What is the ROI of Investing in Fundraising?
A recent academic study analyzing more than one million nonprofit financial filings provides compelling evidence that many organizations (especially religious nonprofits) are significantly underinvesting in fundraising, potentially leaving enormous amounts of philanthropic revenue on the table.
The study, Returns for Fundraising Expenditures in Muslim, Christian, Jewish and Other Religious Nonprofits from IRS Form 990, examines how additional fundraising spending affects future contributions across different types of charities. The findings challenge several long-standing assumptions about fundraising efficiency and overhead.
The Data Behind the Study
The research analyzed 1,020,729 IRS Form 990 filings from 266,243 nonprofits spanning the years 2010 through 2016. Using this large dataset, the researchers examined how fundraising expenditures in one year affected contributions in the following year.
Rather than focusing on average cost ratios which are commonly used to evaluate fundraising efficiency, the study examined marginal returns. In other words, it asked the question:
If a nonprofit spends one additional dollar on fundraising, how much additional charitable revenue does it generate?
This approach is important because average cost ratios can be misleading. An organization can have very low fundraising costs and still be underperforming financially if additional investment would generate significantly more revenue.
In economic terms, the optimal level of fundraising spending occurs when an additional dollar invested produces little or no additional net return. If additional spending consistently produces more revenue, then the organization is technically underinvesting in fundraising.
The Surprising Returns on Fundraising Investment
The results were striking. Across the nonprofit sector, additional fundraising spending produced substantial increases in future contributions. But the magnitude of the returns varied significantly across different types of organizations.
For secular charities, each additional dollar spent on fundraising generated approximately 6-7x that in additional contributions the following year.
For religious nonprofits, the returns were even higher.
Christian organizations saw about nine dollars in additional contributions per dollar spent. Religion-focused organizations classified broadly under IRS categories generated roughly ten dollars per additional fundraising dollar.
These results strongly suggest that many organizations (particularly faith-based charities) are operating far below the level of fundraising investment that would maximize their revenue.
In other words, the evidence indicates that significant amounts of charitable funding may be left unrealized simply because organizations hesitate to invest in fundraising.
The Overhead Myth and Its Consequences
The research also highlights a longstanding challenge within the nonprofit sector: the stigma surrounding overhead and administrative costs.
Many donors and nonprofit leaders equate low or no overhead with organizational effectiveness. As a result, organizations may deliberately minimize spending on fundraising staff, marketing, donor development, and other infrastructure that would make the nonprofit perform better.
This mindset though can create a paradox. By minimizing fundraising costs to maintain a low overhead ratio, organizations may unintentionally suppress the very revenue that would allow them to expand their mission.
For example, the study notes that some charities maintain extremely low overhead expectations within their communities, sometimes even promoting “100% donation” models where separate funds cover administrative costs. While these practices build trust with donors, they can also discourage investment in development capacity and new donor acquisition.
The result is a sector that values efficiency but may inadvertently constrain its own growth.
The Limits of External Fundraising Consultants
One of the most interesting findings in the study involves the use of outside fundraising consultants.
Professional fundraising services often generate strong returns in many sectors. In the study, each additional dollar spent on professional fundraising consulting produced $27 in additional contributions for secular charities, $76 for Christian organizations, and $146 for Jewish organizations.
This finding highlights an important lesson for nonprofit leaders: outside expertise can be valuable, but it must be paired with deep understanding of the community and donor culture involved.
What This Means for Nonprofit Leaders
The study reinforces a simple but often overlooked principle: fundraising is an investment, not merely an expense.
When done effectively, spending on fundraising infrastructure can produce significant returns in future revenue.
Second, the research challenges the widespread assumption that minimizing fundraising costs automatically leads to better outcomes. In many cases, the opposite may be true. Organizations that systematically limit fundraising spending may be constraining their ability to generate mission-supporting resources.
Finally, the study highlights the importance of understanding donor communities. Fundraising strategies that work in one context may not translate directly to another. Cultural expectations and community trust all shape how philanthropic relationships develop.
For organizations that aspire to grow their impact, the real challenge is not simply raising more money, but developing the institutional willingness to invest in the activities that make doing so possible. This requires a shift in mindset from viewing fundraising as an administrative burden to recognizing it as a strategic function that enables mission delivery. When nonprofits align their fundraising investment with the true scale of their ambitions, they position themselves not only to secure more resources, but to build the long-term relationships and infrastructure that sustain their work continuously.
Want to read the study for yourself? Click here. Looking to raise more money for your nonprofit? Send us a message and we would love to learn more about your organization!
