Does your nonprofit want to raise more money this year?
If so, now is a great time to start. Make a New Year's Resolution to improve your donor retention rate.
Because when you keep more donors, you will raise more money.
While that's a simple concept, it's not easy to do. But it doesn't have to be hard, either.
Improving donor retention is a lofty goal, so here's my promise to you. I'm going to help you keep this resolution, through a series of smaller steps in upcoming posts.
Each post will offer practical ideas that you can understand and implement.
When you do the work and keep this one resolution, you'll raise more money for your nonprofit this year - and every year.
For now, let's start with the basics: what donor retention is, why it matters, and the first two steps you need to take towards improving your donor retention rate.
WHAT'S DONOR RETENTION?
Donor retention is a measurement of how many donors you keep, year over year.
It's not a comparison of the
total number of donors you have this year compared to last. Instead, it's comparing your actual donor pool from year to year.
Donor retention asks, "Who gave to you last year, and did they (or will they) give again this year?"
WHY DOES DONOR RETENTION MATTER?
Business owners know that it's cheaper and easier to keep an existing customer than to acquire a new one. The same holds true for nonprofits and their donors.
Yet, generally speaking, nonprofits are doing a terrible job of keeping their donors, year over year. As a result, nonprofits are spending more time and more money looking for new donors.
In the book
Retention Fundraising, Roger Craver explains that most fundraising programs are like a leaky bucket. He goes on to say, "Most groups concentrate far more on pouring new donors into the bucket than plugging the holes."
Before you start plugging your holes, do you know how many holes you have?
WHAT'S A TYPICAL DONOR RETENTION RATE?
The truth is donor retention numbers across the board aren't very good. The donor retention rate will vary from year to year, but it averages well below 50%.
That means, if you're a typical nonprofit, you're losing at least half of your donors. Every year.
The retention rate for first-time donors is even worse - closer to 20%.
Again, that means if you're a typical nonprofit, 8 out of every 10 donors who gave to you last year
for the first time won't give to you again this year.
Shocking, isn't it? Even more shocking, most nonprofits don't know their own retention rate.
WHAT'S YOUR DONOR RETENTION RATE?
Donor retention is a simple formula:
(The donors who gave this year / The same donors who also gave last year) * 100 = Donor Retention Rate
Remember, these are the actual, individual donors, not just your total number of donors.
If you need help calculating your donor retention rate, there are a couple of free tools that you can use. Check out
Best of all, with these tools, you don't need a lot of data to get started. All you need is a list of gifts from your database with these three fields: unique donor ID, date, and amount.
One last tip: you'll need two years of data since you're comparing one year's performance to another.
READY TO TAKE ACTION? KNOW YOUR NUMBER & SET YOUR GOAL
So, you're ready to improve your donor retention rate, keep more donors and raise more money in the new year. Great! You're almost ready to get started.
Before you do, you want to (1) calculate your donor retention rate from last year and (2) set your donor retention goal for this year.
The reason I recommend knowing your current retention rate is so you can set a meaningful goal for your organization - one that exceeds your own performance from last year.
Otherwise, you can always set a goal to outperform the industry average. (In 2017, donor retention was 45.5%, across the sector).
Want an extra challenge? Set a second goal: first-time donor retention rate. (In 2017, first-time donor retention was 19%.)
The important thing is to set measurable goals. Those numbers become your target. Then, next year this time, you can see if you met or exceeded your goals.
Understand that 100% donor retention isn't realistic.
Donors will move away, pass away, or just go away. You can't control the first two reasons donors leave, but you can affect the third.
So, in the next post, I'll start to share some specific examples of things you can do to keep more of your donors. Because when you keep more of your donors, you'll raise more money.
Until next time.
Photo credit: Pixabay
Need help creating a donor retention plan? Laura Rhodes can help.
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