business development, fundraising industry

Stop Being Interchangeable

Too many businesses, consultants, professionals, and organizations exist just to exist. They’re the same as everyone else. “We really listen to our customers.” “We take a data-driven approach to your marketing.” “We are driven and willing to do what it takes to get the job done.”

Blah, blah, blah.

Do you think anyone doesn’t listen to their customers? Do you think marketing firms don’t have data? Do you think that companies just exist to do a half-assed job and leave you unsatisfied?

Those aren’t differentiators.

Those aren’t anything special. If you’re writing something like that, I have to tell you, you’re not doing what you think you are with that kind of posturing.

Ultimately, you’re no different than anyone else. I can see it when I read your blog posts, or your website. Most importantly, I see it in your actions.

I know, because you all say the same things over and over and over. Just like everyone else in your sector.

You’re nothing special for that. Instead, you’re just like the rest. Interchangeable.

And that’s a problem.

Because when you’re interchangeable, you’re competing on price. When the results are the same no matter where you go, you go where those results are cheapest.

Don’t do that.

Don’t let your customers do that. Don’t let your donors do that (don’t let them “shop” your nonprofit for a better “fit” for their donation dollars next year).

Set your value, and let others come to you for the value you bring.

Be different.

Be unexchangeable.

You’re interchangeable if there’s nothing special about you.

If you are (or I am) “just another copywriter”.

Or “just another life coach”.

Or “just another animal shelter”.

Or if you’re doing work that others have already defined, have already scoped out, and all you are doing is filling in gaps they have identified.

That may be okay.

But it’s not really interesting.

More important, it’s not really lucrative.

Most important, it’s not really make a difference.

It’s the generic work, the things “anyone” can do.

Those are the 85% – the 90% – the 95%.

In order to move the needle – in order to really change something – you’ve got to stand out.

You’ve got to be different.

You need to be in the top 5%, to be something that exists nowhere else, to bring ideas that exist nowhere else.

And to do that, you probably need to create some of your own opinion material.

Rather than collating everyone else’s work, just summarizing, you probably need to stake out a position that’s different from everyone else.

You need, in the terms of the Army, to “take that hill”, then defend it with everything you have.

Be unique. Demonstrate that uniqueness. Celebrate it. Promote it.

If you’re not unique, find a way to be unique.

Sales calls this the “unique selling proposition”. It exists for a reason.

When I’m writing about nonprofits, I don’t have a pedigree of a degree and decades of working in the sector.

All I have is my observations, and my opinion.

But they’re mine.

I’m not simply regurgitating results from the Giving USA report (though I did review it). I’m not just collating a bunch of statistics from online researchers and presenting them as if they represent my own original thought process.

I’m actually creating a new position – a new set of opinions – on how nonprofits should work.

I believe they should stop measuring “Retention” and instead should measure “Faithfulness”. [Read that here.]

I believe they should do more in the way of forecasting out four, five, or even 10 years, to see what their expected finances will be. That way, they can determine how much they should spend in order to change that future with greater retention rates. [Read that here.]

And I believe they should stop calling themselves “nonprofit”, as if they are identified by their tax status. [That’s a much longer post, and for another time. I’m not ready to back up that point just yet.]

The message is, though, that each of these positions is unique. I take it, I can defend it, I am using these to stake out my own place in this industry.

My blog posts aren’t just collations of “7 tips that everyone else already knows, but I feel like I’ve got to create some kind of content, so, here, take this that nobody really is going to read or, if they do, won’t learn anything new anyway, but, heck, at least it plays the SEO game well.”

I’m actually providing thought leadership.

Which, if you want to be taken seriously, you’re going to have to do as well.

No more of this circle-jerk of linking to “influencers” in the hopes of some kind of a shout-out.

No more repeating what’s been conventional wisdom for decades, just because you need something to fill a content hole this week and you lack for ideas that might change how you do business or work with a partner. ‘Tis better to skip throwing more crap on the pile than to simply regurgitate for the sake of Google.

Do your own research.

Take a risk. Stick your own neck out.

Make your own noise.

Be different.

And make the world better for it.

***

This is part of a sporadic series of posts on useless ideas to stop, and what to replace those with. [Stop Saying Thank You] and [Nonprofits Don’t Have a Donor Retention Problem, They Have a Donor “Retention” Problem] are the first two, with more to follow.

fundraising industry

Provocative Thoughts on Donor Retention Math, and a Homework Assignment

There’s one big metric that is measured in most nonprofits: the “retention” rate. [See here why I think that’s bad terminology.]

Generally, the nonprofit sector has a problem with this. Most donors who give one year don’t give the next. The current benchmark is under 50%. That means fewer than half of those who give one year will give to the same organization in the next year.

But overall, philanthropy isn’t really growing or declining. In the United States, it’s been hovering about 2% of Disposable Income for the last 3 decades or so.

This basically means each year, the same people give, about the same amount, to charities (mission-driven organizations). They’re not giving more, or less, they’re just giving differently than the year before.

So, most of your effort spent acquiring new donors, or re-activating lapsed donors, is wasted. Because, in another year, you’re going to have to do it all over again.

Let’s Get Mathy

(Yes, that’s a bit of a play on my name. Sue me.)

The 50% retention affects you like this: if you just set a group of donors who gave a total of $100,000 this year on autopilot and let them run, the next year you’d receive $50,000. The year after that, $25,000. And then $12,500, $6,250, and $3,125. That’s the 5-year value with a 50% retention rate. Let’s call that $96,875 the baseline that you could get in the next 5 years (after the initial $100,000 “acquisition” year).

So, what happens if you increase your retention rate a little bit? Maybe instead of 50%, you have 55%. Is it that big a difference?

YES.

Year 2: $55,000;

Year 3: $30,250;

Year 4: $16,638;

Year 5: $9,150;

Year 6: $5,033.

Now, the 5-year total is $116,701.

That’s an increase of over $19,000. That’s a lot of money, for not a lot of change. Just 10% more donors sticking around each year (55 vs 50).

What Would You Be Willing To Spend In Order To Keep An Extra $19,000?

So how do you apply this kind of math?

Well, the first step is to start making projections. It’s easy to get into the habit of looking only at one year’s worth of data, or this year’s budget, or last year’s gift, and ignore trends or forecasts. Don’t do that. Go deeper. Start measuring you retention rate and making long-term projections to see what you can reasonably expect in the future.

A second aspect is to consider what you might have to do to get that additional retention. Because, let’s face it, doing what you’ve always done has gotten you to your current 50% value. You need something different, and that probably means spending money. On donor appreciation events, or another fundraising staff member (maybe part time) to make personal phone calls, or an extra mailing in the year, or whatever.

A good way to think about this is to decide what additional programming value you want to create from additional funds raised. If it’s that you want to get $5,000 additional value out of that $19,000, then you have $14,000 with which to do it. If you need $15,000 additional value, then you need to make it happen with $4,000.

Here’s how the math works out: Returning $19,000 (net $15,000) for a $4,000 spend (to improve retention from 50% to 55%) is an ROI of about 390%. Alternatively, it’s a Fundraising Ratio of a little under 40% (or Cost to Raise $1 of under $0.40). You may think that’s too high, but it’s not. It’s totally worth it. Because you brought in waaaay more money than you spent.

Another Example, Please

Or, you might need to think about it like this: if you need $15,000, what’s another way to get it? Well, suppose you’ve done some analyses and you feel you would need to spend $30,000 to increase retention enough to net that $15,000. How much do you need to increase retention then to get that additional $15,000? You’ve obviously got to figure out a retention strategy that’s going to work to bring you $45,000 additional money over those 5 years. Turns out that’s about a 61% retention rate. So, will your $30,000 spend increase your retention by 20% (61% / 50% – 1 = 0.20)? If not, you’ll need to find more efficient ways of doing it.

Working Out The Math

Spreadsheets are great for creating these solutions. You can use them to play around in just a few columns to see different projections with varying retention percentages.

Begin with your current retention rates, and project that out to an immaterial amount. Above, I went out for 5 years, and that seemed small enough relative to the initial cohort of $100,000. As you increase the retention rate, though, you’ll see that cohort of significance extend later and later.

[At that point you will probably also want to start adding discounts for interest, but that’s a bit more technical and doesn’t materially change the discussion, just the magnitudes of the numbers involved.]

For example, it takes about 7 years at a 50% retention rate to drop the annual giving to under $1000 ($781 in year 7). At a 55% retention rate, not only is each year’s value higher ($19k in the first 5 years above), but it takes longer to become immaterial. There’s a whole additional year of material giving at this level ($837 in year 8). And as you increase the retention rate more, the compounding effect gets greater and greater. A 60% retention rate adds 2 more years, and an 80% rate doesn’t become immaterial until year 21. Talk about impact.

Your homework challenge is to figure out the differential in giving that would come from that 80% retention rate, and then determine how much you could spend to improve that retention in order to have a Fundraising Ratio of under 50%.

Knowing what some of the possibilities are can enable the discussions you’ll need to have with your entire fundraising staff, from front-line to directors, on where your priorities should be and what you might need to do to materially change your results.

Conclusion

The point is, a small change in your retention rate can have a big impact. If you know just how big, then you can know just how much you can spend, and should spend, to make that happen. Until you start working out the math to actually make the changes, though, it’s going to feel like you’re forever running in place.

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When you just tryin’ to keep up
fundraising industry, local, nonprofit profile, regional

Some GiveSTL Day 2019 Statistics

GiveSTL Day is a one-day campaign for St. Louis-area nonprofit organizations. The appeals are generally made through electronic solicitation and social media, but there are no real rules, so organizations can run their campaigns how they wish.

Some of my favorite organizations participate: Spirit of Discovery Park, the Humane Society of Missouri, even the Sierra Club. This is a way to bring the whole community, both organizations and donors, together in a spirit of cooperation and healthy competition.

It’s usually scheduled in the first week of May. I first heard about it in 2018, and this year, 2019, I paid a lot closer attention. I’ve been looking at some 2019 results, and I’ll share a few highlights with some take-aways for those planning to participate next year.

1. Aggregate Results Don’t Really Help Much For Individual Organization Understanding

There were 887 organizations signed up. Of those, 842 received donations, with total donations (including prizes) over $3,000,000. That’s a lot of money, but it’s also not very helpful to individual organizations trying to learn how to make GiveSTL Day a success for them.

For the rest of these analyses, I’m using the GiveSTL Day data that shows results by individual organization, which does not include prizes so the total is only $2.89 million. This is an average of $3,434 per organization. Not bad, but that total is pretty skewed by a few large “winners” and many small “not-so-winners”.

Over 50% of the groups participating in 2019 had under $1,000 of donations. 504 of the 887 received $999 or less. That’s almost not worth it, if you consider the time taken by a staff member to create a campaign, design some artwork, solicit a match, design and produce artwork (or take photographs), plan, write, and publish social media posts and e-mails, set up autoresponder thank-yous, and so on. What’s the return there? I can imagine it might be pretty difficult to justify the same activity for such a low return next year.

However, if you did absolutely nothing, and still got $1,000, it might make sense to participate again. Because, hey, free money.

The point is, it’s hard to look just at aggregates and figure out what’s going on. You need to break results down by organization size and sector to have a good feel for what you could get out of GiveSTL Day. Those will tell you more about how your peers fared, and with some analysis could show you how you did relative to them.

But it probably won’t give you much certainty on what you would get if you participate again next year. Which, to be frank, is what we’re all looking for, right? We all want that secret sauce that turns our GiveSTL Day campaigns into the money trees we dream of.

It’s not that easy.

2. Size Is No Guarantee of Success or Lack Thereof

Organizations are grouped according to size of their budget: Micro (<$250,000), Small (up to $1,000,000), Medium (up to $2,000,000), and Large (everything above $2,000,000).

The fact is, there are small groups that have plenty of success and large groups that struggle. The Small segment this year included 379 organizations. 52 of those received over $3,000 on GiveSTL Day. And 12 of those were over $10,000. Evidently, small-budget organizations can still find the money to create major results in one-day campaigns like this. And remember, $10,000 on a $250,000 budget is a much bigger bump than the same amount on a $1,000,000 budget.

One factor that certainly helps: 10 of those 12 had a match available. Having a match is like free money, in multiple ways. It provides an incentive to give (because that money will be doubled), and it’s a large amount that comes with little effort.

I highly encourage all groups next year to start with a match, as a good way to create additional motivation for giving. (More on that later.)

In the same vein as small is not bad, let me say that being bigger is no guarantee of success, either. Yes, the biggest numbers did come from the largest groups. ThriVe ($181k), Stray Rescue of St. Louis ($136k), Foster and Adoptive Care Coalition ($110k), and St. Louis Priory School ($106k) had big days. But for the rest of the 205 Large groups, just being big was no better indicator of how their day would turn out. Only 58 of them had donations over $3,000 on the day, just past the 52 of the Small groups.

And of all of the 205 Large organizations, only 109 (53%) received $1,000 or more. That means that if you were a Large organization, and participated in GiveSTL Day in 2019, the chances of you walking away with over $1,000 were pretty much a coin flip.

This is an encouragement and a challenge. An encouragement to those small organizations that your results can be better, with appropriate strategy and an effective campaign. And it is a challenge, to those organizations who think that just relying on their name and their current size will be enough to make GiveSTL Day a success. You’re going to have to work for it.

3. A Match Is Not Just Helpful, It Is ESSENTIAL

I said above that having a Match is like free money. It can inspire higher donations, because of the desire to make that donation work even harder. Take a look at the aggregates:

  • 735 groups WITHOUT a match received $1.27 million ($1,725 each)
    • Average gift of $94
  • 107 groups WITH a match received $1.62 million ($15,175 each)
    • Average gift of $202

Fewer organizations, received significantly more money, with almost twice as much given per donation. Now, that’s not to say that having a match guarantees you more money. But having a match is more than just inspiring higher-dollar contributions.

Yes, a match is good for your donors, because it gives them something to shoot for, an initial goal that they can accomplish with the right initial effort.

Beyond that, though, a match is a signal that your organization is doing the right things. It shows that you’re planning GiveSTL Day as a campaign, not as an event. It shows that you’re being thoughtful about how you solicit matches throughout the year.

And planning early enough to get a match in place means that you’re more likely to complete the rest of the essential campaign steps in time for success as well: a marketing concept identified, a timeline planned, resources aligned to take advantage of specials like prizes, etc.

A word of caution: be careful how big you set your match. You want the matching dollar amount for GiveSTL Day to be something that’s going to challenge donors, but you don’t want it to be so far out that you don’t get there. That’s actually wasting your match money. For example, Five Acres Animal Shelter received over $30,000 on GiveSTL Day. But they also had over $5,300 of match remaining unused. Essentially, they missed out on over $10,000 of donations ($5,300 that could have been given and $5,300 that would have been matched).

If the Shelter had an indication of how much of that match would be used, then maybe they could have dedicated those matching funds to another campaign later in the year. As it turned out, there seems to be a missed opportunity.

All that to say – be strategic in how you structure your match. You want to make your matching funder happy that you’ve been able to satisfy her desire to inspire donations, and asking for too big a match (or putting too much of it towards GiveSTL Day) may counteract that.

Conclusion

GiveSTL Day is a giving campaign designed to bring the St. Louis region together for a common purpose. Like similar one-day digital campaigns across the country, there are many opportunities. My suggestions: start early (like every campaign) and get a match (like every campaign, if you can). And make sure you don’t let your own internal view of your organization’s size (and how that may make success easier or harder) inhibit your disciplined approach to having a great GiveSTL Day.