[ASK AN EXPERT] What's a Good Ratio of Fundraising Budget to Revenue Goal?

Our Ask An Expert series features real questions answered by Claire Axelrad, J.D., CFRE, our very own Fundraising Coach, also known as Charity Clairity.

Today’s question comes from a fundraiser who wants to know of any ratio of fundraising budget expenses to revenue goal.

Dear Charity Clairity, As we approach planning for 2026 and beyond, I’m curious to know (outside of events) if you have a sense of any ratio of fundraising budget expenses versus revenue raised needed to accomplish annual budgeted fundraising goals? That is, a very minimum expense line for fundraising that only covers thank you note cards and postage might only be less than 1% of a goal to raise $250,000 locally. Is there a minimum standard we should be aiming for, and what might that include from your perspective?

— A Bit at Sea

Before we dive into Claire’s answer, let us establish an understanding of a few things:

What is a fundraising efficiency ratio?

A fundraising efficiency ratio measures how much money a nonprofit spends on fundraising activities relative to the amount of contributions it brings in.

To avoid confusion when analyzing your numbers, it's essential to distinguish between the two common ways this ratio is calculated:

1. Cost to raise $1 (The dominant ratio)

This is the standard efficiency metric used by most nonprofit analysts and charity watchdog ratings. It calculates the exact cost incurred to raise one dollar of total revenue.

Cost to raise $1 = Total fundraising expense/Total fundraising revenue

How to interpret it: Lower is better. For example, if your fundraising expenses are $15,000, and your total donations are $100,000, your cost to raise $1 is $0.15. The industry benchmark generally aims to keep this ratio at or below $0.20 to $0.25.

2. Fundraising return on investment (Fundraising ROI)

This version flips the formula to show how many dollars in revenue are generated for every single dollar spent on fundraising operations.

Fundraising ROI = Total fundraising revenue/Total fundraising expense

How to interpret it: Higher is better. Using the same example above ($100,000 raised on $15,000 spent), your fundraising ROI is $6.67, meaning you earned $6.67 for every dollar invested in fundraising.

Claire’s answer

Dear A Bit at Sea,

The thing about being at sea is your ability to navigate the waters successfully depends on many variables. For example, how seasoned a sailor you are, how long you’ve been in the water, whether you tend to travel in the deeps or the shallows, the type of weather you encounter, the nature of your vessels, the resources you have on your ship, and the other sailors you have on board to help.

The same can be said of fundraising.

Is there a benchmark ratio?

Alas, there is no one standard ratio of expenses to revenues. It depends on your variables:

• Start-ups and younger charities must generally spend more.
• Older and well-recognized nonprofit brands will be able to spend a lower percentage.
• Smaller nonprofits will tend to spend a larger percentage, as there are economies of scale that can be achieved by larger organizations.

There are some standards, however, for different types of fundraising strategies. Conventional wisdom, per fundraising cost/benefit wizard James Greenfield, and similarly from the Association of Fundraising Professionals, shows donor acquisition and event fundraising to be the most expensive, while legacy and major gift fundraising are the least expensive. I would say even these measurements – averaging to around 20 cents to raise a dollar — are understated, as they often don’t include the ongoing costs of cultivation and stewardship. There is no single accepted standard for measuring fundraising costs, so an apples-to-apples comparison is virtually impossible to find.

Which costs belong in your fundraising budget

Beyond direct fundraising strategies, your budgeting should incorporate what are sometimes considered marketing, relationship-building, or otherwise ancillary programs – yet which are absolutely essential. You can’t have a true fundraising program without these things. That means budgeting not just for the cost to acquire donors but also to renew and upgrade them.

Also, remember your costs must include the direct staff support required to conduct the given strategy. So, for example, the donor acknowledgment strategy you posited does not include simply note cards and postage. It also includes the time spent by staff (as a percentage of their salary) and/or contractors to write, design, print, proofread, and mail the cards. Even if your support is done by volunteers, there is a cost associated with recruiting and managing them. See here for more information about the types of fundraising expenses you’ll want to consider including in your budget.

One other thing important to mention is the ‘overhead myth.’ For too long, nonprofits have been rewarded for how little they spend rather than how much they accomplish. Just as measuring overhead does not neatly correlate with a nonprofit’s impact or effectiveness, neither does establishing fundraising budget minimums and maximums correlate with fundraising success. What’s right for a given charity will depend on many variables, including size, scope, maturity, popularity of the cause, and more. Take a look at the 990s of other organizations like yours and see what their fundraising expenses are compared with their revenues. Now ask, how are you similar or different to them? This gives you a starting – though not an ending – point.

Figure out what you need to get the job done effectively. And I mean the full job – from developing awareness… to building interest… to causing engagement… to generating investment… and to then beginning the cycle once again to maximize the lifetime value of your supporters and build a sustainable fundraising operation. That’s the minimum for which you should shoot.

To your fundraising success!

— Charity Clairity

How to improve your fundraising efficiency ratio

Improving your fundraising efficiency ratio isn't about slashing development costs to the bone or chasing a vanity metric just to satisfy a watchdog group. It comes back to a core truth: you need to invest what it takes to get the job done right.

True efficiency comes from eliminating waste and doubling down on what actually builds long-term donor relationships, not from underfunding your core capacity.

Here are seven tactical ways to improve your efficiency ratio while keeping your mission fully funded:

1. Focus relentlessly on donor retention.

Acquiring a new donor can cost anywhere from $0.80 to $1.25+ per dollar raised, often running at a loss in year one. Retaining an existing donor, however, typically costs just $0.20 per dollar raised. Boosting your retention rate by even 5% lowers overall fundraising costs across your entire operation over time.

2. Segment appeals.

Sending the exact same direct mail piece or email blast to every contact in your database wastes printing, postage, and staff bandwidth. Segment your audience by giving history, engagement level, and interests. Tailored messages yield significantly higher response rates, bringing down your cost-per-dollar-raised on every campaign.

3. Upgrade one-time donors into recurring monthly givers.

Monthly recurring givers have an average retention rate of over 80%, compared to roughly 40% for first-time, one-time donors. Promoting a monthly giving program requires minimal incremental effort, but generates predictable, high-margin revenue with nearly zero ongoing acquisition cost.

4. Track channel-level ROI to cut low-net events.

Special events are notoriously inefficient, often taking $0.40 to $0.50 (or more) to raise $1 once staff time, venue fees, and catering are accounted for. Audit your fundraising calendar line-by-line: evaluate, scale back, or sunset labor-heavy galas and golf outings that generate low net profit in favor of high-yield major gift cultivation or peer-to-peer campaigns.

5. Invest in proactive donor stewardship.

Donors don't leave because you asked them for money too often; they leave because they never saw the impact of their gifts. Prompt thank-you calls, personalized impact reports, and video updates require modest investments, but drastically improve donor lifetime value, dramatically boosting your long-term return on investment (ROI).

6. Harness CRM reporting to attribute revenue and expenses accurately.

Inaccurate data skews your efficiency ratios. Ensure your CRM and accounting software properly tag overhead, staff hours, and campaign expenses to the correct channels. Accurate attribution ensures you aren't overestimating the cost of one strategy or giving a free pass to an underperforming campaign.

7. Automate administrative tasks to free up staff time.

If your development team spends half their day manually entering data, merging spreadsheets, or typing receipts, your labor costs per dollar raised skyrocket. Automating gift acknowledgments, database cleaning, and automated email workflows lets your staff focus on high-yield, human-to-human donor engagement.

Fundraising budget to revenue goal ratio FAQs

How do IRS Form 990 filings track fundraising costs?

Form 990 requires 501(c)(3) nonprofits to break down total spending across three functional expense categories in Part IX: program services, management and general, and fundraising. Public watchdogs use these reported numbers to calculate cost-per-dollar-raised and program expense ratios.

What is the overhead myth in nonprofit fundraising?

The overhead myth is the false belief that administrative and fundraising spending should be kept as close to zero as possible. Low overhead often signals underinvestment in staff, technology, and security, which ultimately weakens a nonprofit's long-term sustainability and program impact.

How does staff time factor into fundraising expenses?

Fundraising expenses include direct campaign bills and the proportion of staff salaries, benefits, and payroll taxes tied to development activities. If an executive director spends 25% of their working hours meeting donors or writing grants, 25% of their compensation belongs in the fundraising budget.

Why do capital campaigns have a lower fundraising cost ratio?

Capital and endowment campaigns yield lower cost ratios (often $0.05 to $0.10 per dollar raised) because they focus on securing fewer, significantly larger major gifts from established donors over an extended timeframe, minimizing broad public marketing and administrative overhead.

Wrapping Up

A healthy fundraising efficiency ratio isn't about cutting expenses to the bone—it's about making smart investments that yield sustainable, long-term donor support. Rather than chasing arbitrary overhead targets, focus on allocating the staff, tools, and stewardship resources required to genuinely engage your community. When you track performance accurately and fund your core capabilities, efficiency and revenue growth go hand in hand.

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