Analyzing Fundraising Strategies through the 80/20 Principle

by Joe Garecht

Analyzing ROI

Guest Post by Ian Adair

When I speak to nonprofit and education professionals involved with fundraising the discussion inevitably turns to the ROI of funding strategies currently in place and ways to improve.  I think many nonprofits have explored various types of funding sources and to some extent have a diversified fund development plan in place.  Where many fundraisers go wrong is in identifying which of these strategies has become too time consuming and less productive to their organization.  To help dissect this problem I utilized the principles of an economist born over 150 years ago- enter Mr. Vilfredo Pareto.

In the business world most are familiar with the term the “80/20 Principle” or Pareto’s Law.  Quick history lesson; Pareto was a controversial economist (who isn’t these days) that lived from 1848 to 1923 and he wrote a book where he included a law about income distribution.  The mathematical formula he used to demonstrate a grossly uneven but predictable distribution of wealth in society where- 80% of the wealth and income was produced and possessed by 20% of the population.  Pareto’s Law can be summarized as follows: 80% of the outputs results from 20% of the inputs.  Now let’s make this relevant to the fundraising world:

  • 80% of the funding comes from 20% percent of our donors
  • 80% of our total volunteer hours comes from 20% of our volunteers
  • 80% of our corporate sponsorships come from 20% of our industry/business relationships
  • 80% of our results comes from 20% of our time and effort

The list can be endless and to varying degrees of course, but I like to focus on the last point the most; 80% of our results comes from 20% of our time and effort.  This leaves us with the sobering result of 80% of our efforts only leading to 20% of our results- which is not smart business.  Fundraising professionals spend an enormous amount of time planning events, getting auction items, writing grants, researching potential donors, updating multiple social media sites, and recruiting volunteers; we are not however taking the time to evaluate these strategies for effectiveness and desired outcomes.  Nonprofits have to understand that doing something unimportant well does not make it important and events requiring a lot of time do not make them more valuable.

  • Which 20% of events/task/or people are causing 80% of our problems?
  • Which 20% of resources are resulting in 80% of our desired outcomes or successes?

The goal of putting strategies and practices through this type of analysis is to discover your organization’s inefficiencies in order to eliminate them and to find your strengths in order to multiply them.  As nonprofit professionals we discover that 80% of our problems come from the time consuming and unproductive tasks in our daily lives.  The ROI on this analysis happens when you make this information work for you by reorganizing where necessary and eliminating when needed.

Who are the champions of your organization?  Nonprofits need to spend time cultivating more engaging relationships similar to the ones that already value your organization most.  These donors are the stakeholders who will be more impactful to your organization in the long run.  I think if Pareto was a fundraising professional he would propose; since engaged donors are the key to providing financial stability to your organization, then go work on cultivating more relationships like thatIn tough economic times “relationships” sustain an organization, not a magic number of donors. 

Ian Adair is a non-profit professional and currently serves as the Executive Director of the Martinez Foundation.  You can also find him on Twitter at @IanMAdair 

Recommended Resource: Ask Without Fear

Ever wonder how to take the stress out of making asks?  Looking for tips on approaching donors with more confidence and clarity to ask for a major gift to your organization?  Want a step by step guide for how to make an ask?  Look no further than Ask Without Fear by Marc Pitman.  Click here to read our review.

 

Photo credit: Images_of_Money

 

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