Fundraising requires investment. You know the drill: it takes money to make money.
To understand if we’re getting a return on our investment, we fundraisers tend to keep our eyes on annual revenue. If revenue is increasing we breathe a sigh of relief then move on to next year. If it’s decreasing, we work furiously to raise more money.
But the only way to really know if the money we’re spending to fundraise is paying off is to look at the movement of donors in and out of giving over the course of time. Yes, we’re talking about donor retention.
Keeping a donor is much less expensive than gaining a new one. First-time gifts often cost more to raise than they’re actually worth. It is only over time and repeat gifts that the lifetime value of a donor materializes. You see, acquisition isn’t about raising money. It’s about raising people who will eventually provide important revenue.
So, the effectiveness of your fundraising investments must be evaluated over the long-term in relation to how donors ultimately stay with and support your organization.
Despite the obvious importance of donor retention, the Fundraising Effectiveness Project reports that the current average retention rate is 44.5 percent. That means nonprofits, on average, are losing more donors than they are keeping!
We call this the Leaky Bucket.
Think of your donor database as a bucket. The concept behind this analogy is simple. New donors come into your bucket through acquisition efforts like direct mail, events, or board contacts. Some stay in the bucket and even upgrade their gifts over time. But all donor bases have attrition – donors that lapse or do not repeat their gifts. This attrition forms the leaks from the bottom of your bucket.
If your bucket has more leaks out the bottom than new donors coming into the bucket, your organization is in danger of wasting valuable time and money.
If you’re not sure about the state of your bucket, our handy-dandy e-book The Leaky Bucket has an interactive tool for making the calculation. It also offers specific suggestions for how to address whatever situation your find your bucket in.
And, if you’re interested in learning more about The Leaky Bucket directly from us, we’re hosting a webinar on the topic as part of the Nonprofit Learning Lab’s Online Conference on November 15, 2018.
It’s never too late to grab your bucket by the handle!