Easier Said Than Done: Choose Your Budget-Cut Battles Wisely

The hard-to-see truth is that donors grow more valuable to the organization every year they’re with you. Their responsiveness, retention, even their likelihood of upgrading their giving amounts — they all increase every year. Here’s how it plays out:

• At the point of acquisition, you’re losing money.
• By the end of the first year, you’re breaking even among those new donors.
• The following year — your second with that group — you’re earning a 2-to-1 return from them.
• In the third year, your return rises to around 3-to-1. Starting to look good.
• The real payoff comes in the fourth and following years, when those established donors are returning $10 (or more) for every dollar you spend.

If you don’t get new donors this year, you won’t have second-year donors next year. More seriously, you won’t have fourth-year donors in four years. It’s as if those cuts leave a black hole in the middle of your donor base — a vacuum where there should have been responsive, committed donors.