (or ineffectively) your organization is achieving its objectives.
KPIs can be used at multiple levels to assess progress. While high-level KPIs focus on the nonprofit's overall performance, low-level KPIs might focus on very specific aspects that apply to specific teams or staff members.
While KPIs represent a valuable opportunity, it's important that you select the right ones to track for your unique organization, especially since there are so many possibilities. Your online fundraising tools already track many useful metrics like these. It's up to your team to determine which KPIs are most useful to track and analyze. So let's explore five common KPIs that your organization should start tracking to make more informed decisions.
Nonprofit KPI No. 1: Donor Retention Rate
When you've taken the time to convert a donor, you naturally want them to stick around and continue supporting your work, which is why it's important to track your donor retention rate.
Donor retention rate simply refers to the percentage of donors that return to give again within a specific time period. Most often, nonprofits measure donor retention year over year.
Too often, donor retention is overlooked in favor of acquisition, though. Nonprofits looking to grow often track their acquisition rate without realizing that many of those donors slip through their fingers after a single contribution. By focusing on retention first, you can strategically plan for sustainable growth.
The reason retention is so significant is that acquiring new donors is more costly than keeping the ones you've already converted. Think about it: It's much easier to encourage those who already have a connection to your cause to keep giving than it is to capture the attention of new prospects.
If you've impressed donors enough to warrant repeat donations, this will naturally grow your fundraising potential, especially considering that those individuals will likely start donating higher amounts or more frequently the longer they're around.
How to Calculate This KPI
Measuring your nonprofit's donor retention rate is fairly straightforward. Calculate it by dividing the number of repeat donors this year by the total number of donors last year. Then, multiply by 100.
For example, let's say 553 donors gave to your organization again this year but 1,198 total people donated last year. In this case, your donor retention rate would be 46%.
Manually calculating this KPI can quickly become tiresome, so make sure you invest in software that tracks this information and calculates this number for you. Then, you can also easily compare today's retention rate with past retention rates to measure improvement.
Nonprofit KPI No. 2: Donor Lifetime Value
Donor lifetime value (LTV) is a prediction of how much one donor will give to your organization from the moment they first donate to the time they lapse.
In other words, this nonprofit KPI is the total amount of money you can expect from the average donor until they churn. Thus, LTV is represented as a dollar amount, and a high LTV is what you're aiming for! When you have a high LTV, that means you'll have more money to invest in marketing, appeals and so on to acquire new donors in the first place.
When it comes to calculating this nonprofit KPI, it's important to bear in mind that you'll never calculate the lifetime value of a single donor. Rather, you'll determine your average LTV for your entire donor database. To be even more strategic, you may break it up into segments, such as:
- Giving level. Think about it: You wouldn't approach a donor who donated $25 once the same way you would approach someone who gives thousands of dollars every year. Those who give only a few dollars will have far lower lifetime values than those who donate thousands on a regular basis. Having segments for various giving levels helps you understand what segments need more attention and where additional opportunities might exist.
- Acquisition channel. Just as this KPI will vary by giving level, it will also change based on the acquisition channel. Someone you acquired from your annual gala will likely have a longer lifespan than someone you acquired from a social media ad. This has a direct impact on their LTV. Knowing this, you can determine which channels and strategies to focus on more in the future.
Knowing the LTV for various segments will help your fundraising team make important decisions regarding how you acquire and retain donors. In any case, it's important to bear in mind that the number you get is simply a prediction of the value of a donor relationship.
How to Calculate This KPI
In theory, calculating your donor lifetime value is simple, but it relies on a few other metrics that you can determine using your fundraising software. You'll need to know your donor lifespan, which is the length of time between the average donor's first gift to their last. You'll also need to know the average donation amount and frequency, which is how many donations a donor will make during a set period of time.
Multiply the lifespan by the average donation amount by the donation frequency, and you get your donor lifetime value.
Nonprofit KPI No.3: Online Fundraising Percentage
With technology becoming more prominent every day, online giving is now a major priority for nonprofits. There was a 10% increase in total online revenue last year. Plus, online giving is now the preferred way to give, with 63% of U.S. and Canadian donors indicating that they prefer to donate online using a debit or credit card. As such, it's important to measure your online fundraising percentage.
Your online fundraising percentage is the percentage of donations that come from online sources vs. other sources, like in-person events and cash donations.
If your online gift percentage is lower than anticipated or lower than peer organizations' rates, that may mean that you need to step up your digital marketing efforts and online campaigns. You can set goals to increase the number of donors, gift frequency, or average donation size.
Calculating this also allows you to properly allocate your marketing budget for the upcoming year. You'll know approximately how much to invest in different promotional channels, so you can make the most of your team's time and money.
How to Calculate This KPI
Divide the number of online gifts by the total dollar amount of gifts over a given time period. Then, multiply that number by 100.
To simplify the process, invest in intuitive fundraising software that automatically tracks all your online fundraising revenue for you. What will simplify things even further is software that allows you to track offline gifts as well. When your system offers unified offline and online donation processing, you'll know exactly how much money you've acquired from each channel at any given moment.
Nonprofit KPI No. 4: Fundraising Return on Investment
When your fundraising team invests time into leveraging new strategies and trends, it's important to understand whether those efforts are paying off, or if you're wasting valuable resources. In order to secure funding, you have to spend money, and it's important that you're making more than you're spending. That's why it's important to track your fundraising return on investment (ROI).
Fundraising ROI compares how much money your organization spends on fundraising strategies with how much those efforts bring in. This is typically calculated on a yearly basis or for specific campaigns.
The lower the cost, the better — so long as you're not sacrificing quality. It's important to bear in mind that you should take all expenses into account, including things like marketing materials, catering, and venue rentals. Some costs that can be easily overlooked include:
- Software costs. Any fundraising or marketing technology you use also factors into your ROI. Be sure that your technology gives you plenty of value for its cost and offers all the features your team needs to operate efficiently.
- Staff time. Many nonprofits fail to remember this, but any staff time spent is a significant investment. For a specific campaign, simply ask staff to estimate the total number of hours they spent or plan to spend on a particular tactic. Then use that to indicate the approximate cost based on their individual salaries.
This metric is crucial when it comes to getting the highest value from your resources. Bear in mind that overhead isn't necessarily a negative aspect of fundraising. It allows you to create quality opportunities and interactions with your community, so make sure you're still investing enough into your campaigns while still getting a notable return on your investment.
How to Calculate This KPI
Like we mentioned, you can either look at this from a yearly perspective or on a campaign-by-campaign basis. Determine how much you spent, including any marketing and administrative expenses. Then, subtract the total amount spent from the total amount raised. Divide the result by the total amount spent on the tactic. Multiply by 100 to get a percentage.
Nonprofit KPI No. 5: Conversion Rate
It can be exciting when your emails and other appeals get a lot of attention and people click through to the content. Unfortunately, clicks alone don't fund your initiatives or help pursue your mission. What really matters is whether or not people actually do something based on your appeals.
Conversion rate indicates the percentage of people who took a specific action when prompted by your organization.
This nonprofit KPI gives you insight into whether your appeals are optimized to drive recipients to take action or if they should be improved. Most often, you'll see this associated with donation requests, but it can apply to many other calls-to-action (CTAs).
For instance, maybe you called on your supporters to volunteer at your next event, in which case you'd measure how many people completed the sign-up form. If your nonprofit runs advocacy campaigns, consider how many people signed the online petition you promoted. Maybe you want to encourage people to sign up for your newsletter, in which case you'd measure how many people do so.
KPIs like conversion rates directly indicate engagement levels with your appeals, letting you know if they're optimized or if you need to take extra steps to improve your efforts. By taking a look at your conversion rates across all types of actions, you can gain a more holistic view of your supporters and what types of activities pique their interest and inspire them to get involved. Then, you can adjust your future activities based on what drives them to convert.
How to Calculate This KPI
To measure conversion rate, your team needs to look at a specific call-to-action. Divide the total number of people who took the action by the total number of people prompted by the CTA. Then, multiply by 100 to obtain a percentage.
For instance, let's say you conducted an email marketing campaign that brought 200 visitors to your donation page. Out of those 200 people, 75 actually donated. In other words, they converted. Your conversion rate is 37.5%.
After calculating this metric, you can measure it against other campaigns and landing pages to figure out what types of strategies work best. You could also use that number to set future goals for your campaigns. For example, a goal for your next campaign could be to improve conversions by 5%. At that point, you can experiment with A/B testing to determine which elements will likely help increase conversions.
These KPIs are only the beginning. There are many others out there that your team should be tracking.
No matter which KPIs you deem most necessary for your nonprofit to track, your fundraising software will play an important role in streamlining data collection. It will minimize the calculations that you'll need to make by hand, so you can spend more time on what matters: refining your strategies and pushing your mission forward.