The Importance of Size (file size, that is)
While income is frequently regarded as the cornerstone of fundraising reports, and of course it is absolutely vital, focusing purely on revenue can be shortsighted and hide some of the important underlying dynamics that are driving the success, or otherwise, of your fundraising programme. This can be the case particularly where the main goal is on increasing return on investment (ROI).
At Sequoia we take a more holistic view on fundraising metrics and advocate monitoring a number of metrics which are better indicators of the health of your supporter file, which will in turn lead to future income. These metrics include supporter level KPIs such as engagement scores, retention rates or lifetime value, but the one we want to focus on here is a more top-level view: your overall file size.
Overall fie size is an often-missed metric and it is surprising how many fundraisers do not have this information at their fingertips. At its simplest level it is the number of people who have given to you in the last X period (we usually use a two-year timeframe). Changes can then be monitored by calculating the number of new supporters you gain less the number of supporters who lapse. Clearly if the new supporters exceed the lapsed supporters then your file will be growing, but if it is the other way around then you will have a shrinking base. See examples below:
Any charity supporter base will have a certain amount of lapsing across the file, so ensuring that recruitment (or reactivation) is outweighing this is crucial. Knowing your lapse rates can also help indicate the churn (or turnover) in the file. Charities with a high lapse rate will have to fight even harder on replenishing the file and this can turn into a vicious cycle.
So why is file size so important? Beyond the obvious answer that having more supporters is a good thing it can also be an early indicator of the direction of a channel and a good counterbalance to the drive for higher ROIs.
Drives for efficiency and higher returns will generally come at the cost of recruitment and reactivation activity as this will always have lower ROIs. Charities often have to accept that recruitment activity will have a negative ROI and break-even points may even be a few years into the future. Even retention activity can suffer as less frequent responders are dropped from communications if their profitability is not deemed high enough. Both these actions will reduce the volume of future supporters and create problems ahead.
Monitoring file size will not only put these questions front of mind and influence decision making, they will also give early indicators which can be acted upon. It is much harder, and more costly, to build a file back up once it has started to decline.
A balanced set of KPIs is therefore important to ensure the right decisions are being made. And easy access to these key metrics is vital for all fundraisers. Canopy, The Charity Intelligence Portal, our comprehensive set of fundraising reports, contains file size measurement amongst many more vital fundraising measures.