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Lifetime Value of a Donor—almost incalculable

Being able to deliver on your critical mission to the community is dependent upon a predictable, sustainable revenue stream.  For many charitable organizations this is an elusive reality.  The most frequent reason for this has its roots in a general lack of appreciation among nonprofits for the almost incalculable value of a long-term donor.

Making appeals for initial or one-time gifts is a very expensive proposition.    The Disabled Veterans National Foundation and SPCA International were recently excoriated in the press for their high fundraising costs: https://8prin.info/QWmGcn  Other “one-ups” include the trendy “crowd funding” phenomenon and natural disaster fundraising appeals.   In all of these situations you have high costs, relatively low nets (and the key word here is “net”) and virtually no renewal.

Although such approaches may succeed in delivering a high “wow” factor and may meet an urgent one-time need, they do not possess the staying power and long-term scalability to deliver on a critical mission day-in an day-out.

In the clamor for new supporters, there are those nonprofits who have discovered the sheer joy—as well as material abundance—of a cadre of engaged and committed, long-term, even lifetime, donors.  Relationships are what make us human so their value is priceless.

Let’s look for a moment, however, at merely the material value a long-term donor brings to your organization.   You acquire a new donor with a $100 gift.  It costs you, on average 95% to 115% of that gift to acquire him or her.  For discussion, let’s take the low side.  So you actually net $5.  Now repeat that each year for twenty years.  You finally have the full value of the original $100 that was initially given.

Why not, instead, make your focus donor loyalty and renewal?  The first year your cost is still conservatively 95% of the gift given.  In subsequent years, however, that cost drops to about 20%.  Let’s be very conservative and propose that your renewed donor continues to give the $100 for the first five years, increases his or her gift to $500 in the next five years and then gives $1000 for the next ten.  So what is the value of this “lifetime” donor?  Over $10,000, that’s what—1000 times the one-time giver.

More difficult to calculate, but real nonetheless, will be the value of the donors that your long-term supporter refers to your organization because of his or her confidence in you.  People love to share when they’ve found a great opportunity.   Get the picture?

Long-term donor relationships really do “pay off”—in more ways than one!

Larry C Johnson
www.TheEightPrinciples.com
Twitter:  Larry_C_Johnson
LinkedIn:  Larry C Johnson, CFRE
Facebook:  The Eight Principles

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