Determining the True Cost of Fundraising

Fundraising is about more than ROI and cost to raise a dollar. It’s about justifying the work being done by an organization and maximizing efficiency. And transparency is key to determining the real value of a fundraising campaign.

That according to Michael Lowstetter, vice president of finance and chief financial officer of the Union Grove, Wis., nonprofit Shepherds Ministries, who spoke at a session at Blackbaud’s 2008 Conference for Nonprofits held last month in South Carolina.

Lowstetter said that popular fundraising measures such as ROI, total revenue, total expense and cost to raise a dollar are important — but, he asked, are they enough? To become truly transparent, Lowstetter and co-presenter Nancy Appel explained, organizations must understand the process of fundraising and determine the true costs, then calculate the costs for the current year — not when the funds actually come in.

Appel, manager of donor communications for the Minnesota drug and alcohol addiction nonprofit Hazelden, said fundraisers need to ask themselves questions such as:

* What are we providing?
* What does it cost?
* How does the cost to accomplish one activity compare to the cost to accomplish another?
* Can we spend more to get more?

“Evaluation is where the impact on the long-term process is determined,” Appel said. “When calculating expenses [for an event, for example], capturing all costs leading up to the event, the day of the event and in days after the event is essential to transparency and ultimately determining the true costs of fundraising.”

The speakers also offered these tips for pinpointing the true costs of a variety of fundraising strategies:

Events
Events are time intensive, but they can give organizations significant net revenue and a predictable scenario: Do the work, get the money.

“However, sometimes a one-time event may not be conducive to building long-term relationships and support around an organization’s mission,” Appel cautioned.