Fundraising efficiency ratio and 5 ways to increase it

The fundraising efficiency ratio measures how much money a nonprofit organization spends to raise one dollar in donations. It’s a key performance indicator tied to nonprofit financial management, donor trust, and long-term sustainability. It’s important to understand what the ratio means, how to calculate it, and strategies to improve it—so you can raise funds more effectively while spending less.

What is a fundraising efficiency ratio?

Fundraising efficiency is the amount of money spent by a nonprofit organization to raise $1.

In more technical terms, it is the ratio between contributions and expenses incurred to raise these contributions.

Take a step further, and it is defined as the ratio between unrestricted contributions and unrestricted expenses incurred to raise those contributions.

How to use your fundraising efficiency ratio

Your fundraising efficiency ratio is a strategic tool to enhance your nonprofit’s performance. Here’s how to leverage it effectively:

• Evaluate campaign effectiveness: Calculate the ratio for individual fundraising activities to identify which campaigns yield the highest return on investment.
• Benchmark against peers: Compare your ratio with similar organizations to assess your fundraising efficiency relative to industry standards.
• Inform strategic decisions: Use the ratio to determine where to allocate resources, focusing on methods that maximize donations while minimizing costs.
• Enhance donor confidence: A favorable ratio is a compelling indicator of your organization’s effectiveness, reassuring donors of the impact of their investment.

Regularly monitoring and applying insights from your fundraising efficiency ratio leads to more informed decisions, which leads to improved fundraising outcomes.

Fundraising efficiency ratio formula

To calculate your fundraising efficiency ratio, divide your total fundraising expenses by the total donations raised during a specific period, such as your fiscal year.

Formula

Fundraising efficiency ratio = Total fundraising expenses ÷ Total donations raised

This key metric reflects how efficiently your organization uses resources to secure charitable contributions. It’s one of the most important nonprofit ratios for evaluating fundraising efforts.

Example 1

Your organization spent $100,000 on fundraising strategies and raised $1,000,000 in donations.

Calculation: 100,000 ÷ 1,000,000 = 0.10

Result: You spent $0.10 to raise every dollar. This is a strong efficiency ratio.

Example 2

You spent $75,000 on fundraising costs and raised $250,000.

Calculation: 75,000 ÷ 250,000 = 0.30

Result: You spent $0.30 per dollar raised. This higher ratio may still be acceptable depending on your goals, donor base, and campaign type, but it signals room to improve.

What is a good fundraising efficiency ratio?

Most evaluators consider a ratio of 0.20 or less to be a strong benchmark for fundraising efficiency. This means your organization spends less than $0.20 to raise each dollar.

Acceptable ratios may vary depending on your nonprofit’s size, fundraising model, and how you categorize administrative costs versus fundraising expenses. However, consistent improvement and comparison to similar organizations are key indicators of long-term financial health.

Factors behind a healthy fundraising efficiency ratio

These factors generally lead to a healthy fundraising efficiency ratio:

• High donor retention: Keeping current donors through good donor stewardship is more cost-effective than acquiring new ones.
• Digital-first campaigns: Online fundraising often has lower overheads than live fundraising events or direct mail campaigns.
• Smart automation and tool integrations: Reduces manual work and boosts productivity.
• Strong prospect targeting: Using fundraising intelligence to focus on likely donors saves time and resources.

Factors behind an unhealthy fundraising efficiency ratio

These factors may be behind an inefficient fundraising ratio:

• Unclear attribution tracking: If you don’t know which fundraising activities drive donations, you may overspend on low-performing channels.
• High administrative costs misclassified as fundraising: This distorts your ratio and masks inefficiencies in operations.
• Ineffective messaging or branding: Campaigns that fail to resonate with donors lead to low engagement and high costs per dollar raised.

How to increase your fundraising efficiency ratio

Boost your nonprofit’s fundraising efficiency ratio with these five proven methods:

1. Use fast tools to keep data current

Speed matters in fundraising because outdated information leads to missed opportunities and wasted effort. If building a prospect profile is a completely manual process or screening results take weeks, your team may be working with old or dated intel. This lowers confidence in gift asks and slows your progress.

Choose fundraising intelligence tools that deliver real-time prospect profiles, scores, and screening results in minutes—not days or weeks. Acting fast with accurate, current data helps you engage the right donors when giving moments arise.

2. Control match accuracy to trust your scores

If a prospect score seems off—too high or too low—you may be working with poor matches. That puts your team at risk of asking for the wrong gift amount (embarrassing!) or missing opportunities entirely (unfortunate!).

Confidence of match controls how closely donor records must align to be included in a prospect’s profile. A higher confidence setting applies stricter matching rules, reducing false positives but possibly omitting some relevant data. A lower confidence setting casts a wider net, which can surface more data but also risks pulling in unrelated records that distort scores.

Understanding and adjusting this setting ensures your scores reflect reality so you can confidently plan the right ask for the right donor.

3. Look beyond wealth to spot best-fit donors

Wealth alone doesn’t make someone a good donor. If you rely only on capacity scores without considering how likely the person is to want to give to your cause, you risk chasing prospects with no interest in giving or connection to your cause.

For example, Canva co-founder Cameron Adams and his wife, Lisa Miller, have committed to donating the majority of their wealth to environmental causes. This highlights the importance of aligning fundraising efforts with donors’ specific interests.

Modern fundraising intelligence tools use three dimensions: capacity (ability to give), propensity (likelihood to give), and affinity (alignment with your mission). Together, these give you a more complete view of a donor.

A wealthy individual with no giving history may look good on paper, but go nowhere. Meanwhile, someone with modest assets but consistent giving to similar causes may be your next major gift donor.

Stop spinning your wheels on cold prospects. Using fundraising intelligence tools that assess the whole donor allows you to focus on those most likely to give.

4. Identify matching gift opportunities to raise more from every ask

A matching gift is one of the easiest ways to increase donations without increasing your workload. When a donor works for a company with a matching gift program, their employer may double their contribution—often dollar for dollar.

Prospect research software flags these opportunities in advance, so you know which donors are eligible. All it takes is a quick conversation to make the donor aware of the benefit. You’ve doubled your impact without making another ask and boosted your fundraising efficiency instantly.

5. Integrate your tools to save time and work smarter

Jumping between disconnected systems slows down your team and leads to missed opportunities. Integrating your fundraising intelligence tool with your donor management (DMS) or customer relationship management (CRM) system keeps everything in one place. This allows you to act faster and stay focused on high-value prospects.

What’s next?

Improving your fundraising efficiency ratio starts with smart tools and sharper strategies. From faster data and more accurate matches to identifying true donor potential and matching gift opportunities, each step helps reduce waste and increase impact.

Before your next campaign, take a closer look at how your systems, data, and processes work together. Integrated tools, well-targeted asks, and a data-driven mindset can help you raise more with fewer resources—while building stronger, longer-lasting donor relationships.

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Bre Alexander

Bre Alexander is a writer and marketer focused on helping nonprofits, healthcare organizations and higher-education institutions improve their fundraising and advancement efforts to fuel their mission.