If you’re leading a UK charity right now, you’re navigating one of the most challenging periods in the sector’s history.

The numbers tell a stark story: 42% of UK charities spent more than they earned in 2023. Donor numbers have fallen by 1.6 million since 2019. Inflation has eroded donation values by 12% since 2021. Insolvency cases nearly doubled from 98 to 184 between 2023 and 2024.

Yet in the same period, demand for your services has likely surged. The communities you serve need you more than ever.

This creates an impossible tension: how do you sustain and grow your impact when the financial ground is shifting beneath you?

The answer isn’t working harder. It’s working smarter — and that starts with honest, benchmarked assessment of your organisation’s health.

This guide will walk you through the seven critical dimensions of charity organisational health, show you how your organisation compares to sector benchmarks, and provide a clear roadmap for improvement. Whether you’re a CEO preparing for a board meeting, a fundraising director defending your budget, or a trustee asking tough questions about sustainability, this is your essential reference.

Assess Your Organisation’s Health in 5 Minutes →

The Perfect Storm Facing UK Charities

Let’s be blunt: the old ways of operating no longer work.

For decades, UK charities could rely on relatively predictable funding patterns, steady (if modest) donor growth, and incremental improvements in operational efficiency. That era is over.

The Post-Pandemic Shakeout

The pandemic forced rapid digital adoption — 81% of charities changed how they use digital technology during COVID-19. But adoption isn’t the same as strategy. Only 44-50% of charities have a formal digital strategy, meaning most organisations are using new tools without a coherent plan.

The result? Digital chaos. Disconnected systems, data silos, and technology that creates more work instead of less.

The Funding Cliff

Government funding has become increasingly unreliable. The bottom quartile of charities reported a median 16.9% loss on public sector contracts. Even the largest charities (£50m+) saw an 11% median decline in government contract values.

At the same time, individual giving is consolidating. There are 1.6 million fewer UK donors in 2024 compared to 2019, even as average gift sizes increase. The sector is becoming dependent on a smaller, aging, wealthier donor base — a fragile foundation.

The Talent Crisis

65% of small charities report difficulties recruiting volunteers. 44% struggle to recruit and retain paid staff. The people crisis compounds the funding crisis: you have fewer resources and fewer hands to deploy them.

Why “Muddling Through” Is No Longer Viable

In stable times, organisational weaknesses are inconvenient. In turbulent times, they’re existential.

A charity with poor donor retention in 2015 was leaving money on the table. A charity with poor donor retention in 2025 — losing 60% of donors annually in a contracting donor market — is in a death spiral.

A charity with inadequate reserves in 2018 was playing it risky. A charity with inadequate reserves in 2025 — when 42% of organisations are spending more than they earn — is one funding shock away from closure.

This is why organisational health isn’t an academic exercise. It’s survival.

Find Out Where Your Charity Stands →

The Metrics That Determine Your Organisation’s Resilience

Through analysis of over 40 authoritative sources — including the NCVO Almanac, Charity Commission reports, and specialist benchmarking studies — seven metrics emerge as the critical indicators of charity health.

These aren’t vanity metrics. These are the numbers that determine whether you can weather funding volatility, scale your impact, and sustain your mission over the long term.

Donor Retention Rate

What it measures: The percentage of donors who gave last year and gave again this year.

Why it matters: Acquiring a new donor costs 5-7 times more than retaining an existing one. Yet the sector hemorrhages supporters at an alarming rate.

The Sector Reality

Think about that: If you acquire 100 new donors this year, statistically only 20 will give again next year. Of those 20, about 12 will give a third time. This is why charities feel like they’re running on a treadmill — you’re constantly replacing lost supporters just to stand still.

Why Retention Is So Low

It’s rarely about the cause. It’s about stewardship failure.

Research shows younger donors (18-34) have significantly higher expectations for prompt, personalized thank-you messages compared to older generations. Yet most small charities lack the systems to deliver this at scale.

When a donor gives online and receives a generic auto-reply (or worse, nothing), you’ve squandered the moment of maximum emotional connection. When they never hear about the impact of their gift, they don’t feel valued. When you only contact them to ask for more money, they feel used.

The opportunity: Charities in the top quartile for retention (50%+) aren’t doing magic. They’re executing the basics consistently: prompt gratitude, impact reporting, segmented communication, and donor-centric engagement.

Red Flags

→ Read: Turning Givers into Supporters — A Practical Guide to Donor Retention

Months of Free Reserves

What it measures: If all income stopped tomorrow, how many months could you operate on reserves alone?

Why it matters: Reserves are your shock absorber. They let you survive a funding gap, invest in growth opportunities, and make strategic decisions rather than reactive ones.

The Sector Reality

The trend is alarming: reserves are declining sector-wide, precisely when volatility is increasing.

The Hidden Vulnerability

Here’s the dangerous part: 42.6% of UK charities had expenditure exceeding income in 2023 (up from 38.3% in 2022). This means nearly half the sector is eating into reserves just to maintain operations.

If you’re in that 42%, every month you run a deficit brings you closer to the line. And if you only have 2-3 months of reserves? You’re playing Russian roulette with your organisation’s survival.

What “Healthy” Looks Like

The Charity Commission no longer prescribes a one-size-fits-all reserve target (they updated their CC19 guidance in 2023 to recommend tailored approaches). But 3-6 months remains a sensible guideline for most small-to-medium charities.

Consider your specific risk factors:

Red Flags

→ Read: Could Your Charity Survive a Funding Shock? The Truth About Reserves

Cost to Raise £1

What it measures: How much you spend on fundraising activities for every £1 of donation income.

Why it matters: This ratio determines whether your fundraising is sustainable. It also faces intense scrutiny from trustees, donors, and regulators — sometimes unfairly.

The Sector Reality

The counterintuitive finding: larger charities spend a higher percentage on fundraising than smaller ones, yet they’re more efficient per pound raised. Why? Economies of scale and specialist expertise.

The Critical Context That’s Often Missed

There is almost NO direct correlation between income shown in a year and the cost of raising that income.

This bears repeating because it’s the most misunderstood metric in charity finance.

If you invest £50,000 in face-to-face fundraiser recruitment this year, you won’t see most of that return until next year (or the year after). If you invest in legacy fundraising marketing, the returns might take decades.

Annual snapshots are misleading. This metric must be judged over multi-year periods.

What “Healthy” Looks Like

New charity exception: 35-50% is acceptable initially for donor acquisition investment. You’re planting seeds that will bear fruit in years 2-5.

Red Flags

→ Read: Is Your Fundraising Efficient or Just Expensive?

Dependency on Single Funding Source

What it measures: What percentage of your income comes from your single largest funding source?

Why it matters: Concentration creates catastrophic risk. One funder withdraws, one government program ends, and your entire operation is threatened.

The Uncomfortable Sector Reality

Brace yourself: ~95% of UK charities rely on one income stream for the majority (>50%) of their total income.

Even more striking: 50% of organisations are almost exclusively funded (at least 90%) by a particular income stream.

If you’re reading this thinking “Well, that’s just how it is,” you’re not wrong. But you’re also not safe.

Not All Concentration Is Equal

Here’s the nuance: academic research (University of Birmingham TSRC, 2020) found that concentration per se is not the problem — it’s what you’re concentrated on.

Stable income sources:

Volatile income sources:

The Government Funding Trap

If >50% of your income is from public sector contracts, you’re in the highest-risk category. The data proves it:

What “Healthy” Looks Like

Red Flags

Programme Spend vs Overhead

What it measures: What percentage of total spending goes to charitable activities (as opposed to fundraising, governance, and admin)?

Why it matters: This is the most publicly scrutinized metric — and ironically, one of the most misunderstood.

The Sector Reality

Variation by size:

The Overhead Myth That Won’t Die

There’s a persistent, damaging belief that “low overheads = good charity.”

It’s nonsense.

A charity that spends 90% on programmes but has no fundraising capacity, crumbling IT systems, and burned-out staff is not more effective than a charity that spends 75% on programmes but invests in infrastructure, talent, and sustainability.

The Cranfield Trust explicitly warns: overhead ratios that are too high or too low are both problematic. Spending >90% on delivery often indicates dangerous underinvestment in organisational capacity.

What “Healthy” Looks Like (With Massive Caveats)

But this varies wildly by charity model:

Red Flags

→ Read: Beyond the Overhead Myth — What Efficiency Really Means

3-Year Income Growth Rate

What it measures: Whether your income has grown, shrunk, or stayed flat over the last three years (ideally adjusted for inflation).

Why it matters: Growth creates options. Stagnation constrains them. Decline creates crisis.

The Volatile Sector Reality

The sector has experienced unprecedented turbulence:

But these headline numbers mask a two-tier sector:

Charities under £500k: Only 3.24% income rise in 2022 while expenditure rose 11.6% (squeezed) Charities £500k+: 6.6% growth in 2022/23

The Inflation Reality Check

This is critical: 2022 inflation hit 11% (highest in 40 years).

A £20 donation in 2021 is worth just £17.60 by 2024 (12% erosion). If your nominal income grew 5% but inflation was 11%, you actually went backwards in real terms.

Pro Bono Economics estimates the sector faces a £6.6bn spending hole due to the cost-of-living crisis.

What “Healthy” Looks Like

Red Flags

The donor consolidation warning: Remember, there are 1.6 million fewer donors in 2024 vs 2019, but average gift sizes are rising. Growth driven by a smaller, wealthier donor base is fragile growth.

Donor Data Management & Digital Capability

What it measures: How you manage supporter data and your overall digital maturity.

Why it matters: In 2025, digital infrastructure isn’t a “nice to have” — it’s the foundation of everything. Fundraising, retention, impact reporting, volunteer management, and financial sustainability all depend on it.

The Shocking Sector Reality

30% of small charities have NO CRM system.

Let that sink in. Nearly one-third of small UK charities are managing donor relationships with spreadsheets, emails, and hope.

Even worse:

The Performance Gap

Here’s what the research shows: charities with proper CRM systems see donor retention rates 15 percentage points higher on average than those relying on spreadsheets.

Think about that ROI: a £12,000 CRM investment that improves retention from 32% to 47% could generate £40,000+ in additional annual revenue.

Why The Gap Persists

60% cite lack of funds for infrastructure investment (up from 49% in 2023) 72% lack capacity/headspace (up from 45% in 2023) 47% cite staff/volunteer digital skills gaps

It’s a vicious cycle: organisations that most need digital efficiency can least afford it. And the longer they wait, the wider the gap grows.

What “Good” Looks Like

Red Flags

→ Read: 30% of UK Charities Have No CRM — Is Yours Holding You Back?

What Happens When You Lead on Guesswork Instead of Benchmarks

Let’s talk about what happens when charity leaders don’t have objective measures of organisational health.

Scenario 1: The Invisible Crisis

A £1.8m charity has 32% donor retention. The CEO thinks this is “about normal” based on conversations with a couple of peer organisations.

Reality: It’s well below the 40% sector average and significantly below the 50%+ that high-performing charities achieve.

The cost: If they had 50% retention instead of 32%, they’d retain an additional 90 donors annually. At an average gift of £250, that’s £22,500 in lost revenue every year — £112,500 over five years.

They don’t know they have a problem, so they never address it.

Scenario 2: The Misguided Board Pressure

A charity’s trustees are concerned that overhead costs are “too high” at 28% (meaning 72% goes to charitable activities).

Without benchmark data, they pressure the CEO to cut admin and support staff.

Reality: 72% programme spend is above the sector average of 69%. The charity is actually performing well. But the cuts happen anyway, leading to staff burnout, system failures, and ultimately poorer service delivery.

The cost: Reduced organisational capacity and staff retention, damage that takes years to repair.

Scenario 3: The Hidden Existential Threat

A charity has 85% of income from a single government contract. The leadership team assumes “most charities rely heavily on one or two funders.”

Reality: While 95% of charities have concentration, 85% from government contracts specifically is in the highest-risk category. When that contract ends (or is cut by 30% in a budget review), they have only 2.5 months of reserves.

The cost: Emergency mode. Staff redundancies. Service cuts. Possible closure.

All three scenarios have one thing in common: The leaders were making high-stakes decisions with incomplete information.

Benchmark Your Organisation in 5 Minutes →

From Defensive Decision-Making to Strategic Confidence

Let’s flip those scenarios.

The Same Organisation, With Benchmarks

Scenario 1 (Retention Crisis): The CEO takes the 5-minute health check, sees their 32% retention is flagged RED and well below the 40% benchmark. She presents this data to the board with a costed plan to implement a donor stewardship system. The board approves a £15,000 investment in a basic CRM and a part-time retention coordinator.

Result: Retention rises to 45% over 18 months. The organisation gains £25,000+ in additional annual revenue. The CRM investment pays for itself within one year.

Scenario 2 (Board Pressure): The CEO shows trustees the benchmark data revealing their 72% programme spend is above sector average. The conversation shifts from “cut costs” to “how do we maintain this while also investing in fundraising capacity to grow income?”

Result: A fundraising role is created instead of admin cuts. Income grows 12% in year one.

Scenario 3 (Existential Risk): The leadership team sees their 85% single-source dependency flagged as URGENT. They recognize this as a strategic priority, not just background risk. A 3-year income diversification plan is developed, funded, and executed.

Result: Within three years, no single source represents more than 45% of income. The organisation survives a subsequent 40% government contract reduction that would have previously been fatal.

The Six Ways Benchmarking Transforms Leadership

1. Replaces Anxiety with Clarity You stop wondering “Are we doing okay?” and start knowing exactly where you stand.

2. Turns Board Meetings from Defensive to Strategic You’re not explaining away problems — you’re discussing data-driven opportunities backed by evidence.

3. Identifies Your Greatest Leverage Points Not all problems are equal. Benchmarking reveals which challenges are holding you back most.

4. Builds Irrefutable Cases for Investment “We need a CRM” is a request. “Our donor retention is 15 points below sector average, costing us £30k annually” is a business case.

5. Creates a Culture of Continuous Improvement When measurement becomes normal, data-driven decision-making becomes organizational DNA.

6. Future-Proofs Your Organisation Regular benchmarking spots trends early, letting you adapt proactively instead of reacting in crisis.

From Assessment to Action — Your Next Steps

You now understand the seven pillars of charity organisational health. Here’s how to put this knowledge to work.

Step 1: Assess Where You Stand Today

Start with our free 5-minute Charity Health Check. You’ll answer seven questions (most offering ranges, so no need for exact figures) and receive an instant, personalized report showing:

Take Your Free Health Check Now →

Step 2: Share Results with Your Leadership Team

Don’t keep this to yourself. Your board, senior leadership team, and key stakeholders all need to see the same picture.

The report includes a one-page trustee summary specifically designed for board meetings. It contextualizes your performance, highlights risks and opportunities, and provides evidence-based recommendations.

Key conversation starters:

Step 3: Identify Your Top 2-3 Priorities

You cannot fix everything at once.

Your health check report will flag which areas need urgent attention. Focus on the intersections:

High Impact + Achievable = Start Here

Examples:

Step 4: Build Costed Action Plans

For each priority area, develop a specific plan with:

Step 5: Benchmark Regularly (Not Just Once)

Organisational health isn’t a one-time assessment. It’s a continuous practice.

We recommend benchmarking:

Track your progress over time. Are your interventions working? Are new risks emerging? Regular measurement creates accountability and momentum.

Where to Go From Here

This guide has given you the framework. Here are the resources to go deeper:

On Our Blog

External Resources

Work with Teque

If your benchmarking reveals that digital infrastructure is a critical weak point, we can help.

Teque specialises in bespoke software solutions for UK charities — custom CRMs, donor management systems, volunteer portals, and integrated databases designed around your workflows, not generic templates.

We understand the sector’s constraints: limited budgets, non-technical teams, mission-first culture. Our approach is phased, pragmatic, and focused on measurable ROI.

Explore Our Charity Solutions →

Your Organisation’s Future Depends on Knowing Where You Stand Today

The UK charity sector is at an inflection point.

The organisations that will thrive over the next decade won’t be the lucky ones. They’ll be the strategic ones — the charities that measure honestly, benchmark rigorously, and act decisively on the data.

Organisational health isn’t about perfection. No charity scores 100/100. Every organisation has strengths to leverage and weaknesses to address.

It’s about visibility. You can’t fix what you can’t see. You can’t improve what you don’t measure. And you can’t lead with confidence when you’re operating on guesswork.

The seven metrics in this guide — donor retention, financial reserves, fundraising efficiency, income diversification, operational effectiveness, growth trajectory, and digital maturity — form the foundation of sustainable impact.

Where does your organisation stand on each of them?

There’s only one way to know for certain.

Take the Free 5-Minute Charity Health Check →

Your mission is too important to lead on instinct alone.

Your Questions Answered

Q: Isn’t benchmarking just for large charities?

No. Small charities arguably need it more. You have less margin for error, fewer resources to waste, and greater vulnerability to shocks. The benchmarks are segmented by size, so you’re always compared to organisations similar to yours.

Q: What if my charity is unusual? Will the benchmarks still apply?

The seven core metrics apply universally — every charity needs donors (or funders), reserves, efficient operations, and sustainable income. The targets may vary by your specific model (e.g., a grant-maker will have different overhead ratios than a service delivery charity), but the principles hold.

Q: Can benchmarking tell me if my CEO/Fundraising team is performing well?

Benchmarking shows you how your organisation performs relative to peers. Individual performance depends on many factors, but if your fundraising efficiency or donor retention is significantly below benchmark, that’s a data point for performance conversations.

Q: What if our board disagrees with the benchmarks?

The benchmarks are drawn from 40+ authoritative sources (NCVO, Charity Commission, CIOF, etc.). They’re not opinions — they’re sector evidence. If your board questions them, dig into the underlying research. This is often an opportunity for education about sector realities.

Q: How do I convince my board that benchmarking is worth the time?

Show them the cost of not knowing. Use the scenarios from this guide: retention problems that cost £20k+/year, reserve levels that create existential risk, income concentration that makes you vulnerable to single-funder withdrawal. Benchmarking takes 5 minutes. The cost of blind spots is catastrophic.

Q: Should we benchmark against similar charities or the whole sector?

Both. The tool benchmarks you against charities of similar size and type. But sector-wide averages are also valuable — they show you the “typical” UK charity baseline. Being better than similar organisations is good. Being in the top quartile sector-wide is excellent.

Q: What’s the difference between this and a financial audit?

Financial audits examine whether your accounts are accurate and compliant. Benchmarking examines whether your performance is healthy and competitive. They’re complementary, not alternatives.

Q: How often should we benchmark?

At minimum, annually. Ideally, key metrics (retention, fundraising ROI, reserves) should be tracked quarterly internally, with full benchmarking assessment twice yearly. Organisational health changes — measurement should be ongoing, not a one-off event.

Begin Your Organisational Health Assessment →

5 minutes. 7 questions. The clarity you’ve been missing.