How to Develop an Effective Strategic Fundraising Plan

Douglas Shaw

Some Thoughts about Methodology

We all know the value of living in the "information age." But when it comes to strategic planning, many of us unwittingly choose to short-circuit the flow of information by not requiring ourselves to have accurate information. Many times I have participated in meetings where a person will guess at previous results rather than getting out of their chair and going to their file to obtain a report. Guessing is no good. Often the primary value I bring to a consulting session is to simply not settle for guesses. It's very common for me to ask a person to leave the room and go find a report that will give us precise information.

I want to caution you strongly to not allow yourself, in the strategic planning process, to operate on inaccurate or partial information. Never allow yourself, or any member of your team, to "guess" about results from past efforts.

Another essential component to Developing an Effective Strategic Fundraising Plan is to begin by asking questions rather than making assumptions or statements. This is especially critical for those in positions of leadership. An assumption by leadership can set a faulty course for the journey.

A statement by leadership can be even more destructive to the planning process than a "guess." If a leader says, "Newsletters don't raise money" … then how is a person reporting to him/her going to challenge them without confrontation? Would it not be better if a question were asked than a statement made? For example, if a leader were to say, "Is it possible for newsletters to raise net income for ministry" … it empowers the employees to provide their own insights and perhaps explore new options.

A Strategic Planning Outline

Below are ten suggested steps that together form a Strategic Planning Outline for the development program. Following this outline, Steps 3, 4 and 5 are unpacked in more detail as they relate specifically to the creation of a strategic fundraising plan.

1. Identify your Mission Statement/Vision Statement.
2. Establish your goals for each major area of responsibility as they support your vision and mission.
3. Document your historical methods for achieving your goals and their effectiveness.
4. Establish assumptions for each major area of consideration.
5. Develop specific strategies for each area including all resources needed to accomplish your goals.
6. Review your strategic plan to assure compliance with goals and their direct support of your mission. Confirm that resources are available; if not modify the plan to acquire additional resources or downsize the plan.
7. Publish your strategic plan to all members involved in accomplishing it.
8. Monitor the execution of your plan, making modifications to assumptions as new information dictates.
9. Modify your plan as reality dictates, making sure that all parties are aware of all changes and appropriate approvals are secured.
10. Maintain a continuous planning file during the course of the year to facilitate more effective planning in the upcoming year.

Identification of Your Historical Methods

The following is intended to assist you in preparing your documentation, which will ultimately lead to the development of your strategic plan.

An important part of setting a course for future action is to have a thorough knowledge of where you've been. In order to be prepared for discussions, you will need to establish the following:

1. Identify the purposes for which your group exists. A donor-focused purpose would begin with your donors rather than your income needs (e.g., to identify, involve and motivate the 12,000 active donors on your file to support this year's operating budget).

2. Identify the methods you have used to accomplish your department's purposes. In other words, list everything that you do. An example of one of the Development Department's methods is the direct-mail program.

3. Document the results of your methods in order to help you accomplish your purposes. Here you will want to measure anything that can be measured …

• Numbers of active donors, lapsed donors, nondonors and newly acquired donors
• Income generated by appeals, newsletters, thank you letters
• Expense to produce your mailings (be sure and include postage and your time and overhead as well)
• Net income generated by each effort
• Return on investment (This is determined by dividing your total income raised from each effort by the total cost)
• In the case of lapsed donors, non-donors and donor acquisition, you'll also want to know your Cost Per Donor (CPD). This is accomplished by dividing your net loss or gain by the total number of donors you acquired (not responses, but actual new donors).
• Lastly, you'll want to determine your Net Yield Per One Thousand Pieces Mailed (NYPM). This is done by dividing the total net income from an effort by the number of thousands that you mailed (e.g. if you mailed 12,000 pieces, you should divide your net income by 12).
  
  Example: $40,000 net income /12 = $3,329.34 NYPM *

If your current methods of measurement are deemed to be inadequate or insufficient, document what you have and then work on improving measurement of your results in specific areas as part of your new strategic plan.

If you are utilizing the services of an agency to develop your direct-mail reports, you may want to contact them well in advance of your strategic planning process in order to obtain all of the reports they use on your behalf.

*Note: If your NYPM is less than $2,000, you should make significant revisions to your direct mail strategies.

Identification of Your Assumptions

The following is intended to assist you in preparing for the development of your strategic plan.

An important part of setting a course for future action is to have a thorough knowledge of assumptions you have made to develop your past strategies. By listing your assumptions you will be better able to determine the effectiveness of your strategies and revise them according to actual performance. In order to be prepared for discussions, please prepare the following:

• A list of assumptions you used in the development of existing strategies.
• New information based upon actual data gained since your original assumptions were established.
• Any revised assumptions.

Development of Specific Strategies

Below are steps in developing specific fundraising strategies.

1. Using your historical methods and established assumptions as a context, examine the tangible results or effectiveness of your past strategies. Use the other members of your department or strategic planning committee to gain the maximum objectivity in this process.

2. Determine which strategies should be:

a. Modified for greater effectiveness

b. Abandoned to free up resources (both time and money)

c. Kept exactly as they are Establish new goals while taking into account any new directives or philosophies being embraced.

d. Develop new strategies to accomplish your goals, taking great care to establish new assumptions based upon as much real data as possible. Make these strategies tangible with very specific goals and steps to accomplish them.

A sample Development Department direct-mail strategy follows:

e. The numbers above reflect years of Douglas Shaw & Associates serving rescue ministries. It's not enough to calculate the numbers. It is absolutely essential that there are very specific proven strategies employed for each effort such as:

• Food Appeals
• Matching Gift Appeals
• Matching Gift Follow-up Appeals
• Handwritten Appeals
• Summer Camp for Homeless Children

It's also critical, when developing percentage of response, to remember that people respond in direct relationship to their relationship with your ministry. For example:

• Active Donors(have given a gift within the last 24 mos.)5-7% response
• Newly Acquired Donors(track separately for one full year)3-4%
• Lapsed Donors(have given but not in the last 24 mos.)1-2%
• Non-Donors(have never given a cash gift)2-3%

Also, be sure and factor in volume when you forecast income. The higher the mailing volume, the lower the percentage of response.

• 12,000 pieces may result in an overall response of 8%.
• 17,000 pieces may result in an overall response of 6%.

Average gifts also tend to go down when volumes increase.

• 12,000 pieces will yield an average gift of $45.
• 17,000 pieces will yield an average gift of $35.

Some strategies will generate more income than others regardless of the month in which they are mailed.

• Handwritten appeals might produce 11%
• Matching Gift appeals might produce 9%
• Gram appeals might produce 8%
  • Basic Story appeals might produce 6%

e. Determine the resources to accomplish your goals, allocating people and budget according to priorities.

f.= $2,404.53 NYPM

Using an outside agency, aforementioned can be accomplished with one person acting as ministry liaison for strategy and the coordination of gathering research (i.e. stories, statistics, information, and photos). This same person can produce reports or relay results to your agency for report development. All agency production costs, time and postage are included in the costs above.

Let me implore you to begin your strategic planning process by asking questions and allowing those around you to ask questions. Questions lead to answers—statements lead to policy, whether intentional or unintentional. I encourage you to serve and empower your staff by allowing them the opportunity to ask all the questions they can in developing your strategic plan. If you need help, there are any number of good consultants available to assist you with this critical process.

Lastly, give yourself the gift of time in this process. Two full days of planning can provide almost any ministry with a solid strategic plan. The meetings must be well run, kept on task, and have accurate information gathered in advance. Let me give you some very important advice: conduct your planning sessions off-site. Interruptions are the enemy of focus and can rob you of an effective strategic plan. May God grant you wisdom in this process.

Don't forget to forecast income from your receipting program. A good rule of thumb is to forecast a 20% response from receipts (1 response for every 5 mailed out) assuming they are sent to donors within 24-48 hours of receiving their gift (e.g., the 13,390 gifts indicated above might well be expected to provide 2,768 gifts. A reliable average gift for receipts would be $30.00. So the expected income from receipts would be $80,040 over one year.

This same strategic approach should be taken for newsletters as well. Just remember your newsletters will need to be donor-focused in order to generate the maximum income. Generally, newsletters will perform significantly below direct mail appeals e.g. if a basic story appeal generates a 6% response, you might receive 3-4% from a well-written newsletter.

Wrap-up

In this article, we have demonstrated what a strategic plan might look like for your development program. This same model can be used to develop a strategic plan for any area of your ministry. It will require the gathering of historical data for each program, factoring in any new strategies that might significantly change your historical trends. Assumptions should be as close to reality as possible.

Douglas Shaw is chairman and CEO of Douglas Shaw & Associates. DSA is a full-service fundraising and communications agency serving national and international non-profit organizations and ministries. For information, visit www.douglasshaw.com

Copyright 2007 Douglas Shaw & Associates. All rights reserved.