New donors and the price of selling coffee

Here's what really chokes off a lot of promising fundraising programs: The need to bring in net-positive cash right now.

These folks need to read The Agitator, especially this post: What Your Board Should Learn from Starbucks. It shows how a little business thinking can clear up the "net now" misconception:

Starbucks spends $1,400 to acquire a customer who starts off by spending $4.25 for a Caramel Frappacino.

If a nonprofit reported numbers like that, you can almost hear the bellowing board member with a calculator: That's a cost to raise of dollar of $329! What's wrong with you people?

Things would go very poorly at the board meeting ... unless someone pointed out that the lifetime value of a Starbucks customer is $14,099.

Which is what Starbucks is going on. As is every other smart business on the planet.

Smart fundraisers think that way too.

Acquiring new donors is almost always a money-losing activity. Get used to it. The math you need to be paying attention to is the lifetime value of the new donors you're getting. Your program is in good shape if that pencils out, the way it does for Starbucks.

Now and then, very rarely, someone manages to make positive net revenue on a donor acquisition activity. It's great when it happens, but it's not normal. It's also not necessary for running a successful, sustainable fundraising program.

In fact, if you insist on making net revenue from donor acquisition ... I can almost guarantee you are not running a sustainable fundraising program.

You will eventually find yourself in a financial death-spiral, with too few donors coming in to replace those who leave, and less and less ability to turn things around as it accelerates.

Growth requires investment. Investment requires spending money. No matter how much your board would like to live in a different kind of world, you can't pretend it's otherwise.

Starbucks got where they are by thinking this way. If you want to grow (even if you just don't want to wither away), you should too.

I can help you build a long-term fundraising plan that will fund your program well into the suture. And I'm available for free 25-minute coaching sessions. Just click here and directly schedule an online conversation with me or with Sean Triner.

from Future Fundraising Now https://ift.tt/2IBXpYb