Year after year, you and your nonprofit strive to have a good year. At least one of the criteria for measuring a successful year is related to your financials. How much did you raise? Did you raise more than last year? Did you raise more than you spent?
Using your financials as an indicator of success perfectly all right—but there’s a problem here:
If you’re only taking into account how much you raised overall or how much you raised from individual giving, grants, or corporate giving, you’re missing the big picture—and that could really mess you up.
Here’s why. Income is a trailing indicator. In other words, it shows up AFTER you have done all the work, like identifying the prospect (or re-engaging the existing donor), qualifying them, establishing rapport, cultivating them, soliciting the donation, and so on—not to mention all the marketing and outreach. And if you’re raising money from grants, that’s a whole other story.
Wouldn’t it make sense to have at least some leading indicators? Those are things that happen at the beginning or in the middle of a process. If you, your team, senior leadership, and your governing board want to understand how successful you’ve really been, you (and they) need to know about the tools, resources, and support you have provided to your fundraising team—including contractors and volunteers. Or maybe it might help to find out you don’t have such tools and resources.
This kind of knowledge is called business intelligence. Nonprofits tend to suffer from a lack of it.
Business intelligence vs. donor intelligence
Nonprofits have an advantage over for-profit companies thanks to prospect research services, also referred to as “donor intelligence.” Donor intelligence can best be described as “accurate, comprehensive, and actionable data [about donors and prospects] to help nonprofits of all types achieve better fundraising and outreach results.” Donor intelligence offers significant advantages, especially if you have a major gift program. These days, many nonprofits use some form of donor intelligence services.
Business intelligence, on the other hand, provides insights into the inner workings of an organization, revealing its efficiency and effectiveness. We’ve been studying the use of business intelligence in the fundraising space for a dozen years and our conclusion. Nonprofits just don’t have enough of it.
According to Oracle Corporation:
Business intelligence (BI) refers to capabilities that enable organizations to make better decisions, take informed actions, and implement more efficient business processes.
Business intelligence about fundraising requires good data showing how well your team does its work. For example, does your fundraising team know how to tell if a donor or other funder meets the criteria to become deeply engaged? To gain that information, your team would need access to a set of criteria, like an ideal donor profile. Then, they could pull a report showing the percentage of donors and other funders who are a great match and correlate that with the amount of income produced.
Measuring business intelligence
However, our research shows about 84% of nonprofits lack such profiles. They either have nothing, rely on an idea, or look at wealth data only.
Has your donor retention rate increased, decreased, or remained flat? For that information, you would need to keep track of the rate—ditto for donor acquisition and upgrading. So far, our twelve years of data show that about 76% of nonprofits lack key performance targets for donor retention, and it’s even worse for upgrading.
When you gather the right data to measure business intelligence, your people know what to do—and guess what? You know how well (or poorly) they’re doing, and so does your board. This produces accountability throughout the organization.
Gathering the right data is critical. It guides the “boots on the ground”—namely your fundraising officers, grant writers, corporate relations people, and even marketing and outreach, so they know what to do. It also provides phenomenal, insightful, and easy-to-understand reporting methods for managers, leadership, and the board.
Here’s how you know you’ve been successful all year long.
Here are three simple methods that will get you and your fundraising team started on the path to greater success:
Set performance expectations.
Performance expectations are often referred to as KPIs – Key Performance Indicators. Setting up KPIs for donor acquisition, retention, and upgrading is a great place to start. All it takes is telling your team (including contractors and volunteers) to acquire X number or percentage of new donors, retain Y percentage of existing donors, and upgrade Z percentage of existing donors to the next level. Break down these annual KPIs into twelve months so they get early warnings if they’re going off track. Document these performance expectations and report plan versus actual at least once a month.
Establish a pipeline target as well as an income target
Most fundraising professionals know how much income you want them to raise per year. Now add a “pipeline target!” The pipeline is a checklist of all open (i.e., unsecured) major gift/grant/corporate sponsorship opportunities. Make the pipeline target three times the size of the income target. This additional target reminds your MGOs to have enough opportunities so they can lose two out of every three dollars and still make their numbers. Your reports will include a reliable forecast.
Document your Ideal Donor Profile
Our Leaky Bucket data shows that around 84% of nonprofits lack a documented Ideal Donor Profile that includes the motivation for giving. It takes some work to craft an ideal donor profile, but it’s well worth the effort. PS: the Ideal Donor Profile includes wealth capacity but many other criteria as well. Imagine the reports you could produce if you knew which donors were a good match and which were not.
Years of research and experience have indicated that teams and individual staff members are happier, more engaged, and much more likely to stick around when they know what’s expected of them and have the right tools, methods, practices, and reporting methods to do their jobs. Guess what happens when your fundraising team is happier and more engaged.
Go on, guess.
Right! They raise more money.
To learn more about business intelligence and how Bristol Analytics can help you assess and improve yours, visit our site.
About the Author
Ellen Bristol founded Bristol Strategy Group in 1995, after a 20-year career selling multi-million-dollar mainframe computer systems to huge businesses. Shortly after launching Bristol Strategy, Ellen fell madly in love with the nonprofit sector and focused her consulting practice there.
Ellen calls herself a performance management geek and a nerd for data analytics. Her work with the nonprofit sector emphasizes the use of data analytics and business disciplines that make it easier for nonprofits to raise more money with less effort and keep their fundraising teams happy and engaged.
In 2023, Ellen launched a new brand, Bristol Analytics, showcasing the software solutions that have grown out of her consulting methodology, including a unique approach to development audits, a simple, powerful method for managing major opportunities, and other tools