The Power to Forecast Future Revenue

 

This week, we are answering the question:

 

From Start to finish, how much revenue will a donor contribute to your organization?

 

So, let’s start to unpack that question.

 

By building a cycle of giving, you are able to retain donors to maximize the potential within your fundraising program. But, what’s the value of retaining these donors? Can we even assign a dollar value to donor retention?

 

That’s where Life Time Value (LTV) comes into the equation. With LTV, we are able to quantify the value of a donor relationship over the lifetime of their giving. Quite literally, we are able to build a prediction of the dollar value of a new donor relationship based off of your unique historical donor data.

 

So, why is calculating LTV important?

 

Remember, LTV is a predicted lifetime dollar value of a donor relationship. This number provides immediate insight into the overall health of your fundraising program, and will highlight the specific areas of opportunity that exist within your program.. Some donor types have a higher Life Time Value than others. It gives you the ability to maximize your potential of your fundraising program.

 

For example, the Life Time Value of a multi-channel donor is THREE times greater than a single channel donor.

 

So, how accurate is the lifetime value of a donor anyways?

 

Please note that LTV is nothing more than a prediction of the value of a donor relationship. Meaning, the more data you input into your lifetime value equation, the more accurate your predictions are.

 

            When Lifetime Value is calculated over a 5 to 8 year period, an organization will gain reliable metrics with forecasting future revenue. – Joey Faul, Deputy Director of Fundraising

 

That’s great. But, how can we relate acquisition costs to Lifetime Value?

 

The first contribution from a donor can be the start to a long relationship. We may acquire our donors from calling, mailing, texting, emailing and digitally. Keep in mind that acquisition channel matters.

 

Phone inception donors are 1.5 TIMES more likely to become multi -channel donors than digital or mail inception donors.

 

We can actualize the cost of acquisition and now compare it to the long term benefit of the donor. The rate of thoughtful appeals across multiple channels will improve your LTV.

 

            The value of a new donor is largely in control of the fundraising steward of each organization. – Joey Faul, Deputy Director of Fundraising

 

So, will you use a Lifetime Value analysis to drive your donor acquisition strategy?

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