Annual Fund arithmetic: $1 in gifts needs $2 worth of prospects.

Fall is upon us and annual funds are launching once again with lots of activity and high expectations. When we begin working with an organization, the annual fund fundraising goal has typically been established, and this always gives us pause. “Great,” we say, “How did you establish that goal?”  Most often, we hear:

  1. “We’ve figured out the gap between earned revenue and our budget. That’s our annual fund goal.”
  2.  “Last year we raised 6% over the prior year, so we’re aiming for 9% this year
  3.  And then there’s the perennial, “The CEO set the goal and our board approved it.”

RSC has helped helped dozens of cultural organizations and non-profits launch successful, growing annual fund programs of all sizes. Setting annual fund goals based on budget need, prior results, or gap-filling is dangerous. Any budgeting process needs careful consideration of the available prospect pool. Need to raise an extra $100K this year? How would you know if you can accomplish this, particularly when 30% of your current donors (on average) won’t likely renew?

Whatever the goal, you need qualified prospects with demonstrated capacity and interest. How many qualified prospects do we need for fundraising growth? At RSC, we say that you need Two Prospects for Every Eventual Donor.

Put another way, you have to allow for being “wrong” half of the time, and your insurance is by having twice as many prospects identified than you need to make the goal. So, that means $1 in gifts needs at least $2 worth of prospects.

If the goal is $2M, for example, you’ll need $4M worth of prospects. These can be renewals, upgrades, or new donors. It sounds easy and pragmatic, but organizations often stray from this critical metric when they can’t balance the budget – and end up basing the goal on what they need instead what can realistically be achieved.

To reach an ambitious fundraising goal, organizations will need to push past the obvious supporters and take a risk or two on potential supporters.

How to begin?

Start the planning process at the beginning of the fiscal year. Thoughtful planning, not active desperation, is the reconciliation to the arithmetic problem. Putting your organization through the rigors of a sound process allows you to adjust your strategy and establish budgets and goals based on what the planning process says, not what the institution needs.

Engage volunteers to help supply new prospects. After rating your prospects, categorizing them in the right giving club, factoring in donor attrition, and identifying which ones you can upgrade (just don’t count them twice), can help you determine early on whether you need more names. Then, enlist the help of well-trained volunteers; they’re a valuable resource for helping you find more potential contributors.

Adjust your strategy as appropriate. Maybe it’s a bigger challenge grant, modifying your timing, or changing your message. Just make sure your strategies are always aligned to achieving your goals, and you’ll be well on your way to executing a fiscally responsible annual fund campaign.

Have fun! Annual funds, properly planned and well-executed, are an ideal apparatus for educating prospects and donors, getting out into the community with your message, and spending time with your supporters.

But what if you can’t immediately identify twice as many prospects as you need?  No worries – simply work toward that goal.  Throughout the year there are literally dozens of ways to identify and begin to cultivate prospects.  Developing your list is an ongoing process, not a one-time event.

If you would like to engage RSC to learn how to evaluate and set up a successful Annual Fund to meet your fundraising goals, contact us at 317.300.4443 or rsc@rscfundraising.com

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