Demonstrating Nonprofit ROI to Board Members
Proving to your nonprofit’s stakeholders that your organization is “worthy” of their financial support is an ongoing responsibility for nonprofit management. Those who commit to the organization’s mission – clients, donors, board members, and staff – all have opinions about the optimal spending levels to execute the mission. Fundraising expense is one place where this manifests. Perceptions of spending levels – from donors, the board, or other stakeholders – can influence campaign and fundraising management. Fundraising success is required to fund what you do! How can you show your constituents that your organization is doing the best with what it has?
How to Best Illustrate ROI
Nonprofit managers can show the board (and others) that the organization has maximized efficiencies by accurately measuring the amount (and types) of resources going to marketing and fundraising activities. If your nonprofit doesn’t do this kind of record-keeping and analysis, the good news is that it is never too late to start! Any number of excellent software solutions and nonprofit tools exist to help with this kind of analysis. In addition to general business practices, your nonprofit must also be able to accurately track the effects any increases or decreases in fundraising expenses might have on the overall financial picture.
Your board may well be aware of metrics surrounding the cost to raise a dollar and be keen to understand what that number is for your nonprofit. Be aware, however, that in the world of nonprofit research, many experts discount that this metric has any real value in rating a nonprofit. The intention of this metric is to identify inefficiencies and wasteful spending. With careful record keeping and data management, you are likely able to make the case that your nonprofit’s return on investment (ROI) is acceptable no matter the number. Capturing this information on staffing and expenses (including proper assignment of costs by program and fundraising activity and those of professional fundraisers or outside consultants) for various strategic outreach efforts or fundraising events is essential to confirm that your nonprofit effectively fulfills its mission.
Why Reporting Matters to Board Members
Offering your stakeholders transparency in how you manage your business helps to ensure confidence in your organization overall. It is no surprise to anyone with experience in the nonprofit sector that there is a sense from many that nonprofits “make do with what we have” or “do without” to be fiscally responsible. However, gaps in management (i.e., no Development director) or a lack of experienced business staff can limit an organization’s efficiency and drive up the cost to raise a dollar metric. Nonprofits can combat these inefficiencies by investing in quality tools – software or personnel – that make record-keeping, analysis, and transparency easier to accomplish.
Understanding the importance of accurate reporting of staff time and all related fundraising expenditures will reap benefits in terms of precise calculations of financial ratios related to fundraising. Sharing this information with your board and other supporters can instill confidence in your nonprofit’s ROI, regardless of that benchmark.
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Published: April 13, 2022