Course Objectives. Definition of Return on Investment 3/12/2015. What s Your Return? Understand how to define & measure ROI

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1 What s Your Return? Leveraging ROI Metrics in Your Fundraising Strategy William Bill O Connor Executive Vice President United States Naval Academy Foundation Robert Rice Principal CCS Course Objectives Understand how to define & measure ROI Examine how to establish benchmarking guidelines Discuss how to incorporate ROI into fundraising strategies Definition of Return on Investment ROI is a simple calculation ROI is a measure of outright and comparative efficiency Used to evaluate the efficiency of an investment Used to compare the efficiency of different investments 3 1

2 ROI Formula ROI = (Gross Revenue Expense of Investment) * 100 Expense of Investment Example: Total Gifts Received: $1,000,000 Fundraising Expenses: $200,000 ROI 400% = ($1,000,000 $200,000) * 100 $200,000 Connection Between ROI & Cost to Raise $ ROI = Revenue Cost Cost Revenue = CTR$ 500% $ % Selecting the Right Tool for the Job What are you measuring? How will you use the information? Who will use the information? Is ROI the best tool for the job? What other tools do you have? 2

3 Understanding ROI ROI is one of many useful metrics ROI can be a useful measure of performance The ROI concept is useful in other ways It is even more useful by individual investment! Using ROI to Evaluate Overall Efficiency ROI is the inverse of cost to raise $1 Measures fundraising efficiency Does not measure fundraising efficacy It is a measurement - not a standard Cost per Dollar Raised Benchmarks: Charity Navigator $0.10 (ROI 1000%) 10 pts $0.20 (ROI 500%) 7.5 pts National Average (Greenfield, Rosso) $0.20 (ROI 500%) BBB Wise Alliance < $0.35 (ROI 285%) Using CTR$ to Evaluate Efficiency by Method 3

4 Using ROI to Evaluate Efficiency by Method Solicitation Method CTR$ ROI Direct Mail Renewal $ $ % 500% Memberships Associations $ $ % 330% Special Events < $0.50 > 200% Volunteer-Led Solicitation $ $ % 1000% Corporations $ $ % 500% Foundations $ $ % 500% Capital Campaigns $ $ % 1000% Planned $ $ % 500% Overall Total $ $ % 400% What is Good ROI Measurement? Ensure ethical practice Gauge year-on-year performance Compare to peers Compare to industry Make better investment decisions How Does My ROI Compare? Depends on several factors: Sector? Size of organization? Longevity of organization? New or longstanding program? Mission? 4

5 Finding the Right Benchmarks Industry sources System/Network groups Peer benchmarking studies Informal requests Your own historical data Industry Benchmarking Reports Case Study: US Naval Academy Foundation What do we do? Raise private funds to support the United States Naval Academy Curriculum Programs Faculty Staff Facilities How do we do it? Align private gift support with USNA institutional priorities USNA Strategic Plan 2020 Build and maintain a productive and responsive fundraising infrastructure committed to outstanding stewardship 5

6 How to Use ROI Measure return on institutional mission Return on Mission Margin of Excellence Support for USNA - measuring the direct impact on Midshipmen, faculty development, etc. Support for USNA Alumni Association how to measure ROI on alumni engagement? ROI calculated for gifts to each case component How to Use ROI Measure return on institutional mission Measure return on each individual funding need 6

7 Return on Individual Funding Priorities ROI calculated for gifts to each case component NAPS Academic Center Current Goal Public Funds: $151,000 $180,000 Private Funds: $140,000 $200,000 Total Funds: $291,000 $380,000 Participation: # of Visits: 2,000 2,500 Examples: International Programs Current Goal Public Funds: $2,599,000 $3,346,000 Participating Mids: Private Funds: $899,000 $2,889,000 Participating Mids: Total Annual Funds: $3,488,000 $6,245,000 Total Participating Mids: How to Use ROI Measure return on institutional mission Measure return on each individual funding need Measure fundraising expenses and efficacy -Determine best resource allocation -Measure other fundraising returns (donors, gifts, bequests, visits, etc.) -ROI per development staff position (FTE) Return on Management New Resources, New Positions Examples: Investing $225K in a new position $1.5M in new gifts Investing $175K in a new position 100 visits/50 requests for Annual Fund 7

8 How to Use ROI Measure return on institutional mission Measure return on each individual funding need Measure fundraising expenses and efficacy -Determine best resource allocation -Measure other fundraising returns (donors, gifts, bequests, visits, etc.) -ROI per development staff position (FTE) Social/Impact ROI Return on Mission Return on Engagement (Alumni Relations) Tracking the gifts of attendees - does participation lead to gifts? Examples: (St, John Fisher College) Buffalo Bills Event St. Patrick s Day Celebrations Tracking events - does participation lead to return on mission? Examples: USNA Distinguished Graduates Benchmarking Best Practice Think long-term consistency Focus on quantitative data By constituency and method Limit to only key qualitative questions Collect raw data, not calculated figures Be specific define everything! 8

9 What Should Be in Your Performance Scorecard? Overall Results Corporate Cause- Related Marketing Cost of Fundraising Program Balance Program Growth Foundation Board Special Event Individual Major Gifts Online Planned Volunteer Comments and Discussion Benchmarking Resources USA - Foundation Center - Donors Forum - Committee Encouraging Corporate Philanthropy (CECP) - Council for Aid to Education - Association for Healthcare Philanthropy - Boardsource - Association of American Medical Colleges (AAMC) - Association of Fundraising Professionals (AFP) - 9

10 Bill O Connor Executive Vice President US Naval Academy Foundation bill.oconnor@usna.com Robert Rice Principal CCS rrice@ccsfundraising.com Thank You! Follow us: twitter.com/ccsfundraising Like Us: Facebook.com/ccsfundraising Link Us In: 10