The Most Misleading Metric in Fundraising

Let’s get something straight:

“Cost to raise a dollar” is one of the most overhyped, overused, and misunderstood metrics in all of fundraising.

If you don’t believe me, the next time you take a trip to the bank, inform the teller you’d like to deposit your wonderful cost to raise a dollar ratio.

Let me know how THAT goes.

Here’s the cold, hard truth of the matter.

You cannot deposit a ratio – you can only deposit dollars and cents.

Therein lies the problem. Too many organizations obsess over looking efficient instead of actually raising money.

Cost to raise a dollar might be tidy on paper –  but in the real world, it often leads to dumb decisions, like killing off donor acquisition programs that are working exactly as intended!

Or worse – assuming your house file segments are  profitable, instead of proving it.

What Cost to Raise a Dollar Gets Wrong

Let’s say you spend $100 on a direct mail acquisition campaign and raise $70.

Your cost to raise a dollar? $1.43.

Cue the alarm bells – and the CFO’s disapproving glare.

But here’s what the cost to raise a dollar number doesn’t tell you:

·         How many new donors did you bring in?

·         How many will give again?

·         How many will become monthly contributors?

·         How many will leave a bequest?

In short, it tells you nothing about the future value of those donors.

Because acquisition isn’t supposed to be profitable upfront. It’s a long game. You’re buying the opportunity to build a relationship – and grow your donor file.

If you shut it down because the ratio looks “bad,” you’re not protecting revenue.

You’re suffocating it.

But the same logic applies to your house mailings, too.

You might think you’re in the clear because your latest house campaign “made money.”

But that topline revenue hides a more important question:

Are you mailing the right people?

If you're sending to 10,000 names but only 2,000 are actually giving –  or worse, only 500 are generating any real net revenue –  then you're wasting money, plain and simple.

Cost to raise a dollar won’t catch that. It’ll just give you a pat on the back for being “efficient.”

Meanwhile, your file is bloated with deadweight, your net is slipping, and nobody’s noticed.

What You Should Measure Instead

If you want to know whether your fundraising is actually working, there’s one metric that cuts through the noise:

Net. Per. Name.

Net per name tells you how much money you actually made from each donor on your file – after expenses.

It forces you to look at results over time, not just upfront. Because acquisition isn’t about day-one ROI. It’s about building a base of supporters who will give again… and again… and again.

Let’s go back to that $100 campaign that raised $70. Most folks would panic - but what if you brought in 10 new donors, and six of them gave again within the year?

What if one became a monthly donor?

What if one left a $5,000 bequest?

Now we’re talking real money. Real impact. And it all started with a so-called “loss.”

Or let’s say you run a house mailing that grosses $40,000. Sounds good, right?

But what if just 500 donors drove 90% of that revenue –  and the other 4,000 names lost money?

Net per name tells you what’s really working – and what needs to change.

That’s the power of net per name. It puts every decision into context – and rewards long-term, disciplined thinking.

So the next time someone questions your fundraising program because the ratio “looks bad,” ask them this:

“What’s our net per name?”

Because that’s the number that actually matters.

And if you’re not tracking it, you’re not fundraising strategically – you’re just playing defense.