how to use your fundraising budget - reeher · 2018-07-12 · assess your spending using the...

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HOW TO USE YOUR FUNDRAISING BUDGET

FOR THE MOST IMPACT

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1© 2018 Reeher | e: [email protected] | w: www.reeher.com

HOW TO USE YOUR FUNDRAISING BUDGET

FOR THE MOST IMPACT

HOW TO USE THE RESOURCES YOU HAVE TO STRENGTHEN YOUR MAJOR GIVING PROGRAM

How should fundraising

dollars be invested for

the most impact?

KEYPOINTDevelopment and advancement teams within colleges and universities are constantly trying to strike a balance between fundraising spending and results. Investing in resources, tools, and talented people can lead to more engagement, more donors, and more dollars. However, since many fundraising shops operate on lean budgets, it’s important to know where to invest the money and time you have to see the results you need.

Reeher draws its research data from more than 100 U.S. higher education institutions with a total of 35 million donor constituents and 138 million donor database transactions loaded nightly. These institutions include public and private colleges and universities whose programs raise anywhere between $5 million to more than $400 million in private donations per year. This rich source of data has helped us highlight which activities and investments drive major giving success within a higher education fundraising organization.

Reeher’s data-driven insight helps pinpoint the best areas for fundraising investment and offers a roadmap for fundraising teams who want the best return on their investment. This paper will help you:

�� Understand your gift sources.

�� Dig into cost-per-dollar differences between gift sources.

�� Assess your spending using the Activity Based Cost Framework.

�� Spend on only the most qualified prospects.

�� Create management strategies to maximize your ROI for Pipeline donor spending.

Here’s how a look in those areas will drive major giving success:

BETWEEN $5M AND

$400M IN DONATIONS

PER YEAR35M

CONSTITUENTS100+

INSTITUTIONS138M

TRANSACTIONS(NIGHTLY)


HOW TO USE YOUR FUNDRAISING BUDGET FOR THE MOST IMPACT


w Understanding Your Gift Sources

Examining gift sources will help you discover where your investments will do the most to improve your major giving results. Although each college or university has different constituent profiles, every institution receives major gifts from three sources:

w Your Cost-Per-Dollar for the Different Fundraising Groups

As you consider your approach to your Pipeline and Evergreen donors, it’s important to assess current and future costs. From an outsider’s view, higher education fundraisers have an enviable position. In 2017, Reeher Community institutions spent an average of 25 cents per dollar donated. Compared to for-profit corporations, which could spend up to 85 cents to raise a dollar, higher education development programs have an impressive return on investment.

Of course the real cost-per-dollar-raised varies from institution to institution around the country. Variations in constituent wealth and engagement, as well as advancement budget mean that some institutions are working much harder to raise money than others. There is a real opportunity for advancement teams to reexamine where their resources are being used to ensure they’re getting the best return for every dollar spent.

BLUEBIRDS: Bluebirds arrive “ready to donate” and were not necessarily identified by prospect research. Something unique at your institution drives their affinity. There is little you can do to influence a bluebird gift.

PIPELINE:Prospects in the Pipeline group fall into Discovery, Cultivation, and Solicitation categories. They may have been self-identified or found through prospect research. Donors often travel through the Discovery-Cultivation-Solicitation process multiple times and could fall off at any point in the process or rejoin along the way. The majority of major gift fundraising effort and expenses should be used to develop donors from this group.

EVERGREEN:Evergreen donors are your known and reliable donors. Moving donors from the Pipeline group to the Evergreen category requires good stewardship and a modest amount of targeted investment. Gift officers are typically incentivized to focus on Evergreens because it’s easy to plan visits with them and secure their gifts. However, some of this effort should be redirected to Pipeline donors to ensure a new cohort of Evergreen donors for the future.

KEYPOINT

Pipeline donors require a larger share of the fundraising budget but are critical to your program’s long-term health.



Regardless of the hand your advancement team has been dealt, your cost to raise a dollar is likely very different for your Bluebird, Pipeline, and Evergreen donor groups. Evergreen donors require relatively little investment compared to the value of their donations. Naturally, it costs more to identify, cultivate, and solicit a broad base of Pipeline donors. You can expect investment in the Pipeline stage to be disproportionate to the amount Pipeline prospects donate.

In fact, when Top 100 donors are removed, spending per dollar averages $1.51 across the Reeher Community. However, this spending is crucial for developing valuable program initiatives such as increasing participation rates and continuously developing new Evergreen donors. Despite its cost, fundraising in this category should be considered a valuable and necessary investment for the future.

Spending Per Dollar Raised

averages $0.25 across the Reeher

Community

Spending Per Dollar Raised Minus Top 100 Donors averages $1.51 across the Reeher Community

=$1

$1.51

$0.25

w How to Assess Your Spending Using the Activity Based Cost Framework

Reeher uses a tool called the Activity Based Cost Framework to compare spending across three primary fundraising activity categories and an overhead category. This tool is designed to present a bird’s eye view of spending on fundraising activities regardless of the department of origin. This framework helps organizations improve their efficiency by indicating broadly where spending reallocation is needed. The categories are:

DONOR IDENTIFICATION:

The process of discovering receptive prospects. Donor identification encompasses Annual Giving activities as well as a portion of gift officer and development assistant activities. Costs are spread over every solicitable individual.

BENEFIT DELIVERY:

The arms of the organization providing donors with information, connection and follow-through. Alumni Relations and Marketing and Communications departments fulfill this role. Costs are spread over every solicitable individual.

VALUE MAXIMIZATION:

The process of converting proven high-wealth relationships into long-term supporters. This includes gift officer and development assistant costs as they pertain to activities with Evergreen donors. Costs are measured on a per-assigned individual basis.

OVERHEAD:

Overhead includes Advancement Services, Development Administration and Advancement Management activities. Costs are spread over every solicitable individual.



The Activity Based Cost Framework Pie Chart demonstrates the average budget percentage Reeher Community members allocate to each activity as well as to overhead costs.

ACTIVITY BASED COST FRAMEWORK

38%

31%

26%

8%

OVERHEAD/G&A

DONOR IDENTIFICATION

BENEFIT DELIVERY

VALUE OPTIMIZATION

Using the Activity Based Cost Framework helps you assess your spending and reallocate resources to see your best results. Proper spending in all areas contribute to a healthy fundraising program. However, Donor Identification activities are particularly important as they directly impact Pipeline donor growth.

Activity Based Cost Framework compares spending across Donor Identification, Benefit Delivery, Value Maximization and Overhead activities. This framework helps you assess your spending and reallocate as necessary.



Value Maximization

“Value Maximization” activities pertain to assigned Evergreen donors. As previously mentioned, in a properly balanced fundraising operation, this elite cadre of donors should consume only a small percentage of total resources. At the same time, per-donor spending is high, since costs are spread over a very small and targeted group.

Benefit Delivery, Donor Identification, and Overhead

The costs of Benefit Delivery, Donor Identification, and Overhead are spread over the pool of every solicitable individual. Spending per-donor is low overall. Assessing your costs in these areas helps you ascertain what changes can be made to prioritize the activities which contribute your Pipeline growth.

For example, Overhead costs Reeher Community members an average of 35% of their total expenditure. However, among individual schools these costs sometimes soar to over 50% of total spending. Overhead doesn’t directly influence the growth of your Pipeline, or the ability of your team to reach its fundraising goals. Schools who overspend in this category, or in Benefit Delivery could see long-term gains by reallocating some of these resources to Donor Identification Activities.

w Keeping Costs Level but Spending More on a Smaller Pool of Highly Qualified Donors You can increase the value of your dollars spent on Pipeline donors by focusing the largest share of your dollars on donors with the highest likelihood to donate. Reeher Community members spend an average of $28.57 on Donor Identification per solicitable individual. This is a very broad pool of individuals, some of whom are better prospective donors than others. Increase the effectiveness of your Donor Identification activities by segmenting your prospects based on their ability and likeliness to donate. Use high-quality, more expensive means of cultivating your select group of prospects to see better short-term donation results and the beginnings of a long-term donor pipeline. Prospects who are not likely to donate can still be a part of your outreach, but contact should be inexpensive and a limited percentage of your budget.

Use Activity Based Spending to help you

balance your spending. To fuel Pipeline donor growth, be sure you’re prioritizing

spending on Donor Identification activities.

KEYPOINT

Be more selective in your Donor Identification activities. See higher-quality results for the same costs when you approach potential donors

with the ability and the highest likelihood to donate.

KEYPOINT

https://www.reeher.com/fundraising-segmentation-strategy-works/

https://www.reeher.com/fundraising-segmentation-strategy-works/



w A Challenge to Current Fundraising Norms

Reeher recommends examining your gift sources and using Activity Based Cost Spending to ensure you’re allocating the resources you need to develop a strong donor pipeline. Discovering, cultivating, and soliciting these Pipeline donors offers your fundraising team new and sustained opportunities for raising money. As you’re adjusting your spending to prioritize the development of a donor pipeline, strong management practices will ensure you have processes in place to get a strong return on your Pipeline donor investments. Here are our recommendations for basic processes you should have in place.

Management Strategies to Maximize Your Return on Investment for Pipeline Donor Spending

�: Outline what the ideal prospect lifecycle should look like and identify what steps need to occur to move a person to the next stage. Holding the team to a defined process provides clarity, focal points for coaching conversations with staff, and gives your officers a framework to practice the art fundraising.

�: Review who your officers are visiting. They should be focused on an even distribution of Pipeline prospects in the discovery, cultivation, and solicitation stages.

�: Emphasize and monitor activity with new prospects and prospects who have never had a face-to-face visit.

�: Frequently assess your spending in the Bluebird, Pipeline, and Evergreen categories and make adjustments as necessary.

�: Qualify and approach donors with the highest likelihood and ability to donate. Reeher Community institutions use Reeher’s predictive modeling to find these highly qualified donors.

Using these suggested management activities as a guide will help you develop a strong, forward-thinking program. It’s possible to provide Evergreen donors with the stewardship they need, while developing your Pipeline donors to deliver gains in the future.



w Conclusion

As it stands, the majority of fundraising teams overemphasize activity with Evergreen donors to the detriment of the discovery work and disciplined development practice needed to maximize their return on Pipeline donors.

Focusing your department’s resources and efforts on processes which support the growth of your pipeline offers you the best long-term return on your investment. Forward-thinking departments spend smartly on this group to constantly increase the pool of committed and engaged donors. Use the following key takeaways to make sure your program is on track:

�� Separate Bluebird, Pipeline, and Evergreen donors to analyze your return on investment for each donor category.

�� Spend the largest share of your fundraising budget on Pipeline donors.

�� Use Activity Based Spending to help you balance your spending. To fuel Pipeline donor growth, be sure you’re prioritizing spending on Donor Identification activities.

�� Be more selective in your Donor Identification activities. See higher-quality results for the same costs when you approach potential donors with the ability and the highest likelihood to donate.

Reeher helps colleges and universities meet their fundraising goals. We provide tools, research, and strategies that guide successful campaigns in public and private institutions of all sizes.

Please contact us at [email protected] for more information about how we partner with development teams to help them meet their goals.

Invest in your Pipeline donors to sustain the

long-term health of your program.

KEYPOINT

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how to use your fundraising budget - reeher · 2018-07-12 · assess your spending using the...

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