Jan 11, 2021
How to calculate net gain from your nonprofit event
With in-person events off the table — at least for the time being — many nonprofits have switched to virtual fundraising programs. One notable benefit of hosting virtual events is that this type of programming often provides a higher net gain. The dollars you raise during a virtual program can go further because it’s likely less expensive than the costs associated with hosting a live event.
Calculating costs for fundraising events held virtually can help you see the benefit of moving your programming online. Even once you can go back to offline, in-person programs, you might decide to keep at least some virtual programs.
What is net gain for nonprofit events?
Usually, nonprofit organizations need to spend money when they host events. Typical costs for in-person events include venue rental, catering, marketing and staffing. Along with expenses connected directly to the event, there are also indirect costs to account for, such as planning the program. If employees spend 30 hours planning the event, that’s time they must direct away from other activities.
Ideally, the event ROI for nonprofits will more than cover the cost of hosting and organizing. A nonprofit that raises $100,000 during an auction or gala won’t pocket that entire amount. To figure out the event’s net gain, or how much the programming brought, nonprofit staff must subtract its direct and indirect expenses from the total proceeds.
How to calculate net gain for nonprofit events
Calculating net gain for nonprofits involves crunching a few numbers. You’ll need three figures to determine how much an event brought in for your organization:
- Gross revenue
- Direct expenses
- Indirect expenses
Gross revenue is all the money raised during an event. If you add up every monetary and in-kind donation, you’ll get this figure. Gross revenue is helpful, but you only gain limited insights from it. To calculate how much your event raised for your organization, you’ll need to subtract direct and indirect expenses from gross revenue. To do that, you’ll first need to tally up how much those expenses were.
Direct expenses are the more straightforward costs associated with throwing an event. They can be relatively simple to calculate, as all you need to do is look at how much your organization paid for specific program features. For instance, if you hired a band to play during a gala, that fee is one direct expense. The amount you paid for the catering service is another. Other common examples of these include:
- Venue rental
- Car rental
- Entertainment — emcee, band, DJ, other performers
- Food and drink
- Invitations and postage
- Security at the event
Indirect expenses are event-related costs your organization doesn’t pay out of pocket. They include the cost of time spent putting together the program by paid staff members and volunteers such as board members.
To calculate the indirect cost of your staff working on the event, keep track of how many hours they spent planning, preparing and attending the program. Then, multiply that number by their total hourly earnings, including benefits. So, if your organization’s associate director spent 80 hours on the event and their salary works out to $30 per hour, the total indirect expense of this time is $2,400.
To calculate the indirect cost of volunteer hours spent planning the event, use the national average value of volunteer time, $27.20 per hour. If your volunteer team spent a collective 100 hours on the event, their contributions’ indirect cost is $2,720.
Net gain = gross revenue – expenses
Once you have calculated the total cost of the event’s expenses, you can subtract that amount from the total revenue to find the net gain. If you ended up raising $150,000 during the event, but spent $50,000 on direct expenses and $10,000 on indirect expenses, the program’s net gain was $90,000.
Cost to raise $1
Along with calculating the net gain from a nonprofit event, it can be useful to assess how much you had to spend to raise $1. Calculating the cost to raise a dollar gives you an idea of whether you are overspending on your galas and other events. To see how much you spend to raise $1, divide the total expenses by the net gain. If your net gain was $90,000 and you spent $50,000 on the event, your cost to raise $1 is $0.55. If you spent $100,000 and raised $90,000, your cost to raise a dollar would be $1.11, meaning you spent more than you brought in. The lower your cost to raise a dollar, the better.
How Ronald McDonald House realized unexpected net gains with their virtual event
The less you spend on planning, organizing and hosting a fundraising event, the greater your event’s net gain is likely to be. Due to 2020’s pandemic, many organizations, such as Ronald McDonald House Charities, found they needed to pivot away from in-person programming to virtual events. Though the organization was initially hesitant to make the switch, unsure of what the response to a virtual event would be, program organizers were pleasantly surprised by the results.
RMHC had 132 first-time donors for their virtual event, called the Un-Gala campaign. The organization also retained 66% of its sponsors after shifting from an in-person to a virtual event. The sponsors who didn’t sign on again in 2020 primarily cited budget cuts as their reason, not the pivot to a virtual program.
Perhaps the most significant pleasant surprise RMHC experienced after shifting to a virtual program was that though the program’s gross revenue was less than that of the previous year’s in-person gala, the virtual event fundraising net gain was higher, due to a dramatic reduction in expenses. The in-person gala cost $334,150 and had gross revenue of $1,062,000. The virtual program cost $35,000 and had total revenue of $806,949. The virtual program’s net gain was $771,949, compared to $727,850 for the in-person gala.
Virtual fundraising event costs: 3 expenses not to skimp on
Whether out of necessity or a desire to try something new to cut expenses, it can be worth it for your organization to switch to virtual fundraising events and programming. As with any program, there are some areas where it’s better to spend than save. Here are some expenses not to skimp on.
- The donation platform: The easier it is for people to donate or participate in your fundraiser, the more you’ll raise. Choose your platform carefully, looking for one that delivers friction-free bidding and donating experience to your donors.
- Marketing and communication: Whether the event is in person or online, you’ve got to spread the word about it and make it clear how people can participate. Have a marketing pro handle all event communications, including promoting it on social media, through email, and direct mail.
- Leadership: An experienced event planner should be responsible for organizing your virtual fundraiser. You want a leader who knows what it takes to plan an exciting, engaging event, whether it’s taking place in the virtual world or an in-person venue.
Increase virtual fundraising net gain with help from GiveSmart
Virtual fundraising can help your organization raise money at a lower cost than in-person galas and programs. Whether you’re pivoting to virtual programs because of pandemic-related rules and restrictions or to reduce expenses, using the right fundraising platform will help you keep track of your efforts and quickly calculate your event’s net gain. As you plan your next virtual event, request a demo of GiveSmart to see how we can help you reach your fundraising goals and increase your net gain.