Increase Fundraising ROI Through a Major-Gift Focus

In today's complex fundraising world, donors are becoming very choosy when picking institutions for their charitable donations. I remember talking to a major-gift donor who said, "Last year I gave five-figure gifts to six charities. Because of economic changes, uncertainly of government regulations and long-term health care concerns, I have good and bad news. I have decided in the future to reduce the number of charities I support. I will continue to support your organization at a larger level."

In my mind, the stakes of stewardship were just raised for our organization. Donors expect sound priorities, a logical operational plan, volunteers that engage and a solid return on investment for their donations. The development of an improved fundraising program begins with major gifts.

A major gift is a significant contribution either one time or over a multiple-year pledge to a nonprofit. What determines a major gift size depends upon the fundraising operations and maturity of the fundraising program. There is no "right" answer to this question. Many organizations base this answer on total fundraising income and an analysis of their donor bases.

You should look carefully at the history of your donors, amount of gifts they make, number of gifts made and do a net-worth study of your donors to define major-gift targets. Common sense says a small nonprofit's major-gift definition is much less than a comprehensive university with a long history and ongoing billion-dollar-plus campaign goals.

Charity Navigator notes that a 3:1 ratio, revenue to costs, or specifically spending $35 to raise $100, gives your organization an acceptable "C" fundraising grade. That organization understands each nonprofit is different. It also notes if your organization wants to have an above average ROI, you need to spend less than 20 cents of each dollar you raise on fundraising costs. You will not do this via annual-giving programs such as a special events or direct mailings.

The Fundraising Resource Group states the fastest and most efficient way to increase your fundraising ROI is to adopt a major-gift mindset. Broad-based fundraising programs with a focus on major gifts and planned gifts, for example, obviously are in the lower cost range since these types of programs generate greater revenue with less expense.

The Fundraising Resource Group states it is not easy to adopt and effectively execute a major-gift mindset. It takes leadership buy-in, patience and expertise. Putting my consulting hat on, I suggest you parallel track your current fiscal year. Review every program and system for ROI. Determine the ROI for your existing program based upon elements such as annual gifts, major gifts and planned gifts.

At the same time, create a new model forecast for the next fiscal year with a target of improved ROI. For example, The Salvation Army currently spends at least 83 cents of every dollar on programs and services. Our present goal is to increase ROI by focusing on increased "sustained" annual major-gift revenue while seeking modest reductions in expenses. It is not easy, and you must emphasize that philanthropy is a team sport owned by both staff and volunteers.

To get started, review the Fundraising Resource Group website or other similar websites for webinars on this subject. This group states that a mindset is a terrible thing to waste and so are precious financial resources given by generous donors. I am inclined to agree with this philosophy. The bottom line is you must develop a major-gift program to increase fundraising revenue, reduce expenses and increase your ROI. Do not wait until the next fiscal year to begin this process. Take the first step in this direction today.