Does investing in fundraising work?

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So I’m a nerd.  We know this.  So it will come as absolutely no surprise to anyone that I spend my leisure moments not on sensible occupations like going out and socialising with friends (whatever they are…) but on pondering answers to questions about fundraising.

Like, how do we know that investing in fundraising works?

Don’t get me wrong, I’ve built a career on investing to grow voluntary income for the charities whose fundraising I’ve headed up. And it’s absolutely worked. For those charities. Big time.

And I can give you plenty of examples of other charities who’ve had similar experiences (and some have even done better than mine. The bastards..).

But is there any evidence that this works as a general principle? That if, on average, non-profit X invests sum Y in fundraising growth, it will lead to growth rate N.

Well, not that I’ve been ever able to find. I’d be very interested to hear of anyone who has any such data…we could be nerd buddies.

But I was recently doing some benchmarking analysis for a client. To do this I had to create a data set of the fundraising performance of a group of major UK charities over the last 6 years.  And once I answered the client’s questions, I had a little play.

For these 22 charities, all medium to large and all major active fundraisers, I looked at the following pieces of information over the last 6 years.

  • Growth in fundraising (FR) expenditure since 2009
  • Growth in voluntary income (VI) over the same period
  • Growth in VI less legacies (on the basis that fundraising expenditure probably only marginally influences legacy income over such a short period)

And this is what I found*

The charities are ranked in descending order of fundraising growth

Name VI growth  VI ex legacies growth  FR exp growth
Battersea Dogs & Cats Home 172% 1673% 2923%
Save the Children 102% 134% 57%
Macmillan Cancer Support 81% 104% 100%
Guide Dogs 39% 80% 106%
British Red Cross 47% 79% 65%
Donkey Sanctuary 44% 72% 219%
Dogs Trust 44% 58% 33%
WWF 51% 53% 41%
National Deaf Children’s Society 35% 31% 3%
Scope 18% 28% 51%
Cancer Research UK 18% 27% 19%
Marie Curie Cancer Care 19% 27% 46%
Sense 22% 17% 56%
RSPB 16% 16% 41%
PDSA 9% 14% 28%
Childrens Society 1% 9% 0%
RSPCA -7% 7% 0%
Barnados -7% 7% 26%
Blue Cross 20% 6% -8%
RNIB -5% 1% 24%
Oxfam -1% -1% 41%
NSPCC -5% -7% -13%
TOTAL 25% 37% 42%

As you can see, most charities in the sample increased their investment in fundraising sharply in this period (an average of 6% compounded per year). Voluntary income rose but somewhat more slowly (a modest 25% over 6 years or 3.8% p.a compounded).   Voluntary income excluding legacies showed a more positive average 5.4% growth rate per year.  So overall, there’s some correlation. Even if the investment returns don’t look, well very spectacular.

Those charities whose fundraising expenditure went down tended to see income declines. Also not a surprise.

But look at the variations. Not only  Batterseas’s very striking 29 fold increase in fundraising expenditure (from a low base) but the difference between those whose fundraising income increased when expenditure went up and those who didn’t. I won’t single anyone out but there’s some pretty worrying numbers here you’d have thought for some charities.

What does this tell us? Well, that fundraising performance is more complicated than just a ratio between inputs and outputs I suppose. There’s lots of other factors at play. So just increasing your fundraising investment isn’t guaranteed to bring success without all the things you need for an effective strategy (which I may have mentioned before).

But I reckon there are also a few more specific things we can say;

  • Regular giving has been driving growth. All bar one of the top 8 charities by voluntary income growth in this sample have been heavy investors in regular giving programmes, mostly through face to face and DRTV.
  • Cutting your fundraising expenditure is pretty much a bad idea most of the time.  Charities with low or negative fundraising expenditure growth had low or negative income growth. Except for NDCS, who it’s worth saying had one of the higher levels of fundraising spend to start with.
  • There’s plenty of evidence for UK fundraising suffering from diminishing returns. And it’s not starting from a great point to undergo further restrictions which will add cost to fundraising.

And that I, seriously, need a life.
*all data is from published annual accounts, this means that they might not be exactly comparing apples with apples for all charities but should be close enough

5 thoughts on “Does investing in fundraising work?

  1. Hi Tobin. This is fascinating work. We have some evidence that investment without getting the messaging right reduces or nullifies the return. IE – investment + correct messages = growth. Seems obvious, eh? We have a checklist on ‘right message’ and have evaluated most of the organisations above. Our finding match yours. Those who had good fundraising propositions at the core of their brand raised more money. Those who had comms driven brands didn’t. Keep up the good work! Alan

  2. Hi Tobin, This is really interesting thank you. Having recently worked for a charity planning an entry into GB this rings true. As always the detail of how investment is spent, returns measured and objectives of each charity is the key thing to understand. James

  3. Evidence from our regular giving benchmarking project across 20 universities’ sub £10,000 giving suggests a correlation between fundraising spend and fundraising income, even allowing for scale of different institutions. Some do better than others with the same resource base, but it’s clear that those who spend more raise more. And it appears that they are, as yet, nowhere near the point at which increased resource gives a decreasing level of extra return.

  4. Hi Tobin. Just wondering if you looked at the magnitude of the changes as well – as you could argue that if a charity generated $10 for every $1 it invested in fundraising, then an increase of 42% would be generating you almost $6 per dollar you invest, whereas if you were a less efficient charity (say $1 of fundraising expense gets you $5 of revenue) then your return on investment is halved. That might paint a slightly different picture in the return on investment, and I would be interested in why you took the % increase approach instead.

    1. Hi Lucy, valid points. The analysis is based on the (publicly) available data which isn’t very granular unfortunately. One of the difficulties in working out a proper return on investment is knowing both when the investment occurred and when the associated income was received. You can’t do this from the public data.

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