Fundraising Costs: Donor Acquisition vs. Renewal
One of the biggest reasons securing new donors is so much more expensive than renewing gifts is because existing donors already feel invested in the mission by way of their previous gift.
Some states that impose a ceiling on maximum annual fundraising costs make it even more imperative for nonprofits to consider how they are spending those dollars. In these situations, it is nearly impossible for a new charity to solicit a broad spectrum of potential donors and expect to raise funds within the percentages allowed.
A few tips for targeting your fundraising dollars to attract and retain donors:
Target 20 percent
It is generally accepted that a large, established organization should expend no more than 20 cents for each dollar raised from the annual donor renewal process using direct mail and personal solicitation techniques. Likewise, a smaller, new organization’s costs could reach up to 30 percent initially.
Plan to spend more to expand your base
In contrast with the 20 percent rule, the same organization seeking to expand its overall donor base by initiating a new donor acquisition program will need to expect to spend more. In fact, they may reasonably expend the entirety of each dollar raised or somewhat more in connection with its donor acquisition effort. When planning to expand the base, keep in mind the lifetime value of each donor acquired, not just the initial dollar raised.
Add to what works
Do not get locked in to one or two funding streams. Some organizations tend to think grants first instead of cultivating relationships with individual donors who have the capacity to give large gifts. Other nonprofits continue to seek funding from the same donors year after year rather than expand their base of prospects.
Of course, loyal donors should be asked, but relying solely on grants or existing donors year after year will soon lead to stagnation or decline in giving.
Continue to implement fundraising strategies that work for you, but stay open to new strategies to grow philanthropy. Before you get started, make sure your organization is ready to spend the money necessary to raise the money your nonprofit deserves.
Norma Murphy, Executive Vice President (Kansas City)
Next stops on the road to achieving Hartsook’s mission of growing philanthropy by 25 percent in the next 20 years:
April 29, 2016
Lilly Family School of Philanthropy
Franztreb Fundraising Lecture Series
John List, Homer J. Livingston Professor of Economics, University of Chicago
May 9-11, 2016
2016 AFP Mid-America Conference on Fundraising
Dr. Adrian Sargeant
“Enhancing Satisfaction in Donor Relationships”
“What Does it Take to be Successful in Major Gift Fundraising?”
May 18, 2016
Association of Fundraising Professionals Forum
“Preparing for your next campaign: Tips for successfully completing your internal and external assessment”
Inspired Fundraising Summit
Resources for Smart Fundraising Available on Kindle
Keep up to date on the latest fundraising trends with the Kindle ASR Media collection:
- Fundraising Leadership – The definitive source for empowering board members to become pro-active fundraising leaders by Karin L. Cox
- Performance-Driven Fundraising – Handy, yet entertaining reference tool for new and seasoned fundraisers by Matt Beem
On the Web
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Visit the Hartsook website for:
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Strategies for Success explores smart ideas, connecting with thousands of fundraising professionals. We welcome your best practices contributions or comments. Send to Strategies for Success editor Karin Cox, [email protected]. If you’d like a free subscription to Strategies for Success or its monthly companion, eHartsook on Philanthropy, contact [email protected].