Do you have a leaky bucket?

It’s February…Valentine’s Day is on it’s way (whether you love it or hate it), and with it, I can already see the #DonorLove posts showing up on all social media.

We must show #DonorLove to get our donors to stick around. #DonorLove reenforces inequity and we must stop. What’s a nonprofit leader to do? To believe?

Here’s my thing. To all of that, I say yes, AND… (okay, maybe that’s the result of too many improve exercises in drama class in high school). But seriously…yes, AND…

There’s actually a deeper problem we’re trying to solve. It’s not #DonorLove vs. donor’s are spoiled and shouldn’t demand #DonorLove.

The problem is that donors give once and don’t come back. The problem is that as an industry we’ve been hovering around 43% donor retention rates for literally as long as I’ve been a fundraiser (15 years now).

The problem is that nonprofit leaders work really, really hard to gain donors, only to have them never give again. And debating whether or not we need to show our donors love is missing the point. We need to be asking a deeper question: why aren’t they coming back? And how do we keep our donors without losing our souls?

The solution lies in relationship-based fundraising, which isn’t as easy and quick as #DonorLove would have you believe. We don’t harass or trap donors into a transactional donation; we build relationships with people who care deeply about our mission. We don’t send thank you notes and gifts, telling them what wonderful heroes they are; we keep them informed about our mission’s progress and impact, reminding them why their donations continue to matter–the change they can be a part of. 

One of my latest clients came to me with their donor retention rate at a meager 12.5%!!! They had gotten donations (through a herculean effort) from 120 donors, and only 15 of them gave again the following year. They came to me utterly discouraged.

I asked them to tell me what their program consisted of, and I could tell instantly why their donor retention rate was so low. They had gotten board members to twist the arms of all their friends and family, and because it had been such a rotten experience all around, everyone refused to participate again the next year, and they’d basically determined that the donors who had given didn’t care enough about the mission to even stay informed via the emails the organization sent.

WOOF…Nightmare, right?

I worked with them to think about their mission; their deep why. We figured out who had most alignment with their mission, and we thoughtfully crafted a slate of engagement points that would demonstrate to their current donors and potential donors the work the organization did, why it mattered, and how donors could engage with the work. 

Fast forward six months into my engagement with the organization. Their donor retention was 57% and they’d raised 300% more than the prior year. They were now sending emails that their donors eagerly answered. When they called to ask for more financial resources, their donors picked up the phone and gave. Their board members were more willing than ever to share the contact information of their network.

The transformation wasn’t in showing more #DonorLove. It was in showing the donors why the work mattered. When the donors could see what the organization did in real time, when donors were able to be in relationship with the staff of the organization and the students and businesses served by the organization (they do work-based learning for high school students), the donors got more committed. 

This month, we’re gonna kick #DonorLove schemes to the curb, and focus on a much more important thing: mission-centered, relationship-based fundraising. Each week this month, our Fridays 4 Fundraising program will teach you one new thing you can do to more your fundraising program in this direction.

This week, let’s figure out your starting point. Calculate your nonprofit’s donor retention rate.

STEP 1: 

Wherever you have your donor data, you need to pull a report with the following information (I’m giving you instructions for calculating your 2023 donor retention rate, so you can plan 2024).

You’ll need a list of all donors who gave in 2022, with a list of their giving in 2023. Usually what this means in a database is that you’ll pull accounts based on a donation date of Jan 1, 2022 to Dec. 31, 2022; and then you’ll want the report to lay out 2022 giving total and 2023 giving total. (If you can’t figure out how to do this, shoot me an email and let me know what system you have…and I can give you more specific advice).

STEP 2: 

Total up how many donors gave in 2022. Total up how many donors in that set gave again in 2023. 

For Example, if this is your chart:

Donor Name 2022 Giving  2023 Giving
Donor A $500 $500
Donor B $250 $500
Donor C $500 $250
Donor D $250 $0

Regardless of AMOUNTS given, 4 donors gave in 2022, and 3 gave again in 2023.

We are not looking at donors who gave in 2023, but hadn’t given in 2022. These are new donors, and they aren’t relevant for counting donor retention. (You’ll be aiming to make sure they give again this year).

It’s important to go donor by donor, and not just do total donors. I had a client once tell me they had 125% donor retention. I told them “that’s not possible, you can only retain 100% of donors…that’s the max.” What they’d done is look at total number of donors in 2022 and total number of donors in 2023. So in 2022 they had 100, and in 2023, they had 125. But in reality, they had more like 70% retention. 100 donors gave in 2022, 70 of those donors gave again in 2023, and they brought in 55 NEW donors in 2023 who had never given before. So their number of donors grew by 125%, but that’s not donor RETENTION. Make sense?

STEP 3:

Take the total of donors who gave again in 2023, and divide that by total donors who gave in 2022. 

STEP 4: 

Multiply that total by 100 to get a percent.

STEP 5: Interpret your results.

Keep in mind that industry average is 40%. But as an industry, we’re failing at donor retention. So if you have between 40-50%, congratulations, you’re better than average…but you’re still losing half of your donors every year, which is going to continue to make you feel exhausted and overwhelmed.

In my experience, programs don’t feel sustainable, predictable, and burn-out proof until you’ve got a minimum of 60% donor retention. 

I’ve gotten programs up to 80% retention before, and those are ones that can grow like crazy! (That’s the donor retention rate I had when I grew a nonprofit from $300,000 annually to $1 million annually in just four years. We had about 40% retention my first year, 60% by the next year, and 80% by the third year. You see, when you’re barely losing any donors, you can grow really fast because every new donor you bring in truly is growth, not just replacing what’s leaking out of your bucket).

So what’s your donor retention rate? Email me back and let me know. I need numbers for next week’s installment…and you and your nonprofit might get featured if you email me back!