The old saying that it takes money to make money is as true for nonprofits as it is for for-profit businesses. Determining how much it costs a nonprofit to raise a dollar can help the organization decide which fund-raising activities have the best rate of return.
Add Costs Together
All the costs associated with a fund-raising effort should be added together to determine how much was spent overall on each activity. For example, a nonprofit that decides to hold a fund-raising dinner should add together all the direct costs associated with holding the event such as office supplies and equipment used to print invitations and do mailings, the music, food, and hall rental, as well as all the indirect costs such as salaries of staff proportionate to the time they spent on the fundraiser. Every single expense should be accounted for when adding the costs together.
Calculate Cost Ratio
Subtract the costs from the amount of money raised during the activity. For example, if the gross amount raised during a dinner was $50,000 and the cost to hold the event was $30,000, the net raised would be $20,000. Divide the costs by the net amount raised -- $30,000 by $20,000 -- to get a per-dollar figure on how much it cost to raise one dollar during the dinner. In this case, it would have cost $1.50 to raise $1.00. This calculation can be used to gauge the effectiveness of different fund-raising techniques ranging from dinners to direct-mail solicitations to telephone campaigns.
Griffith Pritchard served as a senior branch manager and banking officer for M&T Bank. He specialized in small business and personal financial, credit and banking products. He also has extensive experience in small business sales and non-profit management. Pritchard is a graduate of Hobart College.