Want to Retain Your Donors? Think 'ROI'

A dependable revenue stream that grows—ah, paradise!

Have a fundraising challenge you want to crack? Weary of doing the same old, same old yet hoping for different outcomes? Do you want the over-the-top results that come from superior strategy?

Email me with your particular problem, and I'll arrange a quick consultation offering you a practical solution you can implement. I may even use your situation to share with my readers. Names are changed, of course!

My recent conversation with Tonya reminded me of the aphorism that my grandfather often intoned, "We are our own worst enemies."

Tonya is the development director for a health-related organization in the Northeast.

Tonya's organization has been bleeding donors for the past several years. The pace of loss has quickened recently. Apparently unmoved for some time, the CEO and board chair are now concerned and have turned to Tonya to solve the problem.

The state of affairs at Tonya's nonprofit is pretty typical. Nationwide, donor retention has dropped to just under 40 percent for one-year renewals. Compare that to 95-plus percent for commercial firms.

Sense a disconnect?

It took only a brief conversation to determine what is underlying the nonprofit's poor donor retention.

As with many other organizations, the focus is on acquiring new supporters. Whether it's real donors through a direct ask—by mail, in person or by telephone—or through the invitation to participate in an event, it's all about getting someone to give at least once.

What's driving—and aggravating—Tonya's situation is how her organization views money. As with so many other worthy nonprofits, money is seen as necessary only to pay expenses—immediate expenses.

Money is used to pay bills, whether it's payroll, utilities or the costs incurred from fundraising efforts. It's all the same to the organization's leaders.

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!

I told Tonya that mind-sets are a tougher nut to crack than simple arithmetic. She gets it.

My counsel was for her to first convert her boss's thinking. The two them can then convince the board chair.

Success here, as in so many cases, will be incremental.

Donor retention is an ocean liner. It's big, slow to change direction and speed, but once put on the right course, will slip almost effortlessly through the sea delivering a large passenger load—again and again.

I extend my heartfelt thanks to Tonya for reaching out.

Let me hear from you. Please share your situation and the challenges you face in developing sustainable revenue streams. Email me (info@TheEightPrinciples.com), and I'll arrange a brief consult providing you with practical guidance. I'll choose some of these thorny obstacles to share, along with my insights, in upcoming columns.

Success is waiting. Go out and achieve it!