Betting long on donor acquisition

I was late to the audit presentation, but it only took a sec to realize the conversation was heading south.  In response to the auditor’s charge of “too high” (his words) fundraising costs, the finance committee was in full retreat. They were talking deep cuts to the development budget, and without so much as a hint of curiosity about the strategy behind the numbers.

Had they asked, the committee would have been told the organization is in donor acquisition mode. Which  costs money. Lots of money. As much as the 50 cents on the dollar the auditor claimed this organization had spent the previous year. Sometimes more.

Auditors can fuss. Watchdog groups can growl, and donors can complain. But it’s all just sound and misguided fury without program details. Or as the guys over the Agitator label it, “ignorance.” They write:

Because the acquisition of new donors is essential to maintaining and growing virtually every  organization, we all need to get much better at both understanding and explaining this essential process. The alternative is continued ignorance on the part of some watchdogs, implied scandal  on the part of the press, panic and finger pointing in the boardroom, and angry, turned-off donors.

THE PROBLEM WITH KOWTOWING TO IGNORANCE 

For more on this theme, check out Charity Case: How the Nonprofit Community Can Stand Up for Itself and Really Change the World where social innovator Dan Pallotta writes:

Charities’ fear of public disapproval pressures them to cater to public prejudices – mainly  lowering overhead, that is administrative salaries, fundraising investment, marketing expenditure,  and so on.

The more charities give the public what it wants – low overhead – the less those charities can spend educating the public about what they actually do. And the public considers any effort by  charities to educate them about what the charities actually do to be wasteful overhead to begin with.

The more the charities give the public what it wants – again, low overhead – the less they can grow and therefore the less significant their long-term achievements. Long-term achievements  require short-term spending, which yields zero short-term results but increases short-term  overhead – which the public abhors.

To escape the crazy Catch 22, organizational leaders, including boards, must believe – really, truly believe – that it’s the potential lifetime giving of the donor, not the cost of acquiring the first gift, that matters.

Per the Agitator, “an organization might ‘lose’ $50 over and above the amount of a newly acquired donor’s first gift, but in subsequent years that $50 investment produces a mighty substantial return. In most cases a return far, far greater than any returns produced by the organization’s certificates of deposit or endowment.”

In other words, amortize acquisition costs over 10, 20, or more years of repeat gifts, and the ROI on that first gift looks pretty darn good. (Of course, this assumes a well thought out plan for donor retention, but that’s the focus of another blog post.)

So the next time your auditor, a watchdog group, or some “friend” of the organization questions your investment in donor acquisition, invite them to stick around for the rest of the story. It may take a while, but as long betters know, patience pays big.