KPIs, or key performance indicators, represent quantifiable metrics that can assist nonprofit organizations in the process of evaluating their performance. Key performance indicators can evaluate performance in numerous areas throughout a nonprofit. Listed below are 5 different KPIs your nonprofit can use to start the process of tracking success.
1. Donor Retention Rate
Maintaining donor relationships is extremely important for all nonprofit organizations. For small businesses, finding new customers is more expensive than maintaining current customer relationships and the same goes for nonprofits: gaining new donors is more costly than retaining current donors. This is why understanding how well your nonprofit retains current donors is crucial to success and expansion. This process can be done by calculating your donor retention rate. Once you have calculated your nonprofit’s current donor retention rate, you can then begin taking the necessary steps to either maintain or improve retention.
Formula: Number of Repeat Donors This Year / Number of Donors Last Year
2. Donor Growth Rate
When setting the goal of establishing a fundraiser, the expected outcome is to expand the donor base for your organization. Analyzing the donor growth rate of your nonprofit can give you an idea of how effective your fundraising efforts have been. Additionally, donor growth rate is an important indicator of the overall health and performance of a nonprofit. Donor growth rate is typically a culmination of several factors relating to the performance of a nonprofit. After calculating the donor growth rate, it is key to identify areas of opportunity if the rate is negative, as this indicates a declining donor growth rate for your organization.
Formula: (Number of Donors in Year 2 – Number of Donors in Year 1) / Number of Donors in Year 1
3. Fundraising ROI
Fundraising ROI (return on investment) is one of the most important metrics a nonprofit should be tracking in order to evaluate success. This essential metric can assist nonprofits in the understanding of various aspects within their organization, such as:
Evaluation of the target audience
Assessment of fundraising methods
Nonprofit organizations can evaluate changes in donations through calculating the fundraising ROI.
Formula: [(Funds raised by the campaign – Total cost of the campaign) / Total Cost of Campaign] x 100
4. Donation Growth Rate
In addition to fundraising ROI, donation growth rate is one of the most valuable key performance indicators (KPIs) for nonprofits, as it demonstrates the ability of a nonprofit to collect revenue. To put things into perspective, a higher donation growth rate means that a nonprofit is effectively reaching and impacting their target audience. Nonprofit organization that demonstrate a steady growth rate of donations are able to further expand their reach and impact.
Formula: [(Current average gift size - Previous average gift size divided) / Previous average gift size] x 100
5. Profit Margin
Profit margin is similar to both donation growth rate as well as fundraising ROI, as profit margin determines the margin between a nonprofit’s revenues and expenses. A nonprofit with a high profit margin means that the organization utilizes their expenses well in order to generate revenue.
Formula: (Total revenues - Total expenses) / Total revenue x 100