Calculate Your Donor Acquisition Cost
Your Donor Acquisition Cost (DAC)
This is the average cost to acquire one new individual donor. Compare this to your average first-time donation amount and estimated Donor Lifetime Value (DLV), especially from recurring givers, to assess fundraising efficiency.
Understanding Non-Profit DAC
Why DAC Matters for Non-Profits
Tracking Donor Acquisition Cost helps non-profits:
- Measure Fundraising Efficiency: Understand how effectively resources are used to attract new support.
- Maximize Mission Impact: Ensure more funds go towards programs rather than excessive fundraising costs.
- Improve Transparency: Report acquisition costs to donors and the board, building trust.
- Justify Fundraising Budgets: Provide data to support requests for marketing and development resources.
- Optimize Channel Strategy: Identify which channels (events, mail, online) bring in new donors most cost-effectively.
Key Factors & Channels
Acquiring new donors involves unique considerations:
- Donor Segmentation: Targeting specific demographics or interest groups for different campaigns.
- Fundraising Channels: Events (galas, walks), direct mail appeals, online donation pages, social media campaigns, peer-to-peer fundraising, email marketing.
- Recurring Giving: Monthly donation programs significantly increase Donor Lifetime Value (DLV) and predictability.
- Average Donation Size: Influences how much DAC is sustainable per donor.
- Grant Seeking: A separate process with different costs (grant writers, research) focused on institutional funding, not typically included in individual DAC.
- Volunteer Impact: Volunteers can lower costs but managing them also has associated expenses.
Donor Acquisition Cost (DAC) Formula
Non-Profit Donor Acquisition Cost
Example:
Total Fundraising Costs (Quarter): $5,000 (staff time, mailings, online ads)
Number of New Donors (Quarter): 100
Donor DAC = $5,000 / 100 = $50 per new donor
This means the non-profit spent $50 on average to acquire each new individual donor during that quarter.
Frequently Asked Questions
Focus on costs directly related to acquiring *new individual donors*. This includes:
- **Staff Time:** Allocated salaries/wages for fundraising and marketing staff working on new donor campaigns.
- **Event Costs:** Expenses for fundraising events aimed at attracting new attendees/donors (venue, catering, promotion).
- **Marketing Materials:** Costs for designing, printing, and mailing appeal letters, brochures, or acquisition-focused newsletters.
- **Advertising:** Spend on online ads (social media, search), print ads, or radio spots targeting potential new donors.
- **Platform Fees:** Costs of online donation platforms, email marketing tools, or CRM systems used for acquisition efforts.
Do *not* typically include costs solely for stewarding existing donors or the costs associated with writing and managing grants (track those separately).
They measure different things:
- **DAC (Donor Acquisition Cost):** Measures the average cost specifically to acquire one *new* individual donor (Cost / # New Donors). It focuses on growth efficiency.
- **Fundraising ROI (Return on Investment):** Typically measures the overall return from a fundraising activity or the entire program. It's often calculated as (Total Funds Raised / Total Fundraising Cost). ROI looks at overall effectiveness, while DAC specifically isolates the cost of getting new supporters.
No, DAC specifically measures the cost to acquire *new* donors. Costs associated with keeping existing donors engaged and giving again (e.g., thank you calls, impact reports, existing donor newsletters) are considered *retention* or stewardship costs. While critically important for maximizing Donor Lifetime Value (DLV), these are separate from the initial acquisition cost.
Donor Lifetime Value (DLV or LTV) estimates the total net contribution a donor is expected to provide over the entire duration of their relationship with your non-profit.
- **Justifying DAC:** A high DLV, especially driven by recurring monthly donations, means you can justify spending more (a higher DAC) to acquire that donor initially.
- **The Goal:** You want your DLV to be significantly higher than your DAC. A common benchmark target is a **DLV:DAC ratio of 3:1 or greater**, meaning the donor contributes at least three times more than it cost to acquire them.
- **Focus on Retention:** Understanding DLV highlights the importance of retaining donors after acquiring them, as this is where most long-term value is generated.
Grant acquisition is usually tracked separately from individual donor acquisition. The process and costs are very different:
- **Costs:** Involve grant writer salaries or fees, research time, database subscriptions, and reporting efforts.
- **Acquisition Unit:** The unit acquired is a grant (often large, specific amounts) from an institution (foundation, government), not an individual donor.
- **Metrics:** You might track Cost Per Grant Dollar Raised (Total Grant Seeking Costs / Total Grant Dollars Awarded) rather than a DAC per grantor.
While vital, grant seeking costs should not typically be included when calculating your DAC for individual donors.
Maximize Your Mission Impact
Understanding your Donor Acquisition Cost helps your non-profit allocate resources effectively, demonstrate fundraising efficiency, and ultimately direct more funds towards achieving your mission.