In our continuing data storytelling series, we come to one of the most misunderstood statistics – the average donation amount.
We want you to have absolute clarity about this metric, because it’s one of your most valuable fundraising KPIs. The story it tells is one you want to be able to share with your team and your board because it should play a key role in the decisions you make about how and where to spend your fundraising budget.
But as you’ll see, it’s very easy to misinterpret what the average donation amount is telling you.
You might call this the ‘scandalous statistic,’ the one that doesn’t always mean what it appears to mean and gets easily manipulated. Today, you get to find out what it really means.
What Is Average Donation Amount?
The average donation amount represents the mean, the mathematical average amount given by a random donor, if you combine all your donors’ gift amounts together.
On our benchmark page, you can see the average donation amount for the combined data from every nonprofit organization that has used the Fundraising Report Card to create data visualizations for their fundraising metrics and KPIs. In 2023 it was $327.66.
How to Calculate Average Donation Amount
The calculation is very straightforward. It’s an average. Add up all your donations for a given time period, such as a year, and then divide by the number of donations.
That’s it. If your donations total $1 million, and you received ten thousand donations for the year, then $1,000,000 divided by 10,000 would result in an average of $100 per donation.
A Valuable Metric
Average donation amount, or average gift amount, tells you something about the financial health of your organization. With inflation, you would hope to see this amount raise over time. Its best use is to look at it over many years, and then correlate that with your actual budget.
A higher number means you’re getting more big gifts, and a smaller number means you’re getting fewer big gifts than before.
As you’ll see, the most useful way to read the average donation amount is as a measure of your major gifts fundraising success. And therein also lies the problem with this metric, when you look at it in isolation.
All the Problems with Averages on Full Display
You cannot take average donation amount in isolation and draw too many valid conclusions. Here are the main reasons why.
Outliers Skew the Average
The effect of outliers is easy to show when it comes to averages, no matter what you’re averaging. But it shows up more in certain situations. Whether it’s average age of college students, average salaries, average age of death in the ancient world, or the average donation given to your nonprofit, outliers can dramatically mislead the meaning and significance of these averages.
For instance, suppose you have ten donors, and these are their donation amounts:
$25
$40
$95
$120
$150
$150
$160
$225
$500
$25,000
The average of these ten donations equals $2646.40.
Do you see the problem with this figure?
You can’t look at that average and conclude, “Since the average donor gives about $2600, if we run a new fundraising campaign, all we need is ten new donors and we can expect to raise about $26,000.”
If you don’t win the major gift, your average will be far, far less than that. Take out the $25,000 gift from the list above, and the average donation amount plummets to $162.78. With that average, your campaign to win ten new donors makes less than $2000.
The $327 average given earlier is much higher than what most donors give to the real nonprofits that use the Fundraising Report Card, because the big gifts are distorting the average.
The Major Gift Effect
In fundraising, the effect of your major donors on your average donation amount is sizable. Even a small handful of major donors can contribute such a big fraction of your overall budget that it renders the average donation amount almost meaningless.
Without those few major donors, an organization would go under.
In recent years, the famous Pareto Principle – the 80/20 rule – has been turned on its head. For nonprofits today, based on Fundraising Report Card data, about 93% of nonprofit revenue is coming from 7% of donors. And 0.7% of donors are contributing over 67% of the revenue.
These tiny donor segments, if their gifts are included in your average donation amount KPI, dramatically distort the average.
In other words, suppose you have ten major donors and two thousand other donors. Lose just one or two major donors, and your average donation amount will take a noticeable decline. Likewise, add just one or two new major donors, and you’ll immediately see a sizable bump in the average.
An average donation amount that doesn’t change much over several years, more than anything else, indicates consistency from your major gifts fundraising efforts.
The Average Ignores Actual Dollars Raised
Another problem with the average donation amount metric – when taken in isolation – is that you don’t really know how much money you made that year.
Suppose your average last year was $200, and this year it’s $210.
You might be tempted to pat everyone on the back and celebrate. Don’t pop the champagne just yet though. Make sure to look at your actual revenue raised first.
You might have raised more money last year, even though the average is lower.
How can this be true?
An Increase May Not Be Good (and a Decrease May Not Be Bad)
Last year, if 5000 donors gave an average of $200, that’s equals a total revenue of $1 million. But this year, what if you only had 4700 donors? If those donors give an average of $210, the total revenue comes to $987,000.
So last year you had more donors giving at a lower average, which resulted in more revenue. This year, you had fewer donors giving at a higher average, which resulted in less revenue.
So the number of donors matters. And the number of major donors matters.
Consider this scenario:
Your major gifts fundraising program is doing great, but you’re worried about your lack of new donors. So, your organization makes a concerted effort to attract a bunch of new donors this year. And your efforts are successful. You bring in over a thousand new donors. Combined, these thousand donors give an average of $80 this year, resulting in $80,000 in new revenue. That’s wonderful.
All your major donors also continued to give, and so your overall revenue this year increases. But, because you added over a thousand new donors and most were lower dollar donors, your average donation amount will decline.
So, you succeeded, got more new donors, and made more money, but your average went down.
Do you see why this metric can be so misleading?
Giving Levels – How to Work Around the ‘Average’ Problem
So what’s the solution? How can we make the average donation amount KPI be more useful to us? How can we reduce the outlier effect and reflect the actual number of donors in the data?
The answer is, use giving levels.
The Fundraising Report Card shows how this works on our benchmarks page, which gets updated daily. Scroll down past the initial set of data and you’ll come to the Giving Level section. Here, you’ll see five giving levels:
- Under $100
- $100 to $250
- $250 to $1000
- $1000 to $5000
- Above $5000
If you click on any of those five giving levels, you’ll see the average donation amount – for THAT giving level.
This is revolutionary.
Instead of taking all your donors, and including the six figure planned gift from a wealthy business owner and the $5 donation from your ten-year old daughter in the same average – rendering both statistically meaningless – now you’re looking at the averages among comparable donors.
Low-Level Donors
For donors who give less than $100 per year, the maximum this average could be is $100. That would mean every donor in this category gave exactly $100 that year. That’s why you see an average in this section, as of this writing, of $27.26. This isn’t likely to change much, because there are a lot of donors in this category, and many of them give just once.
On the Report Card, each giving level will calculate its own average donation amount, for donors who give within that range.
With this tool, you can now really see the effect of your various fundraising efforts.
That hypothetical campaign that found a thousand new donors giving an average of $80 each? That means many of those donors will be in the lowest giving level, and you might see this average go up a little for your nonprofit. More importantly though, the number of donors in this category, which our tool will also report to you, will now be much higher.
500 people giving $30 each is a lot more revenue than 100 people giving $30 each. For lower level donors, it’s the quantity of donors that matters, more than the average.
Major Donors
As you go up to higher giving levels, the actual amounts given affect the average donation amount much more.
And when you reach the highest giving level, above $5000, you see the major gift effect. At that level, the current average donation amount is nearly $30,000. Per donor.
If you win a new major donor, you might see a dramatic difference in this giving level’s average for your organization, because you don’t have as many major donors as lower level ones.
What It Really Means When the Average Donation Amount Changes
The more donors you have, the harder it is to change the average donation amount. For large organizations with thousands, tens of thousands, or even more donors, adding or subtracting donors here and there isn’t going to affect the average much.
So the larger your organization, the more you’ll come to see that it is only your major donors who can noticeably affect the average donation amount.
A large decline in the average should make you nervous, because that means probably means you lost enough major donors to see a precipitous decline – unless you ran a campaign like the example described earlier and just added a ton of lower level donors.
Likewise, if your average increases far beyond your usual year-to-year average donation amount, this likely means your major gift officers are rocking it and just won several huge gifts this year. But will they be able to repeat that next year?
Average donation amount thus shows, more than anything else, how well your major gifts fundraising efforts are working.
If you want to get more value of out this metric, use the Fundraising Report Card and start tracking your average donation amounts for the five giving levels.
