A good fundraising percentage is generally one where a substantial portion of an organization's resources directly supports its mission, while fundraising costs remain efficient and reasonable. This can be viewed from two primary perspectives: the percentage of expenses dedicated to programs and the cost incurred to raise funds.
Understanding Key Metrics
When evaluating fundraising efficiency, two critical metrics provide insight into how well a non-profit manages its finances:
1. Program Expense Ratio (or Program Percentage)
This ratio indicates the percentage of a charity's total expenses that are spent directly on its programs and services, as opposed to administrative or fundraising costs. A higher percentage signifies that more of the organization's resources are going directly to its cause.
- What is considered good? A charity is often considered highly efficient if 75% or more of its total expenses are dedicated to its charitable programs. This means that for every dollar spent by the organization, 75 cents or more directly supports its mission.
2. Fundraising Efficiency Ratio (or Cost to Raise a Dollar)
This metric measures how much it costs the organization to raise each dollar. It's frequently expressed as the cost to raise $100. A lower cost indicates greater efficiency in fundraising efforts.
- What is considered good? A cost to raise $100 of $25 or less is often seen as highly efficient. This translates to spending no more than 25 cents to raise each dollar, or a fundraising expense ratio of 25% or less of the funds raised.
Benchmarks for Efficiency
Here's a summary of generally accepted benchmarks for good fundraising percentages:
| Metric | What it Measures | Generally Considered "Good" |
|---|---|---|
| Program Expense Ratio | Percentage of total expenses directly applied to programs and services | 75% or higher (Many evaluators consider 65% acceptable, but 75%+ is highly efficient.) |
| Fundraising Expense Ratio | Percentage of total expenses or revenue allocated to fundraising activities | 25% or less (Some suggest up to 35% is acceptable depending on factors.) |
| Cost to Raise $100 | The cost incurred by the organization to generate $100 in donations | $25 or less |
Factors Influencing Fundraising Percentages
While these percentages provide a valuable snapshot, several factors can influence them:
- Organization Size and Age: Newer or smaller organizations might have higher initial fundraising costs as they invest in building a donor base and brand awareness.
- Type of Fundraising: Different fundraising methods carry varying costs. For instance, major gift solicitations typically have a lower cost per dollar raised than broad direct mail campaigns or large-scale events.
- Mission Type: Some causes inherently require more extensive outreach or specialized fundraising efforts due to their niche or the nature of the issue they address.
- Economic Climate: During economic downturns, fundraising can become more challenging, potentially leading to higher costs as organizations work harder to secure donations.
- Investment in Growth: A temporary increase in fundraising costs might be a strategic investment to significantly expand programs and impact in the long run.
Practical Insights for Donors
- Look Beyond Just the Numbers: While efficiency percentages are important, they don't tell the entire story. A charity with a slightly higher fundraising ratio might still be a great choice if it achieves exceptional results, demonstrates strong accountability, and is transparent about its operations.
- Evaluate Overall Impact: Consider the organization's actual impact, its governance, and its transparency alongside its financial ratios.
- Consult Reputable Sources: Independent charity evaluators provide in-depth analyses.
- BBB Wise Giving Alliance: Offers standards for charity accountability, including benchmarks for fundraising and program expenses. You can learn more at https://www.give.org/.
- Charity Navigator: Provides ratings based on financial health, accountability, and transparency. Visit https://www.charitynavigator.org/ for detailed reports.
- Review Financial Statements: Accessing a charity's annual report or IRS Form 990 (available on their website or through Guidestar/Candid) can provide a comprehensive view of their financial health and how funds are used.
Ultimately, a "good" fundraising percentage balances the need to raise funds effectively with the imperative to maximize the resources dedicated to the charitable mission.
