Abstract

Research in this paper examines, through analysis and a case study, the profitability of individual donors.
The purpose is to examine these questions:
What can we learn about the range and distribution of donor

• profitability from case studies?

• Who counts the most, profit-wise?

• What are the implications for fundraising management?

The main conclusions are:
1. Profitable and unprofitable donors : About half of donors are profit
making and half loss making in a year. Donors show a very wide
range in their annual net profitability.
2. It is down to a few : A very few donors create the annual net
surplus in a programme. In the case study shown, three quarters of
net profit was generated by just one tenth of the donors.
3. Strategy : A strategic focus on the few profit generators seems
obvious, and a new approach to fundraising management is
strongly indicated.
4. Changing fundraising practice : Discussions with charities, agencies
and consultancies suggest that cultural factors and a reluctance to
change ‘ the way we do things ’ impede the take-up of a profit-based

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1. You have to start by knowing all your costs, not just direct costs.
   Requests for costs often brings sighs, scratching of heads and ‘I’ll get
   back to you’, but persist, for you must have this information, including
   salaries, overheads, everything.
2. Then build a costs model and apply all costs to donor gross
   revenue for each and every donor - the results will be shocking, startling
   and revealing.
3. Your costs model should be set up in three layers.
   • C1 – direct costs, where most of the money goes.
   • C2 – salaries, any social insurance, or training costs.
   • C3 – your share of overheads such as heat, light, insurance,
     corporate charges and the like.

   Then, deduct these three from gross revenues to obtain net profit (P),
   which will result in three profit levels.

   • P1 – the profit on direct costs.
   • P2 – including salaries.
   • P3 – with all overheads included.

   You need all three profit levels if you are to truly understand how profit
   (and loss) works at the donor level.

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