November 1, 2011

What is the average cost per dollar raised in fundraising?

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1322691759A difficult question, and often calculated in a variety of ways.

Benchmarking between organizations is not standard so costs per dollar raised can vary widely depending on interpretation and exclusion/inclusion of such things as facilities costs, the percentage of the CEO’s salary that would be related to fundraising and many other items.

Benchmarking is often done against national organizations such as the United Way and their average cost is compared to the institution. However, these costs may also vary according to the type of organization, types of campaigns they run, the stage of the campaign they’re in, and how many services are provided by the organization centrally.

For example, if you’re raising a much larger percentage of major gifts, then your average $ cost per dollar raised may be lower than an organization more dependent on raising money through annual fund.

Cost per dollar raised may also be greater at the beginning of a campaign since there are always additional start-up costs such as a gala, ramped up prospect research, system acquisitions and other investments.

It’s also important to monitor the trends in cost per dollar raised. For example, based on your own organization’s calculation of costs, how are you tracking over the last 5 years? Are you more or less efficient?

James Greenfield provided the following answer in his book, Fund-Raising: Evaluating and Managing the Fund Development Process (1999). The overall national average cost to raise a dollar (CTRD) is 20 cents (or 80 cents of every dollar raised goes to the charitable purpose/programs):

# Fundraising Activity/Method National Cost to Raise a Dollar

1. Capital Campaign/Major Gifts $ .05 to $ .10 per dollar raised.
2. Corporations and Foundations (Grant Writing) $ .20 per dollar raised.
3. Direct Mail Renewal $ .20 per dollar raised.
4. Planned Giving $ .25 per dollar raise¾and a lot of patience!
5. Benefit/Special Events $ .50 of gross proceeds.
6. Direct Mail Acquisition $ 1.00 to $ 1.25 per dollar raised.
7. National Average $ .20

Annual fund direct mail and telefund costs also typically fall within these ranges, but again will vary depending on the prospect pools you are contacting.

In practice many people associated with a not-for-profit may be engaged in fundraising and may undertake tasks that have a significant fundraising content. If you have larger ratios of volunteers, it will lower your average cost.

The recent trend in political fundraising on the Internet will also lower your average cost since the acquisition, transaction and retention related costs are often lower than traditional ways of doing this.

The average cost question is asked a lot, but the answer may actually not be that meaningful unless compared to very similar organizations recording everything in exactly the same way.
You should always try to be more efficient, but it may be impossible to achieve the same average cost as some of the organizations you are comparing.

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Posted by Mitch

Mitchell Ravvin, BComm, PFPC, CFRE Fundraising Professional: Rave Results Inc. was founded in 2010 with one mission: To Facilitate Rewarding Partnerships between Individuals, Businesses and Nonprofits.

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