7 Magnificent and Essential KPIs That Matter for Your Nonprofit
The movie “Seven Samurai” has been an inspiration for both “The Magnificent Seven” and my own presentations about key performance indicators (KPIs). I call these “the magnificent seven KPIs that apply to most businesses.” They also apply to nonprofits.
Connected to the four rules of integrating marketing channels, these seven KPIs help nonprofits focus on clear guides to help them manage their marketing efforts and their business.
Nonprofits are like jewels, with many facets that create their overall appearance — serve the cause; support their donors; communicate with the board; and run a day-to-day business with staff, marketing and operations.
It’s this last function — the day-to-day business management — where KPIs can make a difference. By using a handful of metrics that everyone agrees on, you can help organize tasks, rally the team and get everyone focused on the right kind of work to support those KPIs.
Plus, if you have the right KPIs in place, managing progress and performance of the business facet becomes much easier.
I would also recommend that you publish these (or some version that’s better for your organization) for everyone to see, and use them as the guides for monthly or quarterly meetings. A shared understanding of shared goals does wonders for focus, determination and teamwork.
In no particular priority or importance, here are the magnificent seven KPIs for your nonprofit.
1. Net Asset
This is a clear bottom-line number that you manage to support a staff and team while serving the cause. This helps you plan for updates to software, pencil out your marketing budget, adjust for salaries and raises, and know what you have and don’t have for the upcoming year or so.
2. Growth of House File
The house file is the database file of all of the contacts you own. These are email subscribers, folks on your own mailing list, previous donors, and any opted-in lead, prospect or donor who you have in your database. It could be a massive spreadsheet or CSV file, or live within a CRM or a platform.
The house file is where you measure the growth — over time — of your collective leads, subscribers and donors. The job is to get every record as complete as possible — name, email, phone, household address, etc. You should be using the house file for your continued marketing efforts and for segmenting your donor base. Growing the house file is an important way to measure your exposure.
3. Cost Per New Donor
When you roll up your entire marketing budget and then divide that by the number of new donors, you get a universal cost per new donor. If you spend $10,000 on marketing and bring in 250 new donors, your cost per acquisition (CAC) would be $40.
This large number matters more than the cost per acquisition on an individual channel, like social media, email or direct mail. Like I noted when discussing integrating channels, the reason the larger, more general metric works better is because all channels connect and influence each other.
4. Lifetime Value of Your Donor
Straightforward enough, this totals the entire amount a donor has given to the cause. There will be an average lifetime value (LTV), which lumps everyone together for a single number. There’s also proportional LTVs, which helps you segment your donor list in a smarter way.
For example, if you break down your LTVs into the top 10%, 20%, 30%, 40%, etc., you can then better understand what to expect and even how to communicate. Also, you can set different goals for each segment. An average LTV might be too difficult to move substantially, or not give a clear picture of where growth is occurring. You might have a 5% growth of an average LTV of $200 ($205), but within a group of donors see a jump from $110 up to $150. By using proportional LTV, you may find pockets of your donor base that show more promise and opportunity.
5.Yearly Run Rate of All Incoming Donations
This is equivalent to top line revenue for businesses. Tracking this keeps you on pace from year-to-year, and also gives the team a clear goal for the next year. What I love about this number is that it combines all of the new donors with all of the active returning ones, and you can then drill down from there. It’s a big, single, collective number that’s easy for everyone to point to as the aspiration.
6. Number of Existing Active Donors
This can be considered retention of donors, and it’s vital that it’s healthy. Secondary metrics would be the recency, frequency and value (RFM) of the donations, but the main number is how many donors that were acquired are still in the mix and participating.
7. Number of New Donors
This is the lifeblood of your organization. You always need to have new donors coming into the fold to not only shore up inevitable erosion, but also to fuel growth. By comparing the existing active and new, you can see what you need to do to reach the growth mode — where the new donors surpass the eroded or inactive donors, so the net is positive.
Do these KPIs make sense for your nonprofit? Are there others you think are more appropriate? There are probably more, but, by expanding the list, teams can dilute their impact or focus on too many. Or, maybe these are too many. If seven are too many to manage, pick the three that are easiest to discern and tell the clearest story about the health of your nonprofit.
Establishing the right numbers for each of these KPIs is a group exercise. There needs to be a shared understanding so you all agree on what you’re aiming for. And, keeping a monthly or quarterly meeting schedule to make sure you’re managing these KPIs will inspire the entire team.
By using these KPIs, your team can focus their business-facet efforts as a collective group. When you’re all rowing in the same direction and going to the same place, you can make very strong progress.
The preceding blog was provided by an individual unaffiliated with NonProfit PRO. The views expressed within do not directly reflect the thoughts or opinions of NonProfit PRO.
Chris Foster is the vice president of business development at Modern Postcard.