ROI, or "return on investment," is a basic business idea. It's also something that every fundraising event should think about.
Working capital, physical assets, and people's time are all parts of a business investment.
ROI is the net gain that comes from a business spending money and using physical assets, as well as the time of its employees, in order to make money.
So, the investment in a fundraiser is made up of any upfront costs, the costs of the things that are used, and the value of people's time spent fundraising.
Some important things to know about ROI in fundraising:
1- Analyze your up-front expenditures vs. your net gain
2-Reducing costs increases your return on investment (ROI), but maybe not your net profit.
3-Always think about how much each volunteer's time is worth per hour.
Put a ROI value on upfront expenditures
The most important thing is to look at all of your up-front costs and figure out how much money you will make in the end. Obviously, you shouldn't spend money if you don't get anything in return.
One example would be figuring out how much money a capital campaign will spend on advertising. Before you decide for sure, run a small number of test ads to see how many people respond.
If your ads don't get the response you want, you can either change them or think about not spending any more money on ads.
Look for places where you can spend a dollar and get back a lot more than that. This usually includes good publicity, good communication, lists of targeted prospects, and reminder campaigns at the right time.
Put a return on investment number on cost reduction vs. net profits
When you cut costs, your return on investment (ROI) goes up, but the lack of investment can hurt your net. If money spent in the past led to great results, make sure this year's plan includes more money for that effort.
One example is that you might have to cut the money for your capital campaign mailing. Sure, you can save money by not sending mail to people who didn't answer last year.
But you will be caught by the law of large numbers. If less people are contacted, less money will be given.
Remember that you don't have to spend money to make money, but if you don't spend money where it's needed, it can hurt your results.
Figure out how much their time is worth in terms of money raised. The value of each volunteer's time is another important ROI point to keep in mind. Each hour of work done by a volunteer for your fundraiser should be worth at least the minimum wage. If not, your group isn't working smart and is wasting their time.
For example, a group of volunteers might spend 1,000 hours putting together an auction that only brings in $5,000. Many groups would probably be happy with a net of $5,000, but the return on investment (ROI) for everyone's time was small.
Put a ROI value on your merchant partners
In this situation, you want to get the most out of everyone's time by giving them clear tasks and instructions. Don't go to every store in the area and ask for donations of goods. This is a scattershot approach.
Instead, build a relationship with those merchants by giving them value throughout the year before you ask them for a big donation.
Ways to get more out of the money you raise
Focus your efforts where you'll get positive responses and avoid wasting your time on unproductive endeavours.
When someone helps with a fundraiser, they are trading their time for something that helps everyone.
Give them specific tasks that are focused on getting the best results. Don't waste people's time, or you'll make them less likely to join in the future.
Why it's important to know your fundraising ROI
Keep an eye on your return on investment. It's a good way to tell how well your non-profit is doing. If the number is too low, your group will have to keep looking for new members to replace the ones who have lost interest.
Your donors and volunteers won't come back because you didn't value their time, you wasted their money, and you tried to save money when it would have been better to spend freely.
Set up your organisation to get the most out of the money you raise, and your group will be set up for success for many years to come.
