A Smart Approach to Annual Planning

I’ve been thinking about all the necessary elements to my Annual Planning doc – the ones I have and the ones I’m missing.

Yes, a deep analysis of what worked and didn’t is the foundation of success in the New Year. What are some of the other elements included in a smart approach to Annual Planning? Here are 7 that are sitting top of mind.

Cohort x Campaign

I use a donor-centric dashboard view shared in SPN 76 and look at several date ranges to identify the Cohort x Campaign combos that out- or under-performed the averages:

Entire calendar year
High periods (EOY, Giving Tuesday, and other Org-specific moments)
October vs. February behavior – highlighting the first “normal” giving month of the year to the last one – to spot any trend changes in donor behavior

What I’m trying to identify is 1x best-performing donor stage in the lifecycle and 1x worst-performing. These two will be the critical levers for 2024’s initial strategy changes.

Important note: look at YoY performance over three years (last year, the year before, and the year before that). This should smooth out anomalies e.g. large, out-of-pattern emergencies.

Target Unit Economics

This is the step where I like to connect with fellow nonprofit operators to exchange notes on last/this year’s performance. Context is key. Seek to understand whether behaviors seen are Org-specific anomalies or market-shared trends. Decreased email performance for existing donor files, for example, has been a pattern across most Orgs recently.

Having these two inputs on hand, I then head to the drawing board and get into the following metrics:

New Donor Flow

Cost to bring a prospective donor to the website for the first time
Conversion rate from the first website visit to the first donation
Cost of the retargeting funnel to achieve the above conversion rate
Average first donation value
ROI on the first donation value / total cost of the first conversion
Unsolicited recurring conversion rate
Average recurring donation value
Average retention period (by cohort from the dashboards built in SPN 76)
Total donation value
ROI on the total donation value / total cost of the first conversion

Reactivated Donor Flow

Cost to bring a one-time donor back to the website
Conversion rate from that return visit to the monthly donation
Average recurring donation value
Average retention period
Total donation value
ROI on the total recurring donation volume over the cost to bring a donor back

For each metric above, I outline the 3-year values mentioned in the first paragraph marking Org-specific anomalies vs. (seemingly) broader industry trends. And in case of any wild differences I break down certain steps by Cohorts x Campaign dimensions.

These metrics are crucial for any CFO conversation. Whether your fiscal year matches the calendar or not, January is the correct month to discuss 12-month budgets with the CFO. Donor behavior follows a “normal” year schedule.

Finance – Budget, Growth and Revenue

Generally, I follow the 10-20-70 rule:

– Ask for a 10% Budget increase

– Aim for a total Revenue growth of 20%

– With 70% of that Revenue coming from existing recurring – or reactivated one-time donors

Btw at first glance that 70% is a pretty staggering number. It means I’m only targeting 30% of total annual revenue from net-new donors generated during 2024. This sounds aggressive. But I’ve found this formula to be most accurate for Orgs of various sizes looking to grow their fundraising program sustainably.

Also, such a pace allows for that extra 10% improvement in the program’s effectiveness, allowing it to achieve 20% Revenue growth on a Budget increase of only 10%.

If your overarching goals are more aggressive – for example, you’re targeting 50% growth YoY – all of that “incremental” part over the 20% (in this example, 30% of total revenue growth) should be coming from the net-new donor portion.

This assumes the acquisition ROI for anything over 20% growth to be the same as last year to account for diminishing returns and effort needed to scale the program, leaving less time to focus on optimizations.

Cohort Thinking

For the “core” part of the program, I then identify the metrics to improve that are going to land the 10% cumulative effect – putting most emphasis on the part of the Lifecycle that was identified as the “worst-performer” in Step 1, and setting no improvement expectations for the best-performer.

The “cohort” nature of net-new acquisition is important to call out here. From 30% of the Annual Revenue that I’m targeting to collect from net-new donors, half – or 15% of total revenue – should be coming from audiences that are already represented in the donor portfolio, and another 15% should be from new audiences not present in the donor file at all. This then ensures the overall program health and file growth, and keeps the 10-20-70 rule viable.

Operating with Quarterly KPIs

An improvement of 10% in cumulative effectiveness over a year isn’t that much, especially when it’s broken down into 10 different metrics alongside the Donor Journey. However, it assumes all the “untouched” metrics stay intact and do not decrease – which requires monitoring.

The CFOs I’ve worked with have all appreciated me providing upfront “snapshots” of all four Quarters of the year from the outset. Usually I work to a Quarterly 15-30-15-40 percentage budget breakdown and I sit this alongside a Quarterly 20-30-40-10 weighted “pace of improvement” plan where I break down the total changes needed by metric. These snapshots then become quarterly KPIs for the entire team.

Action Items

Your program’s viability isn’t only defined by its financial performance – its relevance to the donor and adoption (or keen study) of new market trends is also vital. Reflecting on 2023, there’s several areas you may benefit from double clicking into:

Revamp the Email program with a focus on content quality instead of frequency.
Dive deeper into engagement metrics across all creatives and consider testing Google dynamic AI creative functionality.
Adopt one – or multiple – Generative AI tools to speed up content creation and increase the variety of Landing Pages, Ads and Emails.
Test into RMNs (Retail Media Network’s) for Donor Acquisition.
Set a goal (~5% of Net-New revenue portion) for Gen Z acquisition.
Increase the Video portion of the budget, both long-form (YouTube / Connected TV) and short-form (TikTok, Instagram, YouTube Shorts) <<< this one will become even more critical if the DOJ case ends in ruling against Google, prompting YouTube’s separation into an independent company and its associated growth from it.
Voice SEO.
Set a small portion of your budget to test DOOH (digital out of home) in the most dense areas with a high presence of target donors.
Dig into and identify measurement frameworks working better than Attribution – such as Marketing Modeling Mix (MMM) – in preparation for 3^rd party cookies phase-out.

Bonus: Data Clean Rooms

This bullet required a separate paragraph instead of being included in the list!

While most of the above tactics are optional and not required for your Org to achieve that 10% effectiveness gain, implementing and adopting (at least) one Data Clean Room will be.

Pressure will continue to build from the 3^rd party cookies phase-out. And most Orgs are at risk of their digital targeting practices being ineffective, to put it politely. Deep donor understanding and an ability to analyze it in a way that will not be affected by looming industry changes will prove to be critical.