Donor lifetime value: what one new donor is really worth
Donor lifetime value is the total a donor is likely to give over the years they stay with you, minus the cost of thanking and serving them. You estimate it from your average gift, how often donors give, and how many come back each year. It tells you how much you can sensibly spend to find a new donor.
Worked example. Change any number to use yours.
With 16 new donors (the 5-year break-even)
Year 1
−$1,608
Net cost
5 years
+$138
Comes out ahead
A loss in year one is normal for donor growth. Look at the 5-year view: returning donors pay it off.
Needs about 35 new donors in year one, or 16 over 5 years.
I don't know our numbers
Use figures from your donor database or spreadsheet.
Average gift: $0 · Retention: 0 in 10
With 16 new donors (the 5-year break-even)
Year 1
−$1,608
Net cost
5 years
+$138
Comes out ahead
A loss in year one is normal for donor growth. Look at the 5-year view: returning donors pay it off.
At $500/month for 6 months, this needs to bring in $3,000 in new giving, about 35 new donors at your average gift. If 5 in 10 give again next year, about 16 new donors would pay it off within 5 years.
Chart assumes you get exactly the break-even number of donors. Enter what they promised to see their version.
- New donors per active month to break even
- 3
- Most you can spend to gain one donor
- $196
How did we get this?
16 donors ÷ 6 active months
How did we get this?
That's what one new donor gives over 5 yrs, after fees. Year one only: $87.
Details
- Break-even, first year: 35 donors ($3,000 ÷ $87 per donor)
- Break-even, 5-year view: 16 donors ($3,000 ÷ $196 per donor)
- Full cost: $3,000 = $0 setup + ($500 fee + $0 staff and volunteer time) × 6 months
Make the case to your board
Already started? Check in on progress
Was this useful? Tell Paul
Is It Worth It? for Nonprofits · Board summary
Board summary: Something else
Inputs: $500/month, 6 months, setup $0, staff 0 hrs/month at $0, average gift $100, 5/10 give again, 5-year view.
Questions we asked the vendor: Do you understand donor journeys and recurring giving? Who owns our donor data, website, and ad accounts if we part ways? How will you report new donors? When should we expect results, and what's the plan if they don't come?
Estimates for planning only. Not financial or tax advice.
Why it matters
If you only count a donor's first gift, almost every marketing effort looks too expensive. Many donors give again, and some give more over time. Lifetime value counts those future gifts so you can judge marketing fairly.
How to estimate it
Start with the average first gift. Add later gifts, reduced by the share of donors who come back each year. Subtract processing fees and the cost of thanking them. The calculator on this page does that for 1, 2, 3, or 5 years. Look at "Most you can spend to gain one donor."
How to raise it
Thank donors quickly. Show them results. Invite them to give monthly. Each of these raises retention, which raises lifetime value more than almost anything else.
Worked example
Hypothetical: a first gift of $100, later gifts of $120, 5 in 10 giving again, a 3% processing fee, and $10 to thank each donor. Over 5 years, the calculator shows one new donor is worth a little over $200.
What you're actually paying for
- Processing fees on every gift.
- Receipts, thank-you calls, and mailings.
- Systems to track who gave and when.
Questions to ask vendors
- Do you understand donor journeys and recurring giving?
- Who owns our donor data, website, and ad accounts if we part ways?
- How will you report new donors, not just traffic or impressions?
- When should we expect results, and what's the plan if they don't come?
How to tell if it's working
- Calculate retention every year from your donor records.
- Track average gift by year to see if donors give more over time.
- Compare lifetime value with what you spend to find each donor.
How we calculate
- Full cost = setup fee + (monthly fee + staff hours × hourly cost + volunteer hours × hourly value) × months.
- Value of one new donor over N years = (first gift + later gift × (r + r² + ... + r^(N−1))) × gifts per year × (1 − processing fee) − thank-you cost, where r is how many out of 10 give again, divided by 10.
- Monthly donors are valued at monthly gift × 12 for each year they keep giving.
- Break-even new donors = full cost (minus the value of other goals you enter) ÷ value of one new donor, rounded up.
- Cost to raise $1 = full cost ÷ giving over the time frame.
- Most it's worth paying per month = (promised donors × donor value − setup fee) ÷ months − staff time per month.
Questions people ask
How many years should lifetime value cover?
Pick a time frame your board is comfortable with. Three years is a common middle ground. The calculator lets you switch between 1, 2, 3, and 5.
Should we include monthly donors?
Yes. Set how many out of 10 give monthly. They often add much more value over time.
About the builder
Built by Paul Watley
Paul is the Director of SEO at Tandem Theory in Dallas, Texas. He builds websites and helps them get found through search and digital marketing. He is originally from Nebraska and now lives in Dallas with his wife, their three kids, and Sunny, their dog.
He built this free tool because nonprofits get the same sales pitches businesses do, with less money and less time to check the math. Put in your own numbers and decide for yourself.