By Laurence A. Pagnoni, MPA
Knowing how much revenue you’re raising is essential. It seems obvious doesn’t it? Yet many fundraisers don’t know how to go about setting the right goal. There’s often silence whenever I ask a Chief Development Officer or the CEO, “How much revenue are you seeking to raise?”
Recently, Jane, a mid-career Development Director, was honest with me: “That’s a seemingly simple question, she said, but I really don’t know.”
I am empathetic. There are many good reasons why we fundraisers do not know our goal. For example, organizational budgets may not have been shared, or administrators are waiting for us to tell them what goal is possible, or we just have not had the resources to do sufficient prospect research and/or to spend time getting to know our major donors personally.
The goals I am speaking about concern your operational costs for the calendar year (The Annual Fund), or your campaign goal, or what reserves you need, or endowment. You will need different goals for each area. Many nonprofits set a goal that is lower than it actually should be. Find out now how to avoid that mishap.
Why Knowing Your Goal Is Essential
Is knowing your goal always essential? Generally, yes it is because you have to know when you have been successful, when you have reached your mark. It’s also essential for donors to know because they often give proportionally to the goal, at around 10% of it for the higher gifts.
You also have to know the number of funders or donors you need to meet your goal. By constructing a gift chart you can delineate the number and varied levels of gifts needed.
It’s okay to not know your goal when you have a process in place to determine it—some call the process discovery, or feasibility, or a planning stage. Whatever you call it, the process should be utterly practical and really answer the fundamental question of how much you can raise. Sometimes you can raise more than you think!
Setting a fundraising goal is important because it helps to ensure that you and your Board and fundraising team are unified about the desired results. Further, keeping track of your progress toward meeting your goal can give you the information you need to adjust your fundraising strategy or improve your outreach. As you make progress toward your goal, you can use indicators (like fundraising thermometers or tickers) to communicate with donors—when they see others giving, and they see that you are well on your way to meeting your goal, they will be more likely to give.
Six Steps To Setting The Right Fundraising Goal
Your fundraising goal is determined by the real cost of your actual need, joined by the donor research and the assessment of what funders and donors are likely to give you when you ask in a thoughtful way, a way that is aligned with their priorities. You must also factor in your costs for running the development program.
All fundraising drives provide an opportunity for a transformational moment in your nonprofits fundraising. We will be discussing this on our Advancing Major Gifts Webinar on July 14, 1 pm ET.
In this process, you are seeking a comprehensive goal that covers not only the cost of your public-facing program, plus any capital improvements, but also the revenue required to move to the next level of your organizational development, plus current and expanded fundraising program capitalization.
Your comprehensive goal setting should include these six steps:
- Determine the real revenue needed. Real operational budgets are a start, but fundraising does not just rely on current numbers. Current numbers reflect your current program commitments, not your aspirational ones. This means that your real revenue need must include the enhancement or expansion you seek. This step is a great chance to include the finance director and to create an important ally. (See my book, Fundraising 401, Chapter 10, Finance & Fundraising Are Not In Opposition.)
- Determine donor and funder capacity to give. At this step, we see the great value of funder assessments and donor feasibility studies, especially when advanced prospect research is integrated into the process. Further, this step must include segmenting your donors which will allow you to know which donors, small, middle, and large, are a fit for which fundraising drive or campaign. Let’s not forget the need to identify new donors, donors who are value-aligned. That cost must also be factored in.
- If capital improvements are involved it’s important to obtain actual cost estimates from qualified vendors. Further, so many capital campaigns overlook building maintenance reserve funds which you will need at about 10% of the capital goal. This reserve stays in place after construction and is restricted to building maintenance.Also, the costs of an owner’s rep, who serves to represent your interest during the construction process, must also be budgeted, along with fundraising counsel, engineers, and architects, each area usually represents about 5% of the goal.
- Include the costs of fundraising so that you’re made whole in the end. Recouping your fundraising costs is often overlooked and a major cause of why development programs are so undercapitalized. Fundraising costs should include stellar donor communications, the appropriate staffing of the development office, and the next level of digital. Digital fundraising is about using all the digital channels at your disposal in an integrated way to reach and expand your audiences, spark engagement, and grow your giving opportunities.
- Include the real overhead rate of staffing and running your nonprofit. Many institutional funders cap your allowable overhead rate usually around 10%; even when your real costs are higher! But in setting your right fundraising goal you can include the real overhead rate.
- Include donor recognition, an area often overlooked. I estimate that between $5,000 – $20,000 is needed annually for most nonprofits, more if you’re in a major campaign.
These steps bring you to your right goal. Would you include any other steps? What’s been your experience with setting the right fundraising goal?