Database Experiences - Survey Results from 78 River and Watershed Groups
Part II - Costs and Benefits
— Baird Straughan, LeadGreen, November 2009
with essential input from Diana Toledo, River Network
and Richard Fox, Trees Water and People
Note: for information on the source and methodology of this report, see River and Watershed Databases, Part I
Database programs are often the most expensive pieces of software that river and watershed groups have. The labor and support that goes into them often costs more than the software itself. And most organizations have only a vague idea of how much they cost ... even after they've had one for years ... or how much they could benefit from them if they made an investment. This article seeks to provide some guidance, based on my 2009 survey of river and watershed organizations and their database experiences.
The bad news is that for organizations which intend to use their fundraising/membership/volunteer databases intensively ... and there are many good reasons to do so ... the aggregate costs are still in the low thousands of dollars. The good news is that for this amount, you can now get more functionality useful to the average river and watershed group - for instance, the ability to have multiple individuals on the database simultaneously, or to broadcast emails.
The best news: if your organization really uses its database to raise funds systematically, the income will probably far exceed the costs.
What should you expect to pay?
Cost of software
Most organizations got their databases "on the cheap." The most common databases were constructed with basic tools like spreadsheets (Excel) and generic database programs (like Access.) Excel generally comes free, and organizations used it without much additional cost, but with all the limitations of a spreadsheet. (See my previous article on satisfaction with databases, Database Experiences - Survey Results from 78 River and Watershed Groups) Access databases typically cost under $500 but required a fair amount of customization, although most of it is done by volunteers.
Among dedicated fundraising/member/volunteer management programs there are two distinct types: 1) those that reside on your computer or on your own network; 2) those that run from the web. The first used to be the only ones available, and some of them got to be very pricey. With the competition of the web fundraising programs, their prices are dropping and their price structures are becoming more transparent. I investigated two options which users have recommended. As of January 2010, EasyWare currently costs $795 for a single user, $1,595 for two, and up from there. GiftWorks starts at $499 for its basic system, with options for support ($40 month) and other add-ons. Another long-term contender in the field, Donor Perfect, doesn't specify prices for installed systems on its website, but mentions costs in the low-to-mid thousands in its testimonials.
The web-based programs charge by the month. eTapestry users reported a range of annual user fees - two of them paid under $500 annually, one between $500 and $1,500, two between $1,500 to $5,000, and one above $5,000. (eTapestry fees depend upon the number of contacts in the database and the services that the organization uses.) Donor Perfect now offers a web-based service with similar pricing.
Salesforce is currently providing nonprofits with free licenses for a version of its product which normally goes for $10,000+ a year. It's the option I've customized to create the WaterGrass database, so - WARNING - I'm biased here. But it's fair to say that the Salesforce donation program is very generous, especially since it comes with good support, regular upgrades, and a dizzying set of features. Perhaps most important, Salesforce as a corporation (and foundation) has been easy to work with. A group of nonprofit consultants have grown up around it and the Salesforce Foundation offers a version of the database customized for nonprofits. But even that is complex, and most river and watershed organizations pay to have it customized further. Customization costs have typically run in the low to mid thousands. (River Network previously quoted around $6,000 last year, but my guess is that this is on the high side.) The WaterGrass database, already customized and with a year of support and data transfer, costs $2,500. In any case, Salesforce isn't ultimately free - unless your staff is highly proficient and has a lot of time, you should count on costs for support and modifications.
A few organizations in this survey had paid for more expensive packages like Raiser's Edge. Those organizations weren't more likely to be satisfied with their database software or to recommend it to others. Better predictors of satisfaction were things like whether enough staff members knew how to use the program, or whether the organization earned $20,000 or more from database-related fundraising during the year.
(It bears noting that more than a third of the respondents didn't know how much their database software cost, or have much notion of the time required to maintain it. This contributes to everyone's uncertainties about investing in databases.)
Cost of maintaining the computer system
This is an intrinsic part of the cost of running a computerized database, because once the organization's valuable data is loaded in, it can't tolerate glitches that prevent it from using the system. Most organizations dedicate their own staff or volunteer time to maintain their computers and electronic communication, otherwise known as their "information technology" or "IT" system. Since many organizations don't have an explicit IT budget (though they should), this cost often goes untracked. I suspect many organizations underestimate it, because it gets covered by extra hours put in by staff members who put aside other work in order to maintain the network.
One-third of organizations spends 40 hours or more at IT maintenance. At $20 an hour, this amounts to at least $800 a year, which is about the same amount paid by most organizations which choose to hire a consultant instead.
In general, the organizations spending 40 hours or more at IT maintenance, or hiring consultants for above $500, are also the same organizations that are raising over $20,000 annually. The different databases take about the same amount of maintenance effort, with the exception that the non-standard databases (the ones I've dubbed "other" in Part I of this report) seem to take more, on average, and the Microsoft Excel and Access databases take less (perhaps because of their simple structure and limited features).
Amount of funds raised
For most organizations, the easiest measure of the success of the database is the amount of money raised by using it. (In my opinion, databases should also be used to track volunteer hours, but most organizations don't.) The database is essential to membership renewals, appeal mailings, major donor solicitations and much other fundraising. Theoretically, it should be pretty easy to run a report of how much money you've raised in the last year, but almost a quarter of the respondents didn't know how much they were earning annually through activities they track in their database.
Oddly enough, the amount raised was not clearly linked to the size of the organization. Groups with more contacts in their database generally tended to raise more.
As you'd expect, organizations that spend more time using their database raise more money with it. Those that raise $20,000 or more through their database spend, on average, 10 or more hours per week using it. There is a lot of variation here, but in general, revenues rise with time spent. A few organizations invested relatively little time and earned large amounts, and I'll have to investigate their secrets later on. And a few spent lots of time for little gain. Ouch!
More telling were the database "best practices" employed by successful fundraising groups. The organizations that raised more also tended to:
Track of interactions with contacts (such as mailings, phone calls, emails, etc.);
Generate emails from the database;
Use their database to identify major donors;
Have more people using the database
Use the database more hours; and
Generate reports from the database on overall organizational fundraising.
Organizations with Excel tended to raise the least. Many Microsoft Access users raised little, but a couple brought in $80,000 and over - these were larger organizations using older, custom-programmed systems which have pushed them to the limit. DonorPerfect, ETapestry and Salesforce averaged highest (in each case around $30,000 per year)
Conclusion: as long as you have a database that allows you to carry out the "best practices," the amount of money you raise depends mainly upon whether you use it, not upon its specific features. Hence, you should be looking for useability.
Potential for Fundraising
With a few exceptions, the reporting organizations could probably raise more from their supporters if they cultivated members and donors and worked systematically from their databases. (This is my personal opinion, but why else would I be proselytizing for systematic fundraising?) With the help of Richard Fox - the very successful fundraiser for Trees, Water and People - I estimated the possible revenue depending upon the size of the membership, based on the experience we've both had with river and watershed organizations. We assumed that an organization would:
Send out two appeals a year to its members, with a 14% return rate and an average gift of $40; (Richard insists that you should send out at least four. He emails, "If you are not developing your members ... someone else is ... and people will forget about you and become disengaged if you only send them two mailings a year." At the risk of killing more trees, I'm afraid that in general results prove him right.)
Charge $35 in annual dues, and get around a 70% renewal rate after sending out an average of two reminders;
Acquire spontaneous new members from events and activities equal to about 6% of its current membership (For a membership of 500 this would mean 30 new members sign up at events and activities);
Acquire about double that number of new members through acquisition mailings or other methods (in order to maintain its membership base for the next year);
Receive major gifts ($500 or more) from 2% of its members after investing about 5 hours in each solicitation. (For a membership of 500, this would be 10 major gifts.)
We figured in costs and staff time for mailings and donor cultivation, and came up with the following estimates:
In the above graph, for example we estimate that an organization with 500 members could gross approximately $27,000, of which approximately $17,000 would cover expenses (mainly staff time), leaving a net of $10,000. (Most organizations don't track staff time dedicated to fundraising - sigh - so they would see this as something more like $25,000 net.)
These figures will seem optimistic to some, but they are below the percentages that Richard and other fundraisers regularly attain, and I believe that as the years pass they will become the expected norm among river and watershed groups.
Many river and watershed organizations are still getting by with inexpensive (or free) database software. Dedicated fundraising software can be had for as little as $500, without support and on a single computer (not web). Organizations that have upgraded recently to web-based or multi-user systems typically paid in the low thousands for the software and customization. The two databases mentioned most frequently respondents were Salesforce and eTapestry. Both ranked relatively high in user satisfaction. Salesforce comes free, at present, but usually requires customization by a consultant. eTapestry charges a monthly fee which jumps after the number of contacts in the database reaches one thousand.
Organizations that raise significant funds (i.e. $20,000 or more) through their database spend, on average, 10 or more hours per week using it. They also invest on average somewhere around $1,000 in consulting or volunteer time in maintaining their computer systems.
For organizations that dedicated time to their databases, they were generally a good investment. The amount of money organizations raised was most closely related to certain best practices, such as tracking contacts with members and donors in the database. Organizations with databases that didn't facilitate these practices - such as Excel spreadsheets and Access - generally earned less.
And in general, the responding river and watershed organizations probably earned less than they could if they raised funds more systematically and contacted their donors more often.
Conclusion: If your organization dedicates time to managing and maintaining a database for your fundraising, it's likely to be an investment that will pay for itself.