The Donor Development Process

Presented by

John Elbare, CFPFlorida Philanthropic Advisors, LLC

Donors or Donations?

What is more important in your organization, donations or donors?

Your answer has a lot to do with your success!

Transactional Approach

Transactional approach is inherently inefficient. It provides no positive reinforcement for the donor.

It misses out on most of the economic value of a donor:a large gift at the end of life.

The Problem

A fund raising strategy based mainly on raising funds usually results in revenue stagnation.

Why? Lapsed donors. Donor who make a gift and never give again.

Donor-Centered Approach

Recognizes the economic value of a donor’s giving over a lifetime

Focuses on helping the donor feel involved with the mission.

Encourages a sense of investment in the mission

Why is This Important?

The key to sustained success is a base of loyal donors.If you do not retain your donors, you are spinning your wheels.

A Typical Case

1. Clarence donates through Giving Challenge -- $50.

2. He becomes a steady donor at $100/year

3. He is personally solicited and starts giving $1000 annually

4. He leaves his home as a gift in his will

The Economics

Year one……….......................$ 50Years 2 – 6 = $100/year........ 500Years 7 – 14 = $1000/year.... 8,000At death = $125,000............ 125,000Lifetime Giving

133,550Average per year: $ 8,900

Questions:

How would this donor be treated by your organization?

Would you have noticed him? Would have cultivated a relationship

with him? If not, why not?

What is the Real Value of a Donor?

This year’s gift?Past Giving?Current Giving?Potential for Future

Giving?An Entire Lifetime of

Giving?

PlannedGifts

Major Gifts

Annual Gifts

Development Pyramid

New Donors

Larger Gifts

Smaller Gifts

What’s the Solution?

Growing a Loyal Donor base

This is the key to building a growing, sustainable source of revenue.

A Critical Question

What does it feel like to be a donor to your organization?

Warning Signs You have a high donor lapse

rate(or you do know your lapse rate)

You do not know why your donors drift way

Your revenue is not increasing substantially every year.

So, How Do We Do It?

By intentionally building strong relationships with our donors

By helping them feel good about their support and involvement

By providing positive reinforcement By providing opportunities for

involvement

What Does A Donor-CenteredSystem Look Like?

Donor Acquisition

Donor Retention Donor Upgrading

Major Gift Planned Gift

Donor Acquisition

Continuous new donor acquisition is essential for long-term success in fund raising.

Your organization needs a steady flow of new donors to grow your donor base.

Without a growing donor base, your revenue decline, not increase, over time.

The Acquisition Challenge

A donor’s first donation is usually: That donor’s smallest donation The hardest donation to get The costliest donation to raise A way to test the charitySo, why don’t we work hard to keep the new

donors we do acquire?

Donor Renewal

It is far easier to retain a donor than to go out and find another one to replace a lapsed donor.

Personal renewal letters Exemption from frequent solicitations Reports on the organization’s work Donor recognition club Opportunities for involvement

Your Opportunity

Every gift is an opportunity to provide positive reinforcement and strengthen the relationship.

It is also an opportunity to harm the relationship and send the donor elsewhere.

Why Do Donors Give?

Donors give because they care about your charitable mission.

Your success in fund raising depends on how well you make your case for support.

Positive Reinforcement

A behavior strengthens if it is immediately followed by a positive reinforcer (reward)

A behavior reduces if it is not followed by any reinforcer (extinction)

A behavior is suppressed if it is followed by a negative reinforcer (punishment)

Gift Acknowledgment

Use personal thank you letters Get their names right Connect the gift to the cause Get letters out fast Treat every donor well, despite gift size Make follow-up phone calls Involve Board Members Find out how they want to be involved Begin relationship building with the first gift Use a new donor kit

Keep Good Records

You need a good information system:

Record of all transactions

Donor giving histories Gift acknowledgments Mail sort capability Contact management

Goals of Good Donor Relations

1. Make sure every donor is properly thanked after each gift.

2. Proactively manage your donor renewal and upgrading process

3. Identify donors who are ready for personal cultivation and begin that process

4. Work to maximize each donor’s lifetime support for your organization.

The Giving Decision

People give from the heart

They give to help people they empathize with

People do not give because your organization has needs

Opportunities for Involvement

Tours of your programs, facilities

Lunches with the CEO Opportunities to meet

clients Opportunities to

meet/shadow staff Opportunities to volunteer Good communications Invitations to all events

Donor Recognition Clubs

Avoid a lot of levels Recognize both annual

and cumulative giving Annual recognition

event Publish an Honor Roll Consider a Donor Wall Offer Certificates Avoid Expensive Gifts

Donor Upgrading

Monitor donor giving histories Raise the ask amount, based on past

giving Tie the new amount to service levels Consider a monthly giving program Move to personal solicitations when

loyalty is established.

Personal Cultivation

Donor acquisition, retention and upgrading is designed to produce a steady flow of loyal donors for personal cultivation.

Virtually all large gifts are obtained through personal, face-to-face relationships.

The Donor Relationship Cycle

Identification Cultivation

SolicitationStewardship

Some Important Metrics

Number of new donors Lapse rate Average gift size by donor Cost of raising funds Years of consecutive giving

(loyalty) Number and timing of mailings

Fund Development Plan

A written plan is essential for reaching your goals.A failure to plan is a plan for failure.

Your Plan Keeps You Focused

Often, the fund raising staff is: Under-trained and overworked Given unrealistic goals Given insufficient resources Given little or no board support Provided with no systems, plan

or policiesYet -- they are expected to raise

money!

Benefits of a Development Plan

Stay focused on priorities Obtain sufficient support Engage the Board Use resources wisely Ensure feasibility Maintain balance Provide accountability

Characteristics of a GoodFund Raising Plan

Strategic in Scope Written Feasible Clear Objectives Defined Activities Measurable

Outcomes Easily Evaluated

Strategic in Scope

Your fund raising plan reflects your strategic plan

You are making your case for your vision

Making the Case

Making the case for support requires both:

1. Factual Reasons – why a gift is a good investment in a charitable cause.

2. Emotional Reasons – how a donor can empathize with the people who are served.

Investment in the Program

Without adequate investment, a promising fund raising program is doomed to failure.

Undercapitalization is the biggest reason for business failure – applies to fund raising as well.

ROI for Fund Raising Strategies

Low ROI:1. Acquisition Mail2. Special Events3. Renewal Mail4. Thrift Stores5. Memberships

High ROI:1. Monthly Giving2. Personal Ask3. Major Gifts4. Planned Gifts5. Capital

Campaigns

Typical Giving Patterns

Initial Gift $25 - $100

Renewal Gift $50 - $500

Major Gift $ 1000 - $50,000+

Planned Gift $ 25,000+

Cost of Raising Funds

Initial Gift 50-100%

Renewal Gift 25-50%

Major Gift 10-20%

Planned Gift 5-10%

Feasibility

The best fund raising goals are feasible yet ambitious

Unrealistic goals can destroy your fund raising effort; they build in a sense of failure and demoralize your staff and volunteers

Fund Raising Systems

A system ensures that policies, procedures and practices are consistently followed.

A good fund raising program is system-dependent not people-dependent.

Examples

1. We need your support for our home nutrition program. We serve 580 seniors and now need to purchase a new van and hire 3 more staff.

2. Your gift will help feed homebound seniors in our community. With your help, we will make sure no senior goes hungry.

Elements of a Plan

Strategic Goals long-term and short-term

Donor Development Acquisition Renewal Upgrading Personal cultivation/solicitation Major/planned giving Stewardship

Metrics & Reporting

Example of a Goal

“Our goal is to raise $500,000 this year to establish an endowment fund that will provide on-going support for client assistance every year. A $500,000 endowment will provide approximately $20,000 each year in client assistance funds.”

Sample Activities

Target Group: Loyal Donors who have made a gift every year for the past 4 years and/or who have a cumulative giving of at least $ 1000.

Activities:1. Compile prospect list2. Hold prospect review sessions, rate prospects3. Send approach letter and follow-up phone call4. Seek personal visit5. Solicit gift after appropriate cultivation

Expected Outcome: 10-15 letters & calls per week; 3-5 visits per week; 2 solicitations per week; two gifts per month, avg. $ 7,500.00 = $180,000/year

Expenses: Mileage, meals, postage, printing = $6,000Staff Time: 25 hours/weekTimeline: Start Oct 2005, then continuously

Indicators

Watch these data: Number of new donors Number of lapsed donor Lapse rate Renewal rate Size of donor base Growth (or decline) of

loyal donor segment(5+ years of annual giving)

Are your reports focused on the money or the donors?

Planning Pays Off!

Florida Philanthropic Advisors, LLC813-562-9333

www.floridagives.orgwww.pgcoach.org

Jelbare@pgcoach.org