Return to site

Opportunity Cost -

Simple way to check you're on the ball

Your work days are full of decisions. You are constantly choosing what to do, what to prioritize, and where to focus your energies.

Often, the most pressing factor as you make your choices inevitably is this: what do I need to do right now to raise money?

But what many people in your position don’t consider is that, very often, raising money can actually be costing you money.

What do I mean?

With all the fundraising you do, there could be an alternative that is more valuable.

To make sure you're not loosing money through your efforts, you need to consider the “opportunity cost.” Opportunity cost is a term used most often in the business world.

It’s the benefit or value of something that must be given up to acquire or achieve something else.

Since every resource (manpower, money, time, etc.) can be put to alternative uses, every action, choice, or decision has an associated opportunity cost.

One example as you grow your fundraising base is the need to add new larger donors.

The opportunity cost to do this may be the letting go of some of your smaller donors. They consume your time and stop you investing the right efforts into cultivating new potential.

In order to factor the opportunity cost of getting those larger new donations you’ll need to consider,

  • How much will you raise by continuing soliciting these smaller donors?
  • How much you could raise by dropping some smaller donors to focus on acquiring the bigger potential donors?

Answering the two questions above will provide you the “opportunity cost” of dropping smaller donors and refocusing on developing the new larger potential.

In this example, say your 30 smaller donors are bringing in $20,000 a year income. Say the estimated time to solicit these donors is around 50 hours.

If you were to invest this 50 hours into cultivating some new five figure donors potential over the course of a year, you figure you could bring you in $40,000.

The opportunity cost in this example is $20,000. That’s the value of letting go of your smaller donors. And by doing so you could add $20,000 to your fundraising.

(You could also pass the smaller donors over to another person on your team you could recoup much of the $20,000. There’s a cost connected with doing that also.)

  • What are you doing in your fundraising that is costing you money by not doing something more valuable? 
  • This week, what will you do to begin to change this situation?

Email me back and let me know how you will apply the opportunity cost in your fundraising so you can make the best choice for your organization’s bottom line.

B'Hatzlacha Raba Raba with all your efforts,

Avraham

All Posts
×

Almost done…

We just sent you an email. Please click the link in the email to confirm your subscription!

OK