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Daily Nuggets: A For Impact Blog

ROI


Note: Sorry. Been away from the ‘page’ for a bit. Back in the game. Always appreciate your feedback.

ROI. RETURN-ON-INVESTMENT. What every ‘Investor’ wants from their investment … and what every For Impact organization should want from its development/advancement/fundraising effort.

We’re doing a ton of work where this concept is completely absent or totally misunderstood.

With all due respect to the industry, I just don’t get it. An organization ‘invests’ money/resources in their development/fundraising operation (a one-person shop or 50 people in the college advancement division). I’m not sure how else you would measure productivity or success without making ROI the #1 barometer.

  • ROI is very simple to calculate. It’s a numerator/denominator math problem.
    Here’s how much money we raised (the numerator).
    Here’s how much money we spent/total expenses (denominator).
  • R (N) – TE (D) = NET, NET, NET CHECK/FUNDS to support IMPACT!
    *’Green’ people write checks to the ‘Blue’ people.
  • R (N) ÷ TE (D) = ROI and COST OF FUNDRAISING. 
    ***For example, if you are a hospital foundation raising $2M a year in ‘fundraising Revenue and your total expenses are $1M … your ROI is 2X or 100%; and your cost of fundraising is 50%.
  • There are two ways to increase your ROI and decrease your cost of fundraising:
      Increase the Numerator (Revenue)
      Decrease the Denominator (Expenses)

In our For Impact world, our own benchmarks are as follows:

  • 3X is minimum model/benchmark.
  • 4X is great.
  • 5X is something you should be very proud of.
    ***If you’re running a ‘Campaign’ within an existing development operation or as a separate initiative, I believe the cost of fundraising should be a ‘nickel‘ (five cents on the dollar). That would give you a 20X ROI.

If you are a For Impact leader, senior staff, executive director or a board member … I hope the above gives you some sense of comparison.

Note: One last example of why ROI is a completely different level of thinking than simply “This is how much money we raised this year.”

I can guarantee a small not-for-profit organization an additional $100,000 this year. Hire two ‘major gifts officers’ at $50,000 apiece. Send them to For Impact Training Camp in June. I guarantee that they can go out and raise $100,000 in the next year (combined).

Same thing would be true with a larger organization at $1M. Hire five major gift officers at $200,000 each. I’m fairly confident if they followed any sales process they would each be able to raise $200,000 in the next year for a total of $1M.

I know you get the point.