4 Key Performance Indicators To Track The Success of Your Nonprofit
In today’s business world, data is king. The nonprofit world is no different. That’s why getting comfortable using KPIs is so important.
In this article, I’ll explain what exactly is a KPI and which KPIs you should be using to track the success of your nonprofit.
What is a KPI?
“KPI” stands for key performance indicator. KPIs are used to measure the performance of your organization. Oftentimes a KPI is a ratio that compares one metric to another to determine how well your organization is doing in that area.
KPIs are used at every level of the organization. They can be used at lower levels to help managers track employee performance. Accountants and financial officers use them a ton when projecting revenues. They can even be used at the highest levels to track the overall growth of your nonprofit.
Why should I use KPIs?
Think of KPIs as a way to mark how far along your organization is progressing. Without these markers, it would be tough to tell if you were on the right path. Further, you can use KPIs to help you make tough decisions because they can bring you clear and concise information.
Using KPIs to analyze your organization can help you answer the following questions:
How well did each department do this quarter?
Which programs are performing better than others?
Are we on target to reach our goals by year-end?
The Best KPIs for Nonprofits
There are a lot of key performance indicators out there to choose from! Most nonprofits overly rely on the basic business KPIs because they seem like “tried and true” metrics. This is true to a certain extent, but as you know—running a nonprofit can be very different than running a business.
I’ve narrowed down this list into these four which I think are the best KPIs to use to track the success of your nonprofit.
1. Cost Per Dollar Raised (CPDR)
The cost per dollar raised (CPDR) is a simple but powerful key performance metric that shows you how much it costs your nonprofit to raise $1. This is an easy way to see if your efforts are paying off financially or if your programs are losing money. Here’s how to calculate it:
CDPR = Total cost of your program ÷ Total dollars raised
As an example, say your nonprofit program raised $10,000. After your accountant tallies the figures, you found that you spent $4,000 on expenditures like salaries and advertising. The $4,000 cost divided by the $10,000 raised is $0.40. That means each dollar you raised costs 40 cents. Not bad!
The takeaway: the lower the CDPR, the better.
2. Conversion Rate by Channel (CRC)
The conversion rate by channel (CRC) KPI is a great tool to figure out where your most active donors are coming from. It will tell you how successful a specific outreach channel is at getting your donors to participate. By knowing which of your donation raising efforts caused the largest number of donors to take action, you can focus your nonprofit’s efforts on the most successful programs. Here’s how to calculate it:
CRC = (Total # of donors who took action ÷ Total # of donors) × 100
For example, say you want to see how well your nonprofit’s social media campaign is doing. You had 75 donations come in across all of your channels, with 6 coming from social media. Divide the 6 donors by the total of 75 donors and multiply to get your CRC of 8%. That means 8% of your donations for that period can be attributed to your campaign.
Knowing if a CRC is good or bad can be tricky. You can analyze your metrics against your own past performance, but another great tool is to use benchmarks to compare your stats to your industry. Check out M+T’s 2022 Benchmarks Study for some nonprofit-specific benchmarks.
3. Donation Growth Rate (DGR)
This is one of the fundamental nonprofit KPIs that don’t get enough attention. When analyzing donation growth, we are looking at your organization’s revenues over a span of multiple years. You can use this KPI to track the success of your nonprofit over time.
There are a couple more steps to compute this one. First, figure out the difference between the first year’s total donation revenue and the second year’s total donation revenue:
Revenue Difference = Year 1 Donations - Year 2 Donations
Then, you can calculate DGR:
DGR = (Revenue Difference ÷ Year 2 Donations) × 100
You should end up with a percentage that will tell you just how much your total donations have grown over the past year. If you have a negative number, that means your donations are down and you may want to look at some more KPIs to find out why.
4. Employee & Volunteer Turnover Rates
The last KPIs I’d recommend as a seasoned nonprofit accountant are a two-for-one: the employee and volunteer turnover rates. Unlike the other financial-oriented KPIs mentioned in this article, this one is focused on the thing that makes your organization the best: your people. Here’s how to calculate:
Employee Turnover Rate = Number of new employees ÷ Number of employees leaving
Volunteer Turnover Rate = Number of new volunteers ÷ Number of volunteers leaving
Having too high of a turnover rate for either category is not great, but it will lead you to analyze why the employees or volunteers are not staying long-term. Keeping an eye on this KPI gives your organization a leg up on attracting and keeping the people that make your nonprofit great.
