Where’s the money?
Jeff and I, and our front-line managers, are constantly asked that question. “When are we going to see those large returns from the investment we’re making in major gifts?”
Our answer, depending on the circumstances, is in two to three, maybe four years. I’m talking here about those large returns. You’ll see returns on investment (ROIs) better than direct marketing in the second year after the donors have been qualified.
How does this work? Let me explain.
The true economics of a caseload are the total revenue from the caseload donors’ giving, against the total cost (MGO compensation + benefits + operating costs). But the total revenue has two elements or inputs.
The first is the whole dynamic of keeping the caseload fresh and productive, with donors who want to engage and are contributing. This should produce a ROI of 1:4 in the first years and rise to 1:8 or better in year 3 or 4 and on, which is a far better result than any other fundraising strategy in a non-profit.
The second is finding those 2-3 donors in the caseload who can contribute significant value. THIS is so important. You, as a MGO, must identify these donors and work very hard to make this happen. It’s the value from these few that propels the ratios of a caseload to an even better place.
Every good major gift caseload will generate these larger one-time gifts IF the MGO is, every year, properly identifying and cultivating 2-3 donors in the caseload who can give transformational gifts.
When this is working as it should, you’ll see six- and seven-figure gifts coming in. In many of our programs with other clients, these gifts have been $400,000, $1 million, $4.2 million, $8 million etc. – large gifts.
This is how a more mature caseload should work. It incubates the donors who can give large gifts, while casting off net revenue at a rate where value retention is far better than any other fundraising strategy in the organization.
But let me warn you. Be careful how you talk about the transformational gifts to anyone, especially finance folks, if you aren’t fully committed to making this strategy work. And believe me, it does take work.
Why be careful? Because, if you write that number into your forecast and then don’t do the work involved in identifying and cultivating transformational donors, you’ll get in trouble. You’ll run the risk of running a deficit because you haven’t delivered the transformational gift to the agreed-upon economy.
To be clear, I’m not playing a game with this point, as the transformational gifts WILL happen if you identify and cultivate those donors in a disciplined and focused fashion, as we’ve suggested. You just need to be sure you’re doing your part on the donor side, so that you’re responsible with the annual operations of your organization.
Here’s my question. Do you have an answer to the question: “Where’s the money?” Have you identified those 2-3 donors on your caseload, and are you cultivating them toward a transformational gift? If not, get busy. It’s some of the best work you can do.
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How to Answer the “Where’s the Money?” Question
Where’s the money?