We all know the phrase, “you have to spend money to make money.” Let’s be honest, if you’re spending a dollar to make a dollar, you’re making nothing. If you spend more than a dollar to make a dollar, then you’re in real trouble.
Nonprofits also need to pay attention to their Return On Investment (ROI). When analyzing a special event or any fundraising activity the first calculation is your gross versus net revenue. Gross revenue is all the money raised by your event (luncheon, gala, 5k run) or activity (direct mail, major gifts campaign, end of year appeal).
Net revenue = gross revenue - expenses
Expenses are not only your direct costs like venue rental and catering. There are also indirect costs like staff and volunteer time dedicated to the event. Oftentimes nonprofits only consider the direct costs and don’t track the amount of time spent on the event or activity.
Consider this, if staff is dedicating their time to producing this event, then they are not paying attention to their other fundraising duties and potential revenue is lost.
The value of volunteer time should not be ignored when assessing your fundraising activities. The current value of a volunteer hour is $29.95, according to the University of Maryland, School of Public Policy, Do Good Institute, and the Independent Sector.
To accurately account for staff and volunteer time I strongly suggest everyone involved keep a time log of some kind. People may balk at this in the beginning, but when you explain why you need this data, they will want to help. There are others like your Executive Director or board member whose time you will simply need to estimate, but that’s a good start.
Here’s a brief example:
Gross revenue for an event = $100,000
Direct expenses = $50,000
Indirect expenses = $27,000
Total expenses = $77,000
Net revenue ($100,000 -
$77,000) = $23,000
The second calculation is the cost to raise $1.00: costs (direct and indirect)/net revenue
$77,000/$23,000 = $3.35
In this example the organization spent $3.35 to raise $1.00. That means they are in the red, they lost money on this event.
To avoid losing money your annual development plan should include an analysis and assessment of all your fundraising activities.
· Compare net revenue and cost per dollar raised across all fundraising activities.
· Which are the most cost eff
· Would more resources increase net return?
AFP has an excellent article on fundraising costs.
Overall, you must consider the value of all of your fundraising activities to truly see the return on your investment of time and money. If you look at activities such as major gifts which are traditionally a much higher ROI, then you can balance that against a special event which can be a lower return.
Michelle Crim, CFRE
Dynamic Development Strategies can help. We offer coaching, grant writing, and fundraising services for our nonprofit clients. We specialize in small to mid-size organizations because we understand your challenges. Please contact us for more information.