Justifying the Cost and Measuring Impact
Trustees play a critical role in balancing an organisation’s finances and ensuring every pound has maximum impact for our donors and beneficiaries, and of course, administrative efficiency. When the fundraising team asks the board for money to invest in a CRM (customer relationship management) system, you are right to ask if it is needed and to ensure the spend delivers on this. We have to be much more strategic in how we spend and we also have to be able to justify that spend to donors and supporters. It is easy to overspend but we also need to make sure that we’re not under-spend. And under-investing in people and processes can be costly.
As a CRM consultant I have worked with over 200 UK charities in my career. As a trustee I have experienced first hand the benefits and pitfalls of a CRM and am in the unique position of understanding both sides of the CRM equation. And so it is with that perspective I have created this guide. I want to give you all the tools you need to make a measured, informed decision, because that is your job and your responsibility.
The hidden cost of doing nothing
The first step in making this decision is to fully understand the impact of not investing in a CRM. The right CRM system can pay for itself many times over, but in order to make the case you first need to understand the cost of doing nothing. Many charities still run on spreadsheets for donor management. Event and survey participants are kept on different databases, email marketing is managed on a platform that is separate from your donation records, and regular reports are manually collated to track progress against targets.
The result is enormous time wasted on administrative overhead and duplicated effort. Based on my experience of working with UK charities, I have estimated the potential impact on an average mid-sized UK charity of around 5,000 supporters with an annual income of £500,000:
Staff time on data entry, correcting duplicate records and manual reporting – 15-20 hours per week (based on average salary costs of £35,000 per annum including on-costs)
Donor retention rates – an average of 60% of first-time donors, 70% of returning donors retained from year to year (according to annual surveys of the UK charity sector by the Institute of Fundraising)
Total donation volume from lapsed supporters who have left the charity without warning or notification – average of £20,000 per year in lost gifts
Without the benefit of integrated systems and data, many well-intentioned charities are suffering unnecessary inefficiency and productivity loss that can sap their financial sustainability. Recent changes in regulation around data privacy have also increased the risk of investing in a spreadsheet system with significant fines and penalties for non-compliance and potential loss of reputation.
The Data Protection Act 2018, the General Data Protection Regulations (GDPR), and other changes to the regulatory framework governing how charities and other businesses process and store personal data have changed the way we think about compliance. Whilst the information commissioner’s office (ICO) has shown discretion and proportionality in dealing with first-time breaches, the fact remains that the maximum fine for non-compliance is 4% of annual turnover or £17.5 million, whichever is greater, and a significant reputation hit is inevitable if your charity loses data.
What can a CRM for nonprofits do?
The most important benefit of CRM software is to enable effective and efficient relationship management. We have previously written about how a good non profit CRM is a key tool to supporting the management of good donor relationships.
CRM software enables the charity to maintain up to date records of donors and other stakeholders (volunteers, supporters, event attendees) as well as regular reports to track key trends in supporter behaviour, demographics and giving levels. This means that any organisation can personalise communications and better target their donor engagement strategies. Data enabled charities can identify and target lapsed donors for re-engagement activity and quickly respond to spikes or dips in donation behaviour. Effective CRM should also mean more success for UK charities fundraising efforts and less time spent on the admin side of managing supporters.
CRM systems like infoodle and Donorbox offer much more than contact management or fundraising automation. But I’m not here to try and help you to choose the best CRM for your charity. The tools within these systems include predictive analytics to help charities identify donors that are likely to increase giving in the future, find volunteers that are ready to take on a more active role, and alert the organisation to potential drop-offs early. This helps smaller teams to do more with less and shifts the model from reacting to supporter engagement data to a more strategic proactive management approach. CRM tools allow small teams to take more strategic actions with the data they have by automating routine communications and tasks to focus on more important decisions.
CRM systems provide a single source of truth and capture key supporter relationship data in one place. This can be an important tool for business continuity within charities, because when key team members leave their knowledge is stored in the CRM data instead of in an individual. Staff productivity is also vastly improved and administrative overheads are reduced because all systems and tools are integrated and inform and talk to each other. This creates much more seamless working practices for example when Gift Aid donations are paid in, the CRM automatically updates to improve and simplify administration processes.
CRM for Nonprofits: measuring the ROI of investment
There are also some easy ways to measure the return on investment of CRM technology investment. It is not as tricky as you may think and again, starts with understanding the cost of doing nothing.
CRM for nonprofit solutions provide tools and processes to measure success, such as open and response rates on communications sent. With a few additional but simple measures of baseline performance, it is easy to measure ROI in hard financial terms. Some of the benefits are not difficult to measure at all, however, measuring things like open and response rates on CRM for nonprofits will be more subjective and your CRM provider should be able to provide benchmarks against other similar charities.
Retention rates of donors, volunteers and other supporters are the most commonly used measurements of CRM performance. It is also important to understand baseline retention rates.
I have estimated that the typical mid-sized UK charity currently has:
- Average first-time donor retention rate of 60%
- Average repeat donor retention rate of 70%
- Lapsed donation volume – average of £20,000 per year lost from lapsed supporters
So, to understand the potential impact of investing in CRM, it is important to be realistic about the potential benefits and outcomes. These include:
- Increase first-time donor retention rate to 65%
- Increase returning donor retention rate to 75%
- Reduce lost donation volume from lapsed supporters to an average of £10,000 per year
It is also worth measuring the lifetime value of supporters and the financial impact of improving retention by 5%. A CRM system and the right processes in place can quickly pay for itself. Based on a very conservative estimate, taking the bottom end of average figures above, the average lifetime value of a supporter to a UK charity is likely to be in the region of £200-£800. If the charity were to improve its retention by just 5% through better relationship management and engagement, the additional lifetime value delivered in retained supporters would easily justify the cost of a CRM for nonprofits.
Other benefits to an organisation from CRM include time saved through automating manual processes and reporting. Reducing duplication of effort is a significant efficiency gain from CRM systems and can be estimated by considering the current cost of duplicated effort and likely efficiency improvements. Charity CRM softwarewill enable teams to capture Gift Aid more easily as it will be integrated and the impact of improved Gift Aid capture will also quickly justify the CRM investment. The risk of GDPR fines or reputational damage due to a data breach can also be significant and would also justify the investment.
Risk management and avoiding CRM traps
The reality is, that with any investment there are risks to be managed and potential problems that need to be avoided. I’ve worked with clients where the implementation was off to a bad start and then eventually derailed because of problems or poor project management. This can quickly lose the trust of senior management and lead to termination of the project. And many projects I have seen have been halted in the implementation process and teams then start to revert to their old systems of record because that is what they know best. This means the organisation has missed out on making the investment work, while often still paying for it.
CRM project plans should be thoroughly documented and detailed, and the right people should be in place to ensure that the plan is followed. This should include detailed data migration and staff training plans.
Project costs can also be a pitfall. It is essential that organisations have realistic expectations about the total cost of CRM ownership, including implementation costs and ongoing training and support. This goes back to the importance of having experienced project managers to support your team.
Data quality is another important consideration and good CRM systems should be capable of cleaning and improving data as it is imported. Good practices and processes should be established and data quality reports run regularly to ensure continued data quality. Too often I have seen charities with low data quality not invest in the necessary resources to ensure their CRM is working effectively, and with the lowest standards of data quality that lead to poor results.
CRM vendors themselves are also a risk. It is important to do thorough due diligence on any potential vendors and to have contingency plans in place in case of a problem. It is also a risk to move to a system that has not been proven or is too complex, a CRM that is not intuitive to use, that can also be a blocker to adoption and effectiveness. Having the right support in place, both technical and operational is important.
In summary, implementing a CRM solution is not without its challenges but with the right tools and processes in place, and careful management, the benefits far outweigh the potential risks.
As a trustee, you have a unique opportunity to understand your organisation’s strategic objectives and oversee the implementation of effective tools and processes that will support and enable them to meet those objectives. I hope that this guide has given you the tools you need to do that effectively and make the right decision for your charity.
CRM investment in charities: Measuring long-term impact and value
CRM investment is not just about immediate returns, but also long-term value creation. Charities need to measure and report on both short-term gains and long-term outcomes to demonstrate ROI to trustees.
Short-term gains
Within the first 3-6 months of CRM implementation, charities should see improvements in staff efficiency and data accuracy. Adoption rates by staff should be high, data entered into the system should be cleaner and up-to-date, and routine administrative tasks like mailing or email campaigns should be completed more quickly.
Medium-term outcomes
After 6-18 months, CRM should lead to improved donor retention and higher Gift Aid recovery rates, both of which directly impact the bottom line. Charities should also see better results from fundraising campaigns and programmes, and be able to use the CRM system to target prospects and cross-sell more effectively.
Long-term value
Over 18+ months, the strategic value of CRM becomes clear. Charities with a fully functional and integrated CRM should see improved donor lifetime value, better identification of major gift opportunities, more effective volunteer management, and overall greater organisational resilience.
Reporting to trustees
Regular CRM performance reports to trustees should put system metrics in the context of the overall organisational strategy. Trustees should understand not just how many donors are entered into the system, but how that contributes to improved donor retention, better campaign effectiveness, higher Gift Aid recovery, and other organisational objectives.
The most effective CRM reports to trustees focus on outcomes, not outputs. How is CRM investment helping to deliver mission-critical work? Contributing to financial sustainability? Supporting strategic priorities and key performance indicators (KPIs)? Good CRM metrics serve the board, not the other way around.
Making the decision: A trustee’s checklist
Trustees have a responsibility to thoroughly evaluate CRM investment proposals before making decisions. The following checklist will help ensure a comprehensive analysis:
Financial analysis
Is the business case based on realistic ROI calculations? Are donor retention rates, administrative efficiency gains, and Gift Aid recovery properly quantified? Implementation costs and ongoing expenses clearly laid out? Potential risk mitigation and related benefits considered?
Strategic alignment
Does the CRM investment support stated organisational strategy and mission objectives? Will it make the charity more effective in achieving its core goals or just more efficient administratively? Does the case address specific weaknesses or opportunities identified in organisational analysis?
Implementation plan
Is there a realistic timeline, with clear resource requirements for both the implementation phase and on-going operations? Have training needs and change management efforts been considered? Are there specific, measurable success criteria?
Vendor evaluation
- Has the charity considered multiple CRM options suitable for the UK not-for-profit sector?
- Do proposed vendors have a track record in the sector and comply with relevant regulatory requirements?
- Are there client references from similar organisations?
Risk assessment
- What are the downsides of CRM investment and how will risks be managed?
- What if implementation goes over budget or on-time?
- What if the selected vendor goes out of business or faces performance issues?
- Is there a plan B for exit or replacement?
Conclusion
CRM investment is a strategic decision, not just a technology purchase. Trustees who want to maximise charitable impact and maintain operational excellence should be evaluating CRM investment proposals carefully.
The business case for CRM investment is strong: improved donor retention rates and lifetime value, increased administrative efficiency, better Gift Aid recovery, risk mitigation, and the strategic benefits of data-driven supporter management. Properly implemented, a CRM system can pay for itself in 18-24 months and provide ongoing value for years.
However, charities must do more than purchase software to achieve success. Trustees must demand comprehensive business cases, realistic implementation planning, and robust performance tracking. A state-of-the-art CRM system is useless without staff trained to use it properly and an organisational commitment to putting data at the heart of all supporter interactions.
As competition for donor attention and dollars intensifies in the charity sector, organisations that invest wisely in relationship management technology will gain a distinct advantage over those that cling to outdated, inefficient systems. CRM investment is one of the smartest long-term sustainability moves trustees can make: enabling smaller teams to have greater impact by working smarter, not harder.
The guide and analysis tools provided here should give trustees the foundation they need to make informed decisions about CRM investment. By focusing on long-term outcomes and strategic value, and rigorously evaluating business cases, risks and implementation plans, trustees can confidently weigh CRM options and choose the investments that serve both fiduciary and mission objectives.
In a funding climate where every pound must be demonstrated maximum impact, CRM investment is one of the surest ways to drive efficiency, effectiveness and sustainable growth. Forward-thinking trustees won’t ask if they should invest in CRM, but rather how quickly they can get a system in place that turns supporter relationships from an admin headache into a strategic advantage.
