If there is anything that unites nonprofits, it is the combination of big dreams and limited resources.
As nonprofit leaders weigh their goals, needs and plans for 2024, accurate and actionable data is as good as gold. One of the most influential ways a nonprofit can bolster their success is through the implementation of a data-driven development strategy. Nonprofit leaders seeking to leverage their data and establish a strategic development approach should reflect on three key questions:
- Where have you been?
- Where are you going?
- How will you get there?
1. Understanding the Past: Where Have You Been?
I once worked with a nonprofit that devoted much of its resources to a series of fundraising events throughout the year. The organization assumed that more events highlighting their mission would lead to greater fundraising revenue. So what happened?
The events attracted a lot of new donors annually, yes, but few became repeat donors. The average contribution was less than $500. Rather than focus on these events, the nonprofit might have deployed its resources toward donor stewardship and retention for loyal, major donors — the people who, according to the data, made up more than 80% of the nonprofit’s revenue with their contributions.
The Pareto Principle is a rule of thumb that says 80% of the results come from 20% of the efforts in many situations. In my experience, that principle holds true in the fundraising realm. It’s often the case that 80% of the funds raised come from 20% of the donors.
This is all to say that before you can even begin to build an effective strategy, you need to take account of your past performance. Analyze historical data to reveal trends for each donor segment and understand potential pain points, such as declining new donor acquisition rates, wavering donor retention among younger demographics or shifting donation patterns of long-time supporters. These trends can signal areas of opportunity and shine a light on what has or has not worked in the past.
2. Establishing Ambitions: Where Are You Going?
The start of a new year is a fresh opportunity for nonprofit leaders to recalibrate and redirect efforts. Once you have analyzed your data, the next step is to utilize predictive models and statistical simulations to determine which donor segments promise the highest return on investment. This approach ensures that the limited resources of your organization are channeled effectively, maximizing impact.
Establishing clear and measurable goals is critical to the efficacy of a data-driven development plan for nonprofits. These benchmarks allow organizations to track progress, evaluate the success of strategies and make informed decisions moving forward.
3. Taking Control of Your Path: How Will You Get There?
You’ve identified your goals, but how can you achieve them? The next step for nonprofit leaders is to take control and take action. Development strategies should be reevaluated every three to five years, with a tactical plan being reconfigured every year. These adjustments allow leadership to account for changes to the individual goals of the organization — a realignment of priorities based on the most up to date results — or navigate disruptions to the larger economy.
The benefits of a development strategy are clear, but sometimes implementing the strategy is easier said than done. Nonprofits often have limited people, processes, time and access to the right technologies to effectively synthesize data. After all, their manpower is dedicated to delivering on their mission, not crunching data. The solution is to limit effort on the backend by collecting data in real time. I have seen a lot of success from nonprofits that use a donor database system that captures and interprets donor behavior comprehensively instead of just tracking gift activity.
Nonprofit leaders should prioritize development strategies that focus on estimated returns based on their data and areas of opportunity. This could include things like demographic trends, prompting focus on millennial and Gen Z donors, or on major donor retention to include planned giving campaigns or strategic gift programs for loyal annual fund donors.
A data-driven development strategy can be a transformative tool that empowers nonprofits to sustainably navigate the complex fundraising landscape. By recording past data, identifying future opportunities and executing on their goals, nonprofits can not only increase fundraising but also amplify their impact in the communities they serve. By following these steps, your organization can be on the right track for a more successful year ahead.
The preceding post was provided by an individual unaffiliated with NonProfit PRO. The views expressed within do not directly reflect the thoughts or opinions of NonProfit PRO.
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Morgan Falor is a consulting director for Armanino LLP, where she focuses on helping nonprofits create strategic approaches to both finance and development. Since joining Armanino, she has aimed to enable nonprofits to further their mission and create greater impact using data-driven approaches.
She has experience in both public accounting and industry, most recently serving as executive director and vice president of finance for a high-profile nonprofit. She received her Bachelor of Business Administration with a major in accounting from the University of Iowa and is a licensed Certified Public Accountant.