Donor economics
Cost Per Dollar Raised: How to Measure It and Report It Well
In a published survey experiment, gifts to human-service nonprofits fell substantially once the overhead ratio reached 35%, and the fall worked through lost trust. This article defines cost per dollar raised, shows it by channel, and sets out how to present it to a board and to donors.
By Donor Insights · Published October 25, 2026 · Updated September 25, 2026 · 8 min read
Enter your email and we will send the PDF, plus the daily stewardship read each morning. You can unsubscribe from any email.
Key takeaways
- Cost per dollar raised is fundraising expense divided by the contributions that fundraising brought in, and the BBB Wise Giving Alliance's Standard 9 sets its ceiling at 35 cents per dollar of related contributions.
- In Hung, Berrett and Ma's survey experiment (NVSQ, 2025), gifts to human-service nonprofits fell substantially when the overhead ratio reached 35%, gifts to health nonprofits at 50%, and the drop worked through donors losing trust.
- M+R Benchmarks 2026 found nonprofits spent $0.10 on digital ads for every dollar raised online in 2025, and search ads returned $2.48 per dollar spent, about 40 cents of cost per dollar raised (our arithmetic).
- Cost per dollar raised differs sharply by channel: in an illustrative organization, gifts from current donors cost 10 to 20 cents per dollar while acquiring new donors cost $1.50 per dollar in the first year.
- Report the number with what it buys: a blended figure, a by-channel figure, and a sentence on what acquisition spending adds to next year's donor file, rather than hiding the cost or pushing it toward zero.
Cost per dollar raised is the amount an organization spends on fundraising to bring in one dollar of contributions. It is one of the two overhead numbers anyone can compute from a nonprofit's tax return, and one experiment on how donors respond to overhead found that they react past a point. In a survey experiment published in Nonprofit and Voluntary Sector Quarterly (vol. 54, 2025), ChiaKo Hung, Jessica Berrett, and Ji Ma randomly assigned participants to see an organization with overhead of 5%, 20%, 35%, or 50%. Donations to human-service nonprofits "substantially decrease when the overhead reaches 35%", donations to health care nonprofits did not decrease until 50%, and the decrease worked through donors losing trust. The practical conclusion is to report fundraising cost openly, alongside what the spending builds, instead of hiding it or racing it toward zero.
What is cost per dollar raised, and how is it different from overhead?
The two numbers are related, and they measure different things. Cost per dollar raised divides fundraising expenses by the contributions those expenses produced. An organization that spends $30,000 on fundraising and raises $150,000 has a cost per dollar raised of 20 cents. The overhead ratio divides fundraising plus management and general expenses by total expenses, so it answers how much of the budget goes to anything other than programs.
Both come from the same place on the IRS Form 990, the annual return most nonprofits file. The Form 990 instructions for Part IX, the statement of functional expenses, define fundraising expenses as "the expenses incurred in soliciting cash and noncash contributions, gifts, and grants," including allocable overhead such as a share of rent and salaries. The BBB Wise Giving Alliance uses both measures in its charity standards. Standard 8 asks a charity to spend at least 65% of total expenses on programs. Standard 9 asks it to spend "no more than 35% of related contributions on fund raising", which is a cost per dollar raised of 35 cents or less. The two 35% figures in this article are different measures: the BBB's 35 cents is fundraising cost per dollar raised, while the 35% in the Hung, Berrett and Ma experiment is an overhead ratio.
At what level do donors react to overhead?
The Hung, Berrett and Ma experiment is useful because it tested levels instead of asking whether overhead matters in general. The abstract reports that, for human-service organizations, gifts fell substantially once overhead reached 35%. For health care organizations, gifts held until 50%. The authors also measured trust and found that higher overhead lowered trust, and lower trust led to smaller donations. This was a survey experiment, not a field test with real appeals, and the published abstract does not report the sample size, so treat the thresholds as a well-designed estimate rather than a rule for every donor.
Trust is the part an organization controls. In Independent Sector's July 2026 trust survey with Edelman Data and Intelligence, based on an online survey of 3,000 U.S. adults in April 2026, 56% of Americans said they trust nonprofits to do what is right, against 57% the year before, and human service organizations were the most trusted type at 67% (pages 6 and 9). Both figures are the share rating their trust 7 to 9 on a 9-point scale, asked as separate questions. A donor who already trusts an organization has less reason to read a fundraising cost as waste, and one who does not has more. Our guide to what donor trust is worth covers how a small organization earns it.
What does it cost to raise a dollar in each fundraising channel?
A single blended cost per dollar raised hides large differences between channels. The best published channel data is for digital advertising. According to M+R Benchmarks 2026, nonprofits spent $0.10 on digital advertising for every dollar raised online in 2025, and ad spending grew 18% on average. M+R reports return on ad spend, which is revenue divided by ad cost, for fundraising ads by channel. Turning each return into a cost per dollar raised is simple division, and the results below are our arithmetic on M+R's figures.
| Ad channel | Return on ad spend (M+R) | Cost per dollar raised |
|---|---|---|
| Search | $2.48 | About $0.40 |
| Multi-channel | $1.82 | About $0.55 |
| Display | $1.11 | About $0.90 |
| Video | $0.56 | About $1.79 |
M+R describes return on ad spend as money in versus money out, and its page does not say how long after an ad gifts are counted. The figures leave out staff time, and a donor an ad brings in can keep giving for years, which is why a channel that costs more than a dollar per dollar in the first year can still be worth running. What a new donor costs and when they pay it back is the subject of our guide to donor acquisition cost.
What does a cost per dollar raised report look like for one organization?
Picture a fictional organization, Lakeside Youth Mentors, with four fundraising activities. The figures below are illustrative, chosen to show how the channels differ, and are not benchmarks.
| Activity | Fundraising cost | Contributions raised | Cost per dollar raised |
|---|---|---|---|
| Visits and calls with major donors | $6,000 | $60,000 | $0.10 |
| Mailed and emailed appeals to current donors | $9,000 | $45,000 | $0.20 |
| Annual dinner event | $40,000 | $100,000 | $0.40 |
| Acquisition mailing to new names | $18,000 | $12,000 | $1.50 |
| All fundraising | $73,000 | $217,000 | About $0.34 |
The blended figure of about 34 cents sits just under the BBB's 35-cent standard. A board member looking only at the acquisition row would want to cut it, since it spends $1.50 for each dollar it brings in. That row is also the only one that adds new donors to the file, and every other row depends on donors who were once new. Cutting it lowers this year's cost per dollar raised and shrinks the donor file that next year's appeals are sent to.
“Donors lose trust in nonprofits when overhead costs are higher, leading to decreased donations.”
How should you present cost per dollar raised to a board and to donors?
The experiment points to one rule: since the reaction runs through trust, give the reader what they need to trust the number. In practice that means five steps:
- 1.Compute it the Form 990 way, with fundraising expenses including their share of rent and salaries, so the figure matches what a donor could find on your return.
- 2.Show a blended figure and a by-channel figure together. The blended number answers the donor's question, and the by-channel number is what the board needs to make decisions.
- 3.Separate acquisition from renewal. Label acquisition spending as the cost of adding new donors, and report how many new donors it added.
- 4.Name what the spending buys in one sentence, for example the donor file it keeps growing or the staff member who thanks every new donor.
- 5.Do not chase a lower number by cutting the activities that add donors, and do not leave the number out. In the experiment, every participant saw an overhead figure, and gifts fell only at the higher levels.
Cost per dollar raised belongs on the same page as retention and revenue in a set of fundraising KPIs. The by-channel figures need your own records. Donor Insights reads your contacts and gifts and ties each gift to the campaign and source it came from, so the revenue side of every row in the Lakeside table comes from your file rather than an estimate. The methodology starts from your own giving records, and the platform shows which channels bring in donors who are still giving a year later.
Frequently asked questions
- How do you calculate cost per dollar raised?
- Divide total fundraising expenses by the contributions those expenses produced. Spending $30,000 to raise $150,000 is a cost per dollar raised of 20 cents. Include a share of rent and salaries in fundraising expenses, as the IRS Form 990 instructions require.
- What is a good cost per dollar raised?
- The BBB Wise Giving Alliance's Standard 9 sets the ceiling at 35 cents per dollar of related contributions. The right figure also depends on the mix: renewal appeals to current donors usually cost far less per dollar than acquiring new donors, whose gifts arrive over later years.
- Is cost per dollar raised the same as the overhead ratio?
- No. Cost per dollar raised divides fundraising cost by money raised. The overhead ratio divides fundraising plus management and general expenses by total expenses. Both come from Part IX of the Form 990.
- Do donors care about overhead?
- Past a point. In Hung, Berrett and Ma's survey experiment, gifts to human-service nonprofits fell substantially at 35% overhead and gifts to health nonprofits at 50%, and the drop worked through lost trust. The abstract does not report the 5% and 20% results separately.
- Should we cut acquisition to lower our cost per dollar raised?
- Usually not. Acquisition costs more per dollar in the first year, and part of its return arrives later, as renewal gifts from the donors it added. Cutting it lowers this year's figure and leaves fewer donors to renew next year. Report it separately so the board sees what it adds.
Sources
- Hung, C., Berrett, J. L., & Ma, J. (2025). How High Is Too High? An Experimental Analysis of Donors' Aversion to Nonprofit Overhead. Nonprofit and Voluntary Sector Quarterly, 54(2), 302-326. DOI 10.1177/08997640241254079 (published online May 29, 2024, survey experiment).
- BBB Wise Giving Alliance. Standards for Charity Accountability (Standards 8 and 9). Give.org.
- Internal Revenue Service. Instructions for Form 990, Part IX, Statement of Functional Expenses, column (D) fundraising. IRS.gov.
- M+R (2026). M+R Benchmarks 2026: Advertising (ad spend per dollar raised, return on ad spend by channel). 2025 data.
- Independent Sector & Edelman Data and Intelligence (2026). Trust in Nonprofits and Philanthropy, July 2026. Online survey of 3,000 U.S. adults, April 3-20, 2026.
Related articles
What Does It Cost to Acquire a New Donor?
The first gift rarely covers what it cost to win. The payback comes from the years that follow.
What Donor Trust Is Worth (and How a Small Organization Earns It)
Two out of three donors say trust matters before they give. Fewer than one in five extend it. That gap is workable.
The 12 Fundraising KPIs Worth Putting on One Dashboard
Stop tracking forty metrics. These twelve tell you whether you are growing.
Disclaimer
Educational purpose. This article is published for general informational and educational purposes only. It is not investment, financial, funding, donor, tax, legal, accounting, or fundraising advice, and reading it creates no advisory, fiduciary, or client relationship. Consult your own qualified professionals before making decisions.
Not an offer. Nothing here is an offer, solicitation, or recommendation to buy, sell, donate to, or fund any organization or security. Pray, Inc. DonorInsights.com is not a registered investment adviser, broker-dealer, law firm, accounting firm, or fundraising counsel, and publishes only impersonal commentary of general and regular circulation.
Public data, no guarantee. Analyses of named organizations rely on public sources such as IRS Form 990 filings, an organization's own published materials, and reputable press. These sources are believed reliable but are not audited or independently verified by us. The content may contain errors or omissions and is provided "as is" with no warranties of accuracy, completeness, or currency.
Opinions and estimates. Donor-level and financial figures for named organizations are our inferences and opinions, including forward-looking projections that are not guarantees of future results.
No affiliation. Named organizations are independent and are not clients, affiliates, sponsors, or endorsers of DonorInsights.com. Third-party names and trademarks belong to their owners and are used only for identification and commentary. Links to third-party sites are not endorsements.
No reliance. We accept no liability for any action taken based on this content.
Corrections. This analysis reflects public sources available as of publication. If you are an organization discussed here, or any reader, and you believe a figure or statement is inaccurate, email hello@donorinsights.com and we will review it and correct any error promptly.
Your use of this site is governed by our Terms of Use.