# The Ultimate Course on Nonprofit KPIs [Part 3]

*This is a **three-part series** on setting up KPIs for your nonprofit. If you haven’t already completed *Part 1* and *Part 2*, it is recommended you do so before proceeding with Part 3.*

Congratulations on completing your KPI dashboard!

That is a great accomplishment and I can tell you, if you stick with it, you will be ahead of many organizations operating blindly, unaware of their improvements or lack thereof, until it’s too late.

In Part 3 we will be referring back to your dashboard so please be sure it’s complete and you have at least three months of data to reference. If you can’t possibly find three months of data (you just don’t have measures or you are new to the nonprofit world) you can use the example dashboard and the data in it for the analysis.

I want you to begin by checking the following things are done correctly:

**All of the metrics on one tab are measured in the same time frame**. Ex. metric for that week, or that month? If you have some monthly and some weekly, make a second tab so you always compare metrics with the same time frame.

**Every metric is clearly defined**, so clearly your significant other, parent or teenager could read it and understand what you are measuring without having to ask you to clarify.

**Each metric has assumptions.** Simply what you think this metric will show you and why it’s important. Here is an example of a definition and an assumption so you can see the difference:

- Metric: Total Traffic from Email Marketing /Month .
**Definition**: This is how much website visitors came from email. - Metric: Total Traffic from Email Marketing /Month.
**Assumption**: This shows us how effective our email campaigns – including newsletters and fundraising emails – have been.

**Each metric can be measured every week or month with little effort**. You should never use a metric that takes hours to manually count. If the metric can’t be easily measured and in some way automated by software, consider the cost of your time. You won’t keep it up when things get busy, so don’t set yourself up to fail. Find a metric you can measure easily or invest $50 in a software that can track it all for you. Keela has KPIs built in so you would have some you could pull automatically. While other software like Google Analytics is free.

**Finally, did you confirm which metrics (KPIs) are your leading and lagging indicators?** This is important. Leading indicators should be at the top of your dashboard with lagging at the bottom. If you want to get extra fancy, and this will help you down the road, order your metrics following your “funnel” or journey.

**HOW TO:**

**Think about the journey your metrics measure**. Does it start with spreading the message then engaging potential donors? Then collecting donations, then using funds efficiently to make an impact?

**Put your metrics in this order on your scorecard from top to bottom**. In my example, this would look like:

1. Spreading the message – KPI: Website Traffic

2. Engaging Donors – KPI: Email Open Rate

3. Collecting donations – KPI: Donation Growth Rate

4. Using Funds Effectively – KPI: Funds to Programs Ratio or another impact metric

## How to review your data with a critical mind

Open your dashboard and answer the following questions:

#### 1. Volatility Analysis

** Look at each of your metrics**. Really look at the numbers month-over-month or week-over-week, is there much volatility? I want you to identify at least three areas of interest.

Does your metric suddenly jump up one month then drop back to a consistent state? Does a metric that has been high for months in a row suddenly drop and stay that way? Think through why this may have happened? What did you do, change, try in that month that may have affected this measure? Did you hire someone new? Invest in something different? Change your website?

Make a note as a comment in that cell on your dashboard (right-click, Add Comment) on what you think may have caused this change. Add a more detailed explanation for at least three of these.

#### 2. Correlation Analysis

**Consider which metrics are connected**. There are always connections between metrics but sometimes they hide and you need to change the metric slightly to see them.

**Here is an example**: On Keela’s customer success team we measure the number of tickets we get each month to see if we are training and onboarding customers well. The better we onboard customers the less tickets there should be. However we are also adding lots of new customers every month, new customers are bound to have more questions as they learn the system. So we decided to look at a ratio of tickets to total customers. This metric is a decimal like “0.6”, meaning we have “0.6” tickets for every customer. We can see easily if tickets are going up or down, regardless of how many customers we add to the platform.

What metrics might you benefit from adding a ratio for? List at least one with an explanation of how this will give you better insight.

#### 3. Benchmark Analysis

**Have you pulled benchmark data for any of the KPIs you have chosen?** You should understand benchmarks whenever you can as it gives you an anchor from which you can see if you are struggling or excelling.

**Remember benchmarks are for everyone in your industry**, the good, bad and the ugly. If you are performing below benchmark, consider this a priority!

#### 4. Change over time Analysis

This is my favorite part but can be daunting for some less math or formula inclined. Don’t worry we will walk you through it. You can see each metric and “eye ball” the jumps or changes, but our eyes can be deceiving. It’s important to understand changes over time in percentages so you can compare apples to apples. Choose three metrics and do each of the calculations in steps a, b, and c below. Here’s how: Take one row of data for one metric and calculate the following in the open cell at far right. (This will be the cell for the next month, that’s ok for now).

**a) Calculate the growth rate from one month to the next:**

Formula: *“Sum(“Most recent month” – “Previous Month”) / “Previous Month”*. It will look something like this =sum(N8-M8)/N8.

*Make sure you set the Format as % (percentage) or it will show up as a 0.*

If that metric declines it will show as a negative percentage. This is important to know and just as valid.

**b) Calculate growth rate from quarter to quarter:**

If you have your quarterly metrics, just do the same calculation as above. If not, you will need to consider the metric: Is it a count that starts new each month? Or is it cumulative? (Growing over time.) If it’s a count, simply add up the three months in Q1, add up the three months in Q2, then repeat the steps in the above example.

Formula: “Month 1 + Month 2 + Month 3” = Q1” “Month 4 + Month 5 + Month 6” = Q2” Then use “Sum(“Q2” – “Q1”) / “Q1” That’s your quarter over quarter growth rate.

If it’s cumulative, take the final month in the most recent quarter – the final month in the previous quarter, and divide it by the final month in the previous quarter. This will show you the % growth rate from one quarter to the next.

**c) Calculate the growth rate month by month over time:**

This can be insightful if numbers are really large. You will need to add a row in your dashboard under the row of the metric in question.

Then in the second oldest column (the one AFTER the first metric recorded) enter the following formula. “Sum(the metric above – the first metric from the month before)/ the first metric from the month before. Hit enter. (In percentage format)

THEN hover your cursor over the bottom right corner of that same cell you just added the formula in, click and drag across all of the cells in that row to the end. And voila! Growth rates month-over-month for all months on record.

**d) Calculate your compound monthly growth rate **

This gets a bit confusing but this is often the number boards want to see when they ask what your donation growth rate is. You may ask, from what period to what period? But in reality, a compound growth rate is a perfect fix as you can simply update it each quarter and keep your compound growth rate since the beginning of the year or beginning of your organization on hand.

Remember this only works if your donation amount grows consistently (great for recurring donation-based orgs). If it doesn’t, it may be better to use this calculation on a metric that does grow consistently. Maybe donor list size? Or newsletter list size?

**When calculating the growth rate, consider the logic of what you’re actually doing**. You are first calculating the difference between the two metrics or months, specifically how much you have improved/declined by. Then you ALWAYS divide this number by the earlier metric since you want to know growth FROM before. Growth FROM the beginning metic. Never divide by the more recent metric, it’s a common trip up when calculating change over time.

## How to calculate Return on Investment (ROI)

Return on Investment is a familiar idea but if you’ve ever wondered how to calculate it, we will show you how and let you practice it here.

**Definition**:

ROI is a calculation that looks at all your costs of, say, running a campaign, and all the funds generated from that campaign, and tells you how much MORE you generated than spent.

That’s it. Hopefully it’s a positive ROI and you did generate more than you spent. If not, it’s even more important to know your ROI! The reason ROI is so important is that it helps you make smart decisions. If you know your ROI on two different campaigns you can easily decide which campaign to run again and which one needs improvement. Without this calculation, you may inadvertently be spending more than you make when fundraising which is simply not sustainable nor helpful.

### Calculation ROI

To calculate your ROI you will need to know what you spent on each campaign. This should include all direct expenses like venue cost or marketing cost, but should also include an estimate of hours spent by each individual being paid so you can calculate the cost of their time.

You can calculate their hourly wage and multiply this by the number of hours spent. If you have a team working on a campaign you can take an average hourly wage (be conservative, meaning use a slightly higher than average wage per hour if you have a large span in salaries). Once you have all your expenses or costs, you need to know how much revenue or funds were raised through this campaign.

Now for the formula: Subtract the costs from the funds raised then divide this number by the cost of raising them. (Multiply this final number by 100 IF you are not using a spreadsheet in percentage format)

Cost of Campaign =** $5,000**

Funds raised by Campaign =** $15,000**

ROI: (15,000-5000)/5000 x 100 = **200% **

**TIP:**

IF you are using a spreadsheet and the cell is already in percentage format, DON’T multiply by 100! This last step is ONLY used when you are using a calculator or heaven forbid your brain!

### Keela’s ROI Calculator

If you are at the point where calculating ROI seems like a good idea, you should be past the point of using spreadsheets to add up your donations. For $50 a month you could have a CRM system that does it all for you. Let me be clear, this is a best practice for well-run nonprofits, not a luxury, whether that’s Keela or one of the other great products on the market.

If you want to grow you must be willing to invest in tools that have a good ROI. To see how ROI works for something simple like a CRM purchase check out this calculator.

### Predictions and Forecasts

So now that you have the data and you have made the analysis what’s next?

Predictions – or forecasts as they are more often called – will help you estimate where you are heading. Whether that’s for cash flow purposes or for planning new projects or initiatives, your board will want to know you have thought through the next 12 months.

Once you have a good understanding of where you have been, you should be able to predict where you are going. Forecasts can be a simple extrapolation of your month by month growth rate, or a more detailed estimate of revenue generated month by month based on planned campaigns and the seasonality of giving.

One good way to start your forecasts is to consider what you did last year, and what you have planned for the year ahead. Have resources improved? Do you have more volunteers? How has your donor list grown? You can calculate some conversion rates based on donations generated from emails sent last year and use that metric to estimate donations you may receive based on your list this year. While these are all estimates, you can plan much better with estimates than you want without.

Now that you have all of your metrics in order you can use them to forecast your year ahead. **One note of caution:** The larger your organization, the more affected you will be by external fundraising trends. There is a great blog by Joan Garry where she discusses the importance of considering these trends when forecasting. I love her focus on trends overall both external and internal, this is precisely what you have been learning with your KPI dashboard. In this blog, she shows you how to look outside your organization.

## KPI-Certified

Congratulations! You’re finished. I hope this has been an informative journey for you. Now, as a data-driven nonprofit professional, you know the basics of how to determine, track, and analyze the KPIs best-suited to your organization and begin to see trendlines in your own data sets. Keep adding to your dashboard, analyzing your metrics, and thinking about how everything is connected. I promise, it gets easier, and more enlightening, the longer you keep at it. Because the more you understand and use KPIs the better your organization will be at making decisions.

This 3-Part KPIs Course is brought to you by Keela and CharityVillage.