The Value of Databases for Nonprofit Fundraising

When it comes to nonprofit fundraising, one of the most valuable tools you can invest in is a database. Unfortunately, it’s often one of the last areas organizations put their dollars.

Launching a new nonprofit database takes upfront resources. There are subscription costs, consultant costs to support setup and customization, and staff time to upload current donor information into the database. Even if you’re transitioning from one database to another, you’ll need to learn the new system and ensure your data has transferred accurately.

The natural question might then be: Why bother? What value can a database provide to my nonprofit’s fundraising?

To answer this question, in this article, we’ll explore:

1. Why databases are valuable for nonprofit fundraising
2. What organizations lose by not having a database

Why are databases valuable for nonprofit fundraising?

Every year, database developers and software companies make new advancements that make nonprofit leaders’ jobs easier. If you haven’t used a database since Microsoft Access, you’ll be surprised at the flexibility and value a well-designed and well-implemented database can provide.

Today, a database can:

• Save you time and money: Yes, a database has an upfront setup cost, plus an annual subscription if you’re using a cloud-based service (which is recommended). But a database actually saves an incredible amount of time for executives, fundraising staff, and even board members by providing a real-time treasure trove of information in an easily accessible format. For example, imagine you have a stack of 20 grant agreements. How long will it take you to find the guidelines for one specific grant? At least 20 minutes of sorting through paperwork. How long would it take you with a database? Sixty seconds at the most, and only if you’re a slow typist. With a database, donor background is at your fingertips. And those hours saved translate into dollars.
   
• Add capacity to your team: Imagine having more capacity on your team without hiring new staff. That’s the power of a database. A database enables executive and development leaders to spend less time on administrative work and more time on fundraising. Plus, today, all-in-one database solutions can connect your fundraising, marketing, CRM, finance information, and more. This provides richer data, all while eliminating time spent on duplicative data entry.
   
• Maximize your reach: A fundraising database organizes all your donor contact information in one place. That means no more searching for donor emails or addresses. Instead, you can focus on donor cultivation efforts. With a database, you can easily send monthly or bi-weekly supporter emails and impact reports, segment your donor updates by interest area, and send more print and email appeals. Tracking open rates and donations will enable you to continuously hone and improve your strategies.
   
• Increase your revenue: A database can shift your fundraising team’s mentality from reactive to proactive. Instead of struggling to keep an updated list of reporting and outreach plans, your team can spend their time doing that outreach. As you shift your focus to activities that generate revenue, the additional funds raised can even go toward hiring more development or executive staff. Your fundraising can finally stop being reactionary and instead become a virtuous circle of revenue and capacity growth.
   
• Improve your data security: With a database, you’ll have multiple levels of security to protect sensitive donor information. And, you won’t need to share donor phone numbers, addresses, and giving history with your fundraising team members via email (which is important since 91% of cybersecurity breaches begin with phishing emails). Databases reduce the chance that phishing could compromise donor data while providing security options like two-factor authentication. Internally, you can even set up different user profiles to control what each authorized user can view and edit within the system. Plus, removing former team members’ access to data will be as easy as clicking a button.
   
• Enhance your team’s collaboration: Imagine if all your team members had access to the same essential donor information. Instead of spending time providing donor background or explaining giving histories, development staff can jump right into strategizing about how best to engage those donors. You can also bring in your communications or marketing staff, going deeper into testing different donor engagement tactics. When your teams spend less time on administrative fundraising tasks, they can spend more time collaborating and innovating.
   
• Boost your team’s morale: Investing in a database isn’t only about data. It’s about the people who use that data—and making their jobs easier. No development staffer enjoys searching piles of grant agreements or digging through physical copies of donor checks to find the basic information they need to succeed in their roles. Investing in a database is an acknowledgment that your staff members’ time matters—and that you want them to be able to spend it on the most high-value fundraising activities.

With these incredible benefits, it’s hard to imagine an organization not using a fundraising database. But for many organizations, investing in a donor database always gets bumped to the bottom of the priority list. A database may only become a priority when a nonprofit’s strategic planning process highlights the need for overdue investments in operations and infrastructure—or during a crisis.
 

What do organizations lose by not having a database?

Organizations delay getting a fundraising database for all kinds of reasons. Setting up a database sounds technical. We have other budget priorities. Entering prior donor information takes time. We’ve been getting by without a database for years. If we only have 20 donors right now, do we really need a database? 

But seldom do these rationales consider what an organization is losing by not having a database.

Fundraising without a database

If you’ve ever worked with a nonprofit without a database, this scene will sound familiar.

The executive director has finally set aside two solid hours for donor outreach. Off the top of her head, she comes up with the names of a handful of donors she should contact. But as she starts to craft the first email, she realizes she doesn’t know who last spoke to the donor. She heads over to the new development associate, hoping for some quick updates. “Who was the last person to talk to this donor? When was their last gift? Should we make a renewal ask?”

The development associate panics. All he’s been told is that there’s a spreadsheet of grant dates and a file cabinet full of checks from the prior year. Should he dig through the checks to find the donor’s last gift date? But what about recent outreach? Only the development director will have that information.

Together, the executive director and development associate walk to the development director’s office. But the development director is packing up her bag. She’s sick and needs to head home ASAP. “Send me the list of donor names,” she tells the executive director. “If I’m feeling better tomorrow, I’ll review my notes and pull together summaries for you.”

And so, the two hours the executive director has allocated for donor outreach will just have to wait. Maybe she can reschedule for next month…
 

This is only one example. Any development professional could share many more, all based on true stories.

The costs of not having a database can be significant. So, let’s look at what an organization loses by not having a database.

• Succession readiness: In our example above, all the donor relationship information was in the development director’s head. This is the case in far too many organizations. One of the most fundamental reasons organizations invest in a fundraising database is in answer to the question: What will you do if your executive director or development director leaves the organization? Without a database, you potentially lose access to years of nuanced donor information. Organizations have to essentially rebuild their fundraising programs and donor relationships every time there’s a leadership turnover.
   
• Relationships with donors: Cultivating strong donor relationships—the kind that result in generous gifts year after year—requires consistency. That means reaching out regularly with updates and appreciation and being consistent in how you communicate. Particularly with major donors, you tailor messages to highlight the programs they’re most interested in. You also need to know when to reach out for a gift renewal ask and details like how a donor prefers to be asked. Do they like a frank funding request in an email? Or do they prefer a meeting or a meal first? As minor as they may seem, these details can make the difference between an increased gift and a lapsed one. Without a database, every individual touch with a donor can be like starting from scratch.
   
• Efficiency: As was evident in our scenario above, finding detailed donor information without a database is incredibly inefficient. Many organizations have donor details spread through multiple staff members’ email accounts, file-sharing systems, spreadsheets, financial systems, and even hard-copy printouts. Without a database, finding critical information—such as the dates and amounts of a donor’s last three annual gifts—can take hours and distract fundraising staff from revenue-generating work.
   
• Time and money: Interruptions at work cost the U.S. economy $588 billion per year. That means your organization is losing money every time you need to stop and find donor information—and ask one or more other people to help. Research shows that after each interruption, it takes an average of 23 minutes to get back on task. In our story above, the organization lost over an hour of combined time, including that of two senior staff members.
   
• Ability to truly plan ahead for deadlines: Planning ahead requires more than simply knowing a deadline. It means making sure your development team has all the information they need to start preparing in advance. While it is possible to track grant proposals and reporting deadlines in a spreadsheet, there are significant limitations. You can’t attach grant agreements, proposals, or budgets to a spreadsheet, much less the last grant report or the most recent email update sent to your program officer. But you can organize all of these materials in a database. Instead of spending an hour tracking down grant materials and correspondence, development staff can use that time to reach out to program leads with questions far in advance. No scrambling. No late nights. Just smooth collaboration.
   
• Data vulnerability: Many organizations rely on individual staff members’ email inboxes to keep a record of donor communications. In addition to creating issues for collaboration, succession, and donor cultivation, it also creates a security risk. Globally, 96% of phishing attacks arrive via email. Even though we may all think we’re prepared, the latest research shows that “more than one-third of leaders [have] clicked on a phishing link—4x the rate of other office employees.” Using email as a filing system for sensitive donor information puts both organizations and their donors at risk.

When viewed holistically, the costs of not having a fundraising database are significant. And, in dollar terms, these costs far exceed the modest expense of setting up and maintaining a database.
 

Conclusion

At the start of this article, we posed a common question that many nonprofit leaders wonder:

What value can a database provide to my nonprofit’s fundraising?

The answer is the kind of value that can help make your organization strong and sustainable for the long term.

A donor database isn’t simply an investment in your organization’s fundraising. It’s an investment in your organization’s future and impact. The data, outreach, and contributions recorded today will help guide future executive directors and fundraising staff for years to come.
 

Additional Resources

• Part 2 in this blog series: Optimizing Fundraising Success: 8 Essential Database Best Practices
• Funding for Good’s Pre-Strategic Planning Checklist

This blog is an original work of the attributed author and is shared with permission via Foundant Technologies' website for informative purposes only as part of our educational content in the philanthropic sector. The views, thoughts, and opinions expressed in this text belong solely to the author and do not necessarily reflect Foundant's stance on this topic. If you have questions or comments, please reach out to our team.