How Do You Justify the Cost of New Fundraising Software?

In my sales job at Bloomerang, I talk to a lot of nonprofit execs who would like to change their software. When I ask them why, I hear answers that are all over the map.

Many of these execs have to justify a new fundraising software purchase to a Board of Directors. Some of their reasons are easy to justify to the Board — others, not so much.

For example, many execs tell me that they have to do too much manual data entry, or that it’s hard to run thank-you letters, or that their data is scattered across too many data silos. When they ask their Board to appropriate funds to fix “the problem,” the answer often is that it’s “not in the budget.” In my observation, most Boards aren’t willing invest much into solving administrative problems.  

But are we even addressing the right problem? Too often we wind up addressing what are really symptoms, not the real illness.

If the exec thinks that he or she has a problem like, “I’m losing money because I can’t keep track of donors who lapse,” or “I know there are many donors who could give more, but I can’t figure out which ones,” then we might have an issue that the Board might invest in — the issue of revenue! But how much money are we talking about?

Fundraisers can apply some simple metrics to help justify their proposal to the Board.

Let’s start with donor retention. The Fundraising Effectiveness Project (FEP) tells us that, nationally, more than half of all donors lapse every year (including almost 75% of first-time donors)! If your database could tell you how many donors (and which ones) lapse each year, you could easily see your opportunity cost of not fixing that problem. Simply run your lapsed donor report with the amount of the last gift of each donor. If 250 donors lapse at an average of $100 apiece, that’s $25,000 that got away! If your database would allow you to identify those donors, and target them with a personalized “we want you back” campaign, and you were able to recover even half of them, that’s $12,500 in “found money” that once was lost. That is a little easier to justify.

Or maybe your donor population is stagnating and in need of a wakeup call. If you have 150 donors who have faithfully donated $150 per year (a little less than the average annual gift, according to FEP) for three, four or five years, it’s likely that many of them would respond favorably to an “upgrade” ask. How many of them would say yes to an ask of an additional $100 (after thanking them profusely for their loyalty)? Even if it’s only 50 donors, you’ve added another $5,000 to your annual appeal result.

When we start talking about opportunities with “major gifts,” (which sometimes are right under our noses) the projections can go into the tens of thousands of (new!) dollars. Maybe now you have your Board’s attention?

Apple founder Steve Jobs once said that people are basically smart, and will do great things if they have the right tools. Increasing your revenue by a few thousand, or several thousand, or many tens of thousands of dollars is very doable for most of us “smart people” with the right tools.

So when you decide to evaluate fundraising software, don’t try to fix symptoms; look at the “illness.” Don’t look for “features;” look for solutions to real fundraising problems (or opportunities). Look to do “great things.”

And when you ask for a budget for fundraising software, don’t tell them it’s too hard to run a report, or that your system is clunky. Now you can assign a real value to it — one your board can related to — dollars and cents.