Overhead. Cost to raise a dollar. Administrative costs. These and other metrics are frequently used by your donors to evaluate your program expenses and the health of your organization. While these provide some value, they have limited effectiveness when it comes to measuring what you are accomplishing in a meaningful way. It is extremely important to be fiscally responsible and transparent with donors to gain and maintain their confidence. Yet keep in mind, there are additional ways to demonstrate your organization’s effectiveness that speak beyond the cost per dollar raised.
1. Share the life-changing impact of your organization.
Donors want to know that your organization is a good steward of the money they worked hard to acquire. But focusing only on the money can make the true value of a contribution difficult to discern. In a recent interview, a donor told us about his experience serving on a foundation board with a few bankers who were focusing solely on the cost, while overlooking the life-changing experience.
We were asking for a donation for the opera, to take some disadvantaged kids from a rough part of town to the opera. The bankers wanted to see the cost per person and the cost per kid and all that sort of stuff. And I’m forever after them saying, “Guys, you know, forget about this rate of return and cost per this and that. You like the project. How much money are you going give to it?”
Well, it was going to be 250 bucks a kid or something like that. These bankers went absolutely bananas. And I said, “Why are you being like that?” “Well, it’s too expensive per kid.” I said, “How do you know? You’re not the expert. What do you know about opera and kids that are underprivileged?” Alright? So how can you put a value on that?
Donors give to your organization because they want to make a difference, based on their own life experiences, and they believe your institution is the best place to make that difference—in medical research, academic achievement, and environmental and social initiatives.
Let your donors know the tremendous impact they make by sharing the personal experiences of the people who are forever changed by your organization’s work.
2. Focus on net gain.
Reduce your overhead and ROI anxiety by shifting your focus. As you review previous marketing strategies and internal investments, don’t just look at the cost per dollar raised, but consider the net gain (total raised minus the investment). Reflect on the investment in research projects, the dollars spent on meals served, and the number of lives changed. A recent blog post from re:charity shares ideas on how to reframe your thinking (and also suggests strategies for improving your financial efficiency).
3. Redefine “overhead” in terms of excellence.
The Wise Giving Alliance, GuideStar, and Charity Navigator wrote open letters urging nonprofits and donors to utilize more than just overhead ratios in making gifting decisions. As you frame your reports to current and potential donors, share the excellence that is possible because of your internal expenditures and investment in your staff. Describe the expertise and leadership experience that your new director brings, the efficiency that the office space allows, or the longevity of the higher-quality source materials. Help donors see that an investment in your organization is a good investment in a product or service of which they can be proud.
Donors ultimately want to know that their resources are being used effectively. But what is absolutely critical in making the “next” gift is donors knowing their contribution is making a difference, making an impact, and changing people’s lives.
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