R is for Re...Venue

Sunday, Dec 3, 2017


It’s been a busy Fall here at Sparkie and we admit we’ve let our blog posts slack a bit as we focused on two of our biggest product engagements this past quarter: (1) website and Petfinder integrations and (2) printable adoption packets.

With these releases, we’re moving our software closer towards our goal of helping rescuers to minimize the duplicative work they often need to do (and as a result, help them to reduce the number of software programs they need to use for all that work!).

Now that these features are out of the way, we felt that, with rescue groups’ biggest fundraising season fast approaching, it’d be a good idea to resume our ‘startup series’ with the first of three blog entries focused on rescue group finances, and the tools and techniques rescue organizations can borrow from startups to ensure their operations remain stable and as predictable as possible, well into the future.

Bill Campbell: “It’s not about the money.”
Ben Horowitz: “What’s it about, Bill?”
Bill: “It’s about the FU****G money.”

- The Hard Thing About Hard Things: Building a Business When There Are No Easy Answers

While we’ve never met an animal rescuer who has gotten into animal rescue ‘for the f***** money’ (and we here at Sparkie aren’t doing this for that reason either) at the end of the day, without a certain amount of steady, consistent money and a forward-looking financial plan, no group could stay in rescue for too long.

Finances permeate all parts of animal rescue groups’ operations, though the extent to which they do can vary based on the stage of growth the rescue organization is in. A rescue group just starting up (like a company) will have higher costs at the onset, ranging from legal work and insurance policies to basic marketing expenditures, like a logo or website design. Over time, while these administrative costs might decrease, the costs of maintaining supporters, donors, and perhaps even expanding to include a paying staff, will start to rise.

To help make sense of all these numbers, it’s helpful to have a simple model that you can use to build the financial foundation of your organization; that model is “profit”, or simply, revenue (money coming in) minus costs (money going out). We’ll use this blog post to dig into the revenue side of the equation.

R is for (Rescue) Revenue

Revenue is income, or the amount of money your organization takes in every month, quarter, year, or whatever time period you look at it from. But many rescuers we have spoken to are not so sure what all their sources of revenue, in fact, are, nor what the quickest and most efficient way is to raise those sources of revenue.

Test your understanding of your rescue revenue by trying to answer the following 3 questions:

  1. What are all sources of your rescue group’s revenue? (hint: there’s probably at least 5 sources for any typical rescue group)
  2. Of those sources, how much effort (in hours) and cost (in supplies, materials, etc) does it take to raise that revenue?
  3. How has revenue changed over time? Where has it grown? And where has it declined?

How easy was it to find those answers?

Maybe it took less than a minute, or maybe you had to think about it for an hour or two before having all the details. Regardless, frequently examining these questions and corresponding answers is a good way to ensure your rescue stays stable and solvent. Let’s dive into each a bit more.

Sources of Revenue

Most animal rescues groups we’ve spoken to have told us that they have the following 5 primary sources of revenue:

  1. Adoption fees, though often they do not even begin to cover the costs of rescuing/rehabilitating animals
  2. Formal fundraising fees, like ticket sales to a gala or funds from a marketing campaign (e.g. ‘Giving Tuesday')
  3. Grant awards (however, grants require data on operations that many rescue groups do not track)
  4. Donations from supporters, including individual contributors, corporate sponsors, and/or local businesses
  5. Merchandise, like t-shirts, tote bags, etc (though we admit this source is less commonly found)

So, off the top of your head, do you know what % of total revenue from each source above contributes to your annual income? Or how each of these ‘income streams’ has changed in the past 1, 2, or 3+ years? And why?

Just by beginning to break down where your ‘money’ is coming from, you can start to better understand where to invest more time and resources, assuming, of course, that the effort required to raise that revenue is practical.

This leads us into question #2 from above: how much effort (in hours) and cost (in supplies, materials, etc) does it take to raise each source of revenue...

Revenue “Effort”

While each of the above sources takes a minimal amount of effort to raise, some may end up sucking a lot of your time for relatively minimal results.

For example, during our email marketing seminar this summer, many of the rescue groups that joined that call admitted they raised more money from an email campaign targeted to past donors than they did from their annual holiday benefit.

BUT, not only did they raise more money on a gross level, the time and resources it ‘cost’ them to write and send the email newsletter compared to preparing for a fundraiser was much less, and proved to be the real ‘win’ for this group. It is this NET amount, or ROI (return on investment), that is critical for rescue groups to examine. And while you may have a ‘hunch’ that certain revenue is easier to raise than others, trying to calculate the actual ROI can be eye opening.

The simple equation

Let’s run a quick example, comparing a fundraising event to an email newsletter asking for donations.

ROI for the Fundraiser:

  • Costs = Let’s say hosting this fundraiser at a local pub costs you $500 in supplies, food, and event space. In addition, it ‘costs’ you another 50 hours of planning to put on the fundraising, from hosting meetings with volunteers to setting up the space the day-of the event. Assuming your time is worth $50 an hour, that’s 50*$50 = $2,500. So the event costs you $3,000 ($500+$2,500) to host.
  • Revenue = You sell tickets for $50 each, to 100 people, so your revenue is $50*100 = $5,000.
  • Your ROI = (Revenue-costs)/(Costs); in this case that’s ($5,000-$3,000)/($3,000) or 67%.

ROI for an email campaign:

  • Costs = Let’s say you use an email marketing software that costs $50 a year or ~ $0.50 per mailing if you do 100 mailings per year. Then, time wise, it takes you only 30 minutes to put together the email and send it out. 30 minutes of your time = $25, using the rate of $50/hour mentioned above. So your ‘costs’ for this email are $25.50.
  • Revenue = Let’s say you have 100 people on your listserv, and 10% decide to donate $10.00 each, then your revenue from the mailing will be (10 people *$10) = $100.
  • Your ROI = While your revenue is LESS than the revenue you made from the fundraise ($100 compared to $5,000) your ROI is 292%!!! That’s right!

You’ve literally made over 4x more from that email campaign than from a fundraiser. And chances are, it was also a lot less stressful too!

So the bottom line (pun intended) is, not all revenue is created equal, and it’s important to understand where it’s worth investing your time (which has real economic value) and where the effort may not be worth it.

We just had to, for the nerd in us...

As a final point to this question, we’ll also call out that it’s important to consider the qualitative outcomes of certain revenue streams, and balancing those outcomes accordingly. A YouCaring ‘emergency’ campaign might have a great ROI (takes 2 minutes to put together and can raise - in some cases like we’ve seen - $10K in a few hours) but it could also create considerable donor fatigue over time, such that the ROI actual declines with each campaign or, more hurtfully, cost you donors forever.

Conversely, while ROI for a fundraising event may be relatively low, it could have big positive, albeit more difficult to measure, outcomes in terms of reputation enhancements in your community, social media followers that eventually turn into adopters, fosters and/or donors, and general PR that could lead to further growth opportunities.

There is no one right formula for your rescue group, but without first tracking where your revenue is coming from, and how much time it took to get it, you’ll never be able to know for sure if your particular formula is the right one

Reducing Revenue Variability

Rounding out this post, consider also analyzing how variable your overall total revenue is as an organization. Start with your monthly income (e.g comparing how much revenue you raise in December compared to July) and then look at a longer time-frame, like quarterly or yearly. Maybe your rescue raised more money the year it was founded than it has in the past year. Why is that? What changed that was within, or beyond, your control?

Your revenue should NOT look like this. The line should be as flat and upward sloping as possible

Outside of adoption fees, (which, unfortunately will be steady so long as you are rescue animals), how consistent is your other revenue? If you apply to 5 grants each year, how often do you receive all 5? If over half your revenue is from individual donations, do you know who your biggest donors are and when they are most likely to donate?

Like startups that constantly have to predict how much revenue they’ll make each month to determine how quickly they can grow and how many people they can hire to support that growth, so too do rescue groups need to understand what their income will be 3, 6, 9 months out to truly set up a plan for sustainable rescue.

We started this post talking about the idea of ‘profit’, (revenues-costs) and explored some important ways to think about your rescue group’s revenue. But this is a moot point if costs spiral out of control or are not accurately accounted for. So be on the lookout for our next blog post, where we breakdown the different types of costs you’re likely to accrue when running a rescue, and tips/tricks for how to control costs relative to your revenue.