Our Ask An Expert series features real questions answered by Claire Axelrad, J.D., CFRE, our very own Fundraising Coach, also known as Charity Clairity.
Today’s question comes from a nonprofit employee who wants advice on how to calculate an accurate nonprofit dollar retention rate.
Dear Charity Clairity,
When you write “the average dollar retention is just 47%,” I’m not sure what that means. Does that 47% refer to how much money retained donors raised as a percentage of total revenue raised?
Should we track retained dollar value in 2021 compared to total retainable revenue in 2021 (the same year) or compare that amount to total retainable revenue in 2020 (the previous year)?
I can see a case for both, depending on what you want to measure, but ideally I just want to know how to compare apples to apples so we can know how we’re doing.
— Stats Nerd
Dear Stats Nerd,
First, I’m glad you’re asking this question. It means you understand the significance of both donor retention and dollar retention, which are of equal importance. And, you’re right, it’s important to make sure you’re comparing apples to apples!
The best place to find data—and the methodology that was used to collect it—is in resources like the Fundraising Effectiveness Project Reports. I believe I grabbed the stat you’re referencing from the 2020 report. That’s where I would go to understand how they collected and analyzed the data used to reach that statistic.
When it comes to the heart of the “how to compare apples to apples” question, here’s what I suggest:
- Run a report that shows how much money your donors contributed to your nonprofit during the previous year. That revenue includes your gross fundraising revenue and the pledges committed for that specific 12-month period.
- Take that same group of donors and see how much money they gave or committed this year (during that same 12-month period). By “same group,” I mean the same individual people within the group, not a category of donors such as “board members” or “leadership circle.”
- Analyze the data and ask yourself a few questions. Did the people in this donor group give more or less this year? How much more or less did they give?
You can also break this data down into segments to hone in on where there are opportunities to deepen your relationships with donors and increase your donor retention and dollar retention rates.
For example, you might look at segments like:
- Average donation size. You may find major donors continued to give at constant or even higher levels while mid-level donors or first-time donors gave less often or gave smaller amounts than they did previously. It’s important to have this information on hand so you know where your cultivation and solicitation efforts are succeeding and where you’ll need to make adjustments.
- Purpose of gift. You may find the number of donors who gave “where most needed” decreased while the number of donors giving for “emergency relief efforts” increased. This will inform the types of calls to action you’ll want to include in future asks.
What to measure
As you suggest, what you measure will depend on what you want to know and how you’ll use that information.
As for your question about calculating dollars raised from previous donors as a percentage of total dollars raised, you’ll want to look at the groups of donors who raised those donations. Why? Because you’ll likely see a difference based on gift size or other factors.
For example, if you find you have a 47% dollar retention rate when you compare this year’s gift size with last year’s gift size, you have a data point that takes all donors into account. However, if you analyze the data based on different factors—like the fact that they’re a new donor or recurring donor—you’ll have a better idea of where you’re succeeding when it comes to cultivating and soliciting different groups of donors and where you need to make adjustments.
The whole point of measuring and analyzing data around dollars raised and donors who gave to your cause is so you can tweak your fundraising strategy in the future. So look at your reports, find opportunities for change, and change tactics as needed.
I hope this helps,
— Charity Clairity
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