80/20

You know this one—the fact that 80 percent of the outcomes typically comes from 20% of the causes.  In fundraising that translates to 80% of the money raised comes from 20% of the donors.  The truth of this makes a great case for spending 80% of your time cultivating and stewarding that 20%.

You could do worse.  Especially if you are one-person development band.  Spending most of your time on the most effective actions is smart.  That doesn’t mean, of course, that you don’t spend any time on the other donors.  Indeed, if you don’t have a large pool of donors, 20% will be a very small number.

Managing a small development office really is a juggling act.  Several of my clients recently held their annual galas.  All were totally consumed.  And since my work with them is more focused on other things—major gifts and planned gifts, endowments, board development—I didn’t get to see them very much.  Nor did the activities we are working on get the attention they needed.

“But the gala brought in….” they all said, naming numbers that sounded impressive.  Until, of course, you parsed them.  It wasn’t only the difference between net and gross; or even the shock (to them!) of recognizing the real costs.  It was the way the revenue for the event came in.

Yep.  Eighty percent of the people bought tickets; 80% of the money, however, came from sponsorships.  And that represented less than 20% of the event participants.

Sure, the event brought more than money to the organization.  It could be a wonderful way to engage new supporters; it could also be terrific for recognizing and stewarding old friends.  It should be a great start to get people (and businesses) more involved.  But that all means that you haven’t just thought about the event as the occasion.  It must be part of a process with plans for what you are doing with which segments of your prospects and donors before, during and after that singular occurrence.

Events, of course, are only one way that organizations raise funds (and awareness).  In one of those serendipitous moments, I just got a blast email announcing a webinar about direct mail.  One of the participants, the email stated, is a “veteran fundraiser who tripled direct-mail contributions for one charity to $300-million, despite the recent recession.”

Wow! I thought. Three hundred million. That’ll make a whole bunch of small organizations abandon everything else they are doing—that’s a lot of bucks.  More by many times than most nonprofits total annual operating budgets.

And even if you don’t get to that number, tripling direct-mail contributions is impressive enough.

It is.  But it also neglects to talk about the costs of raising a dollar via direct mail.  Think about it.  If you are already superb at bringing in funds via direct mail, odds are you are at something less than 10%.  Typically direct mail response rate for non-acquisition mailing is closer to 4%.  Triple that and you are still not being very effective (effectiveness being the number of yesses you get relative to the number of asks).

Even with direct mail, the 80/20 rule well, rules.  So 20% of the yes responses will account for 80% of the revenue.

By all means, send out direct mail. Craft a good letter.  Segment your list so the letter speaks more directly to your prospects.  And then  roll up your sleeves and seriously get to work—cultivating the 20% who have shown a larger commitment.

Janet Levine works with nonprofit and educational organizations, helping them to identify the ways that they can be more effective and build their fundraising capacity.  Learn more at http://janetlevineconsulting.com.

 

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About janetlevineconsulting

For over 20 years, Janet Levine has worked for and with nonprofit and educational organizations, helping to grow their advancement programs. Her consulting company, Janet Levine Consulting, serves a wide range of organizations from small, all-volunteer agencies to major national organizations. She regularly teaches courses in non-profit management, fundraising and grant development, both face-to-face and online at http://courses.lmlearningstation.com/. In addition to her nonprofit work, Janet brings years of experience as a business and sales manager in the for-profit sector. She has an MBA from the Graziadio School of Business at Pepperdine University.
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