Increase your Donor Base with an Annual Report
The non-profit leader’s momentum of “doing” is interrupted by a heavy dose of “reporting.” In this resource, we cover an optional, but no less important form of reporting, the Annual Report. While it may be tempting to skip this yearly review, do not underestimate the importance of this report. Your Annual Report is a direct reflection of you and your organization, so take a deep breath, get out your calendar and set aside some time to make it happen. Whether you are planning to create the very first Annual Report for your organization, or you just need a refresher, we are doing a deep dive into this very valuable tool.
Before You Begin
To really do this right, you have to begin by appreciating the value of the Annual Report. Much more than just a review, the Annual Report is a tool that moves you forward. The purpose of an Annual Report is generally three-fold.
- Shows current donors that their donations have been well spent.
- Makes the case for a continuing need for donations.
- Serves as an introduction to attract new donors to the cause.
Before you begin, know your audience, which is, in a word, donors. While the Annual Report is a great morale builder for staff and volunteers and a courtesy to patrons, there are more efficient ways to inform these groups. The main audience for the Annual Report is generally going to be your donors. We like to divide the world into three types of donors:
- Foundations, which are private, corporate or government institutions that grant funds based upon their well-defined mission and strict IRS guidelines.
- Major Donors are those who give above a certain threshold, often between $5,000-$10,000 depending on your overall budget. These are usually the lifeblood of most non-government-funded organizations.
- Individual Donors are those who give small gifts on a regular basis through direct mail, online gifts, gala tickets, auction items, etc.
Approaching your Annual Report with this audience in mind will generate the most possible value out of your report.
Benefits of an Effective Annual Report
Besides just a reporting tool, the Annual Report has several other benefits. It can help members of the organization stay on track with the mission and goals and act as a template and resource to refer to throughout the year. While showing current donors that their contributions have been well spent, at the same time you are raising awareness of your very important mission. Other benefits include:
- Maintaining mission fidelity
- Benchmarking yearly progress
- Keeping a consistent story and message
- Efficient donor reporting
- Well produced marketing piece
- An opportunity to expand your audience
- Team-building experience
Finding the Time
While preparing an Annual Report can be time-consuming, it doesn’t have to be. You can hire an outside firm to do it, or consider making it a team building exercise. Encourage members of your organization to give their input on organizational accomplishments. If you hire an outside firm to do your report, it is always best if the firm has some history with your organization. Whichever route you choose in producing the report, do not choose the path of ignoring it altogether. A well-written and thorough Annual Report demonstrates professionalism in your organization and makes a statement that you care enough about your donors to keep them informed.
Structure
There is no exact science to how your Annual Report is structured. We encourage you to be creative with the structure, but follow the basic outline used in most reports. Keep in mind that the less you write, the more they’ll read. Whenever possible, use charts and photos over long descriptions. Remember that there are different learning styles. There are those readers who love words, those that prefer pictures, and those who like numbers. Annual Reports should have all three.
Most Annual Reports follow this general outline:
Letter from the Executive Director and/or Board Chairman
Think of this as your Executive Summary, which is the first thing a reader will see when they open your report, though it is often the last piece that you will write. When the report is near complete, take an objective read through it and then summarize in a way that reflects both the organizations accomplishments and its gratitude towards those who helped make it all happen. Either the Executive Director or Board Chair can author this letter, but we recommend choosing one or the other, or doing a joint letter, rather than two separate letters.
Organizational Information
Include a section that provides a basic summary of what your organization does. This section should be short and sweet:
- Mission
- Vision
- History
Within these three fundamentals, it should be clear what your purpose is, who you support, and how your purpose is achieved.
Programs & Accomplishments
Focus on this section, as it is the bread and butter of your Annual Report. The Programs & Accomplishments section should describe (in words, photos and charts) the activities of the organization and show donors exactly where their money is going. This is your time to explain to your donors “what you do all day” – and more importantly, how their money is spent, so be thorough. Here is a checklist of highlights you may want to include:
- People served (In 2009, we served meals to an average of 100 homeless people every day. That’s 36,500 meals served)
- Growth (Our enrollment grew by 15%)
- Partnerships (We partnered up with Foot Locker and provided 25 youth baseball teams with brand new shoes
- Support (Over 1500 new people signed up on our website and pledged to abstain)
- Buildings (We increased our international presence by building an HIV Prevention Center in India)
- Improvements (80% of young people who participated in our free tutoring sessions increased their ACT score by 1 point or higher)
- Expense Reduction (We decreased our overhead expenses by 5%)
Results should be tangible and measurable. Donors like things that can be quantified. This is also a great place to add special stories and testimonials. Remind them of your organization’s good work, the programs in place, and how these programs relate to your mission. But, most importantly, talk about accomplishments in direct relation to the generosity of donors.
Future Goals
Although the Annual Report is a recap of the past, we suggest including a brief section describing the future goals of the organization. Donors like to see progress, but they also like to see realistic short and long term goals. This will encourage donors to continue giving. Also, while writing the Annual Report, this section can lead to great team discussions at your board or staff meeting, in which you can restate and refine your goals and objectives.
Financials
The financial section will vary, depending on the type of nonprofit organization. Generally Annual Reports will show Revenues and Expenses and sometimes a Balance Sheet. While some readers won’t spend much time to look at this section in depth, your major donors will, so make sure this section is accurate and clear.
Graphs and charts are a nice way to highlight the strengths of your financials and show where the money goes. The pie chart below gives an example of making financials easy to understand, by breaking the expenses down by category and offering a visual aid.
In addition to a visual aid, sometimes nonprofits include a paragraph or two explaining what the financials mean. Numbers without notes leave people free to draw their own conclusion. It is always a good idea to help people understand the numbers through explanatory notes and comparisons to industry benchmarks and previous years’ performance.
List of donors
These lists can get lengthy (or at least you hope so!). This is a good opportunity to be creative with columns, rows and overall structure of the pages. It is important to list everyone involved in the organization such as affiliates partners, staff and volunteers, as well as your donors. For key staff and board members, list their credentials and community affiliations. Double and triple check these lists, to make sure everyone is noted and spellings are correct.
When a donor prefers to remain anonymous, they will usually let you know that when giving the gift. However, if there is any question about whether a particular donor would want to be acknowledged in the Annual Report, always get their permission before printing their name. This is true especially of major donors.
How You Can Help
Always include an invitation for people to get involved. Encourage readers to not only donate, but also participate. Once they’ve read through the entire report, they are sure to be excited about your organization, so let them know how they can help be good stewards too. We recommend being clear and specific about what people can do. Simply stating “Contact us to get involved” is not attractive enough. Invite them into your family and explain the different levels of involvement.
Publishing the Annual Report
In the past many organizations got around publishing an Annual Report by citing the expense involved with printing and distributing hundreds or thousands of copies. Nowadays, Annual Reports can be published on your website for virtually no cost beyond your normal web maintenance fees. If you can afford to print our hard copies for major donors, it is still very impressive to hold a fine printed piece, but plan to send the bulk of them by email. The links below are good examples of nonprofit Annual Reports online.
- Meta House http://www.metahouse.org/2008AnnualReport.pdf
- Volunteers of America http://www.voa.org/2008_Annual_Report_PDF
- Arthritis Foundation http://www.arthritis.org/2008-annual-report.php
Conclusion
A thorough and professional Annual Report will give your organization much more credibility. This is an opportunity to inform the public that your organization demonstrates good stewardship, strength, stability and longevity. The Giersch Group consultants are able to assist with the entire process, making it easier and less time-consuming. Do not rush through this report or overlook the value of it. If your organization is looking to establish a positive, long-lasting reputation, an Annual Report is a necessity.
E-fundraising Tip
Monthly Newsletters are a great way to keep donors updated and encourage them to give throughout the year. The old way of sending monthly newsletters involved the hassle and high costs of printing, binding, folding, stuffing, addressing and sending. For many organizations, e-newsletters provide an easier and cost-effective alternative.
Start by compiling a list of your readers e-mail addresses. Next, there are great programs such as Constant Contact (www.constantcontact.com) which will walk you through the process step-by-step. These programs often use best-practice procedures in distribution of your newsletter, including options for people to unsubscribe and compliance with anti-span guidelines. E-Newsletters should provide an opportunity for the reader to take action or participate. Drive readers and donors to your website through the newsletter, by including direct links. The cost is low and benefit is high. Keep in mind that increasing your organization’s online presence is a good idea, as long as the majority of supporters are online. What works for you and your donors is most important.
