Nonprofits that invest in fundraising and analytics can achieve exponential returns and sustainable growth. However, many nonprofits underinvest in these areas due to outdated beliefs that portray fundraising costs as wasteful spending. According to fundraising expert Kirk Smith, this outdated thinking prevents nonprofits from making strategic investments that could drive future impact.
With an initial investment, effective fundraising and analytics programs can set off a virtuous cycle. Nonprofits can acquire new donors and gain data to better understand and engage them. This results in higher retention and lifetime value, generating more revenue to reinvest in acquisition and further program improvements. Over multiple cycles, returns multiply and compound.
However, nonprofits are often hesitant to spend on fundraising due to pressure to minimize costs. Outdated metrics that focus on percentages of dollars spent on programs versus overhead promote the belief that fundraising costs necessarily reduce program funding. In reality, strategic fundraising investments can grow the total funding pie, providing more resources for programs in the long run.
Nonprofits need to build the case for increased investment based on the potential returns. Analyzing the lifetime value of different donor segments can model the returns from greater investment in key programs. While large nonprofits have resources to invest in advanced analytics, small nonprofits can start simply by comparing the value of different donor groups over multiple years of giving to see the exponential effects.
Messaging to stakeholders should also focus on the compounding returns from fundraising and explain how initial investments are repaid and multiplied over time. With data and the right narrative, nonprofits can make a compelling case for investing in the fundraising programs that will drive future impact and sustainability.
The view of fundraising as purely a cost center is outdated and harmful, but it can be overcome by demonstrating the virtuous cycle of investment and return. Nonprofits that are able to invest strategically in fundraising and analytics programs will achieve exponential growth and impact – the key is making the data-driven case to invest in the future. By articulating this vision and supporting it with numbers, nonprofits can replace outdated beliefs with an accurate understanding of fundraising’s potential.
View the full recording of this session in our Resource Library.