Nonprofit Guide to Benchmarking: How to Set Goals that Drive Growth

As a nonprofit, knowing where you stand compared to your peers is crucial for both operational and philanthropic success. Benchmarking allows organizations to evaluate their current position, identify opportunities for improvement, and set clear, actionable goals for the future. In this blog, we’ll discuss the purpose of benchmarking, walk through key indicators, and explore how to use benchmarking results to fuel your organization’s growth.

Why Benchmarking Matters for Nonprofits

Benchmarking is not just about comparing numbers; it’s about gaining insight into how other organizations in your sector operate and perform. By engaging in this process, nonprofits can achieve several key objectives:

• Guides Goal Setting and Growth
  Benchmarking helps organizations set realistic, data-driven goals. Understanding how your peers are performing enables you to align your development strategies with best practices, ensuring your organization is on the path to growth.
• Offers Insight into Peer Activities
  Knowing what peer organizations are doing in three critical areas can shape your approach:
  • Operationally: How do other nonprofits structure their teams and manage resources?
  • Programmatically: What programs and initiatives are driving impact, and how can you enhance or expand yours?
  • Philanthropically: How are peer organizations raising funds and engaging with donors?

The Benchmarking Process: How to Get Started

The benchmarking process may sound overwhelming but breaking it down into manageable steps makes it easier to gather valuable data. Here’s how you can start:

1. Uncover Your Industry’s Benchmarks

Some philanthropic sectors release annual reports on industry-specific benchmarks that show how the sector performed in the most recent year – as well as outlining how “high-performing” organizations stand out. These reports can help you understand general trends and standards within your field like:

• Cost Per Dollar Raised (CPDR)
• Return on Investment (ROI)
• Staffing Structure (# of Full-time & Part-time employees and how that correlates with philanthropic revenue)
• Giving by Constituency (Board, Alumni, Corporations, Foundations, etc.)
• Participation rates among your donor pool

Some industry resources to explore include Giving USA (all philanthropy), AHP Report on Giving (healthcare philanthropy), and CASE/NAIS Facts at a Glance (education philanthropy).

If specific benchmarks don’t exist for your nonprofit’s niche, you’ll need to dig a bit deeper into your peer group.

2. Identify Your Peer Group

Not all peers are created equal. It’s essential to define which organizations to compare against based on different criteria. Your peer group will help you set realistic benchmarks and inspire growth.

• Comparable Peers: These are organizations that are similar to yours in size, budget, and focus. They often compete for the same philanthropic dollars.
• Aspirant Peers: These are nonprofits that outperform you in key areas—think of them as models to aspire to.
• Local Peers: Local organizations that may not share the same scope or size, but they could be competing for the attention of the same donor base. Understanding how they engage with the community is important.

3. Gather the Right Data

Now that you’ve identified your peer group, it’s time to collect the relevant data. The more data you gather, the more informed your decisions will be.

• Where to Look:
  • Publicly Available Resources: Nonprofits are required to file Form 990 with the IRS (note: religious organizations are not required to file), which includes key financial information such as revenue, expenses, and leadership compensation. Annual reports and articles published by or about the nonprofit can also provide valuable insights.
  • Directly from Peers: If you have a relationship with a peer organization, consider reaching out directly to ask about their strategies and operations.
• What to Look For:
  • Organizational Budget: Understand the overall budget to see if your resources are aligned with your mission.
  • Fundraising Revenue: Breakdown of revenue streams, such as individual donations, memberships, corporate support, and government grants.
  • Fundraising Expenses: Are your fundraising costs in line with the revenue you’re generating?
  • Leadership Compensation: Comparing compensation for leadership can highlight if your nonprofit is paying competitive salaries, which can impact talent retention.
  • Staff Structure: Is your staff level appropriate for the size and complexity of your operations?
  • Capital Campaigns: Understand how your peers are planning and executing large fundraising campaigns.

Using Benchmarking Data to Plan for the Future

Once you’ve collected the data, it’s time to analyze the results. Benchmarking isn’t just about identifying what other organizations are doing—it’s about applying these insights to your own strategy.

• Identify Operational Shortcomings
  Are there areas where your organization may be falling behind? For example, if peer organizations with larger teams are generating significantly higher fundraising revenue, it might indicate a need for more staff or different resource allocation.
• Spot Gaps in Fundraising
  If peer organizations have dedicated staff members for specific fundraising areas like corporate/foundation relations, planned giving, alumni/parent relations, etc., and are raising significantly more from those constituencies/types of gifts, it could point to a gap in your own team or strategy.
• Set Actionable Goals
  Use the insights from your benchmarking exercise to create a clear, data-driven action plan. Set goals that will move your organization closer to industry standards, and develop strategies to implement best practices.

Conclusion: Using Benchmarking for Growth

Benchmarking is a powerful tool for any nonprofit organization. It not only helps you understand your position relative to peers but also enables you to identify areas of strength and growth. By systematically gathering and analyzing data, you can set realistic goals, refine your strategy, and propel your organization toward greater impact and sustainability.

While benchmarking is a powerful tool – and it is helpful to know how your industry performs as a whole – the results of any benchmarking exercise should be looked at with your community and demographics in mind. Every organization is unique. When setting goals to improve certain areas of your organization’s fundraising efforts, if you have the financial flexibility, invest new dollars into said area rather than diverting funds from areas where you are already performing at, or above, industry standards.

Reach out to The Angeletti Group and get started with a benchmarking assessment today. Your future success is waiting!