Want to Retain Your Donors? Think 'ROI'

Getting a return—and the amount of that return—is hardly ever considered.

This cash-in-cash-out frame of mind has clouded where leadership's mind should be—on ROI. For the funds expended, what is the longer-term return on the investment? Will it grow over time, reducing cash outlays?

Money spent on fundraising is not and should not be equivalent to money spent on the electric bill.

Likewise, it's not about what you get today from a donor. It's much, much more about what you will receive tomorrow.

It doesn't take a rocket scientist to see that spending 80-90 cents per dollar raised to get a new person to give is costing the organization a lot more than the 20 cents or less it takes get a donor to renew. What's more, the return on the investment climbs higher as the renewed donor gives larger gifts, over time.

So why do so many organizations continue down the "get-a-new-donor" path?

It's not because the folks that lead these organizations are inept. It's because they're totally in the cash mode, seeing only the next 30-90 days.

It's the same attitude that keeps worthy organizations hitched to their mistakes of the past. How many times have you heard a nonprofit leader say, "But we've already spent so much money yesterday," as an answer to the question of why he or she remains committed to a path of action that clearly hasn't delivered as promised.

The real cost of "sunk costs" is what every first-year business school student learns.

When an organization see's its donors as precious assets to be maintained and developed, the entire picture shifts. Now it's not just the initial outlay and the immediate receipt. It's about what will be received next year and the year after. And the year after that!