This is part 3 of our series on The Perfect Fundraising Plan. You can read the first two parts here:
- How Executive Directors Can Most Help Their Development Directors
- Elements of the Perfect Fundraising Plan
A perfect fundraising plan has six elements.
Each is critical and the lack of any one of them can make your fundraising efforts tougher. Significantly.
I introduced the perfect fundraising plan in a recent post. But that was an overview. Now we dig into the details. Step-by-step, how to actually do it.
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Now that we’ve got that out of the way, let’s dive into the details of the first element…
WHY HISTORICAL TRENDS MATTER FOR FORECASTING FUNDRAISING REVENUE
When you forecast fundraising revenue incorrectly, catastrophe can occur.
Staff might be laid off.
Clients can lose lifesaving services.
Funders may lose faith in your organization.
And it’s super easy to forecast fundraising revenue incorrectly if you ignore historical trends.
I learned this the hard way. I made this mistake once and it would have cost me my job if not for my CEO’s intervention.
This was when I was leading development at GMHC, which organizes AIDS Walk New York, the largest HIV/AIDS fundraiser in the world.
Late last decade, before the great recession, AIDS Walk New York raised as much as $7 million a year. Ignoring historic fundraising trends, I saw that $7 million number and plugged it into my projections. Like an idiot.
I was being an idiot because by ignoring revenue trends, I didn’t realize that:
- Revenue for walks was down nation-wide.
- The corporate sponsors that gave to events like AIDS Walk in those high years were no longer giving at those pre-recession levels.
- Funding for HIV and AIDS services was declining across the board.
Luckily my CEO took me aside to explain these factors to me. She saved me from being fired.
And more importantly she saved the organization from financial tragedy, which would have been completely my fault.
The CEO was absolutely right, and AWNY revenue that year was inline with national and local trends, raising closer to $5 million.
That year I learned that data is much smarter than I am.
We’ve been best friends ever since.
WHAT THE “HISTORICAL TRENDS” SECTION NEEDS TO COVER
This section of your plan needs to answer these three questions:
- Over the last five years how has philanthropic giving trended overall?
- Over the last five years how has philanthropic giving trended among organizations with a similar focus and size to mine?
- Over the last five years what has the giving picture looked like at my organization?
I use five years because it helps smooth out any outlier years and includes a Presidential election cycle, which can affect fundraising at some nonprofits.
HOW TO ANALYZE OVERALL PHILANTHROPIC TRENDS
While this 50,000 foot view may feel removed from your organization, it really isn’t.
Your organization won’t be a data outlier. It just won’t. It’s far more likely that your organization will follow nationwide trends than buck them. Don’t think otherwise. That’s how organizations create unrealistic budgets and end up with significant layoffs.
Think about the financial collapse in 2008 and the massive decline in donations that followed. It would have been crazy for any nonprofit to not factor in these national trends into planning after that.
So how do you figure out the trends? I suggest making an investment in purchasing the yearly philanthropic analysis issued by Giving USA. Based on research and analysis conducted each year by the Indiana University Lilly Family School of Philanthropy, the Giving USA report provides an unbiased look at philanthropic giving trends in the United States and makes predictions for future years.
It’s dense. It’s going to take some time to digest. But it’s worth it.
In fact, the report can also be used as a terrific professional development tool for your fundraising staff and Board development committee.
But whatever sources you decide to use make sure you gather information on:
- Aggregate giving. Is it trending up, down or flat?
- Overall giving trends by source. Individuals, foundations, corporations.
- Overall giving trends by response method. Online, hard copy mail.
- Overall giving trends to your sector. Such as education, health care, arts, etc.
LOOKING AT THE “COMPETITION”
One thing nonprofits do very poorly is looking at the “competition” for benchmarking data.
But looking at how similar organizations have fared with fundraising can be very helpful to determine if there is room to expand your program and whether you’re ahead or behind the pack.
While annual reports can give you this information, the quickest way to get all of the data is from 990s. Luckily, GuideStar has all of this information for free.
Here’s what you need to look at in the 990s:
- Overall giving (obviously).
- Overall cost to raise a dollar. While another organization might be raising more than you are, are they spending a lot to raise it?
- Amount raised and spent on events.
- Amount paid to development consultants.
- Revenue trends. A big increase (or decrease) in revenue followed by a return to a flatter revenue picture does not a trend make.
Every organization is different. But conducting a yearly competitive scan is helpful when determining fundraising goals. When I was worked in development at New York Law School, I absolutely looked to see how other stand-alone law schools were performing. It was a great way to see where we could grow.
It’s especially important for younger organizations with little historical data. Looking at the field is absolutely crucial to see what is possible.
DEEP DIVE INTO YOUR OWN FUNDRAISING DATA
The third (and final) step is to pull the following fundraising datafor the last five fiscal years from your own database:
- Total revenue
- Revenue by category (direct response, major donors, corporate, foundations, events, planned giving, etc.)
- Total number of donors for each fiscal year
- Total number of new donors from previous fiscal year
- Total number of donors that lapsed from the previous fiscal year
- Total revenue from online giving for each fiscal year
If possible, also look at attendance for any major fundraising event like a gala. You’re looking for trends.
If any fiscal year shows a one-time sharp increase or decrease in revenue, dig deeper to find out why. Did a very large bequest come in? Did a large government grant end? It’s important to take the time to explain any unusual numbers.
Don’t make the mistake of incorporating one-time gifts into future projections. This can truly lead to a disaster at the end of a fiscal year.
Once you have all of your data, put it in Excel and run some very basic graphs.
I can guarantee that this visual presentation is going to highlight important trends that you will need to consider to create a fantastic fundraising plan and forecast fundraising revenue.
In the comments below please let me know how historical and fundraising data has helped you create your fundraising goals (along with any song that makes you think about fundraising). I think its time that fundraisers had a good playlist, and I’ll add any suggestions to a list in Spotify to share.
And once again, in upcoming posts I’ll dig into the details of the other five elements of the perfect fundraising plans, and how you should put those together. If you want to subscribe to get notified by email as they are published (if you haven’t already done so) just click here:
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