UK charities aim for £4 returned per £1 spent on fundraising. But annual snapshots mislead. Learn how to measure true fundraising efficiency and ROI over time.

“We Spent £50,000 on Fundraising Last Year. Was That Too Much?”

It’s the question that creates more heat than light in charity boardrooms across the UK:

“How much should we be spending on fundraising?”

Your finance committee scrutinises every line item. A trustee challenges the face-to-face budget: “We spent £30,000 and only raised £45,000? That’s a 67% cost ratio! We’re wasting donor money!”

Your fundraising director tries to explain: “But those donors will give for years. The lifetime value is…”

The trustee cuts her off: “I’ve read that good charities should spend no more than 25% on fundraising. We’re at 67%. This is unacceptable.”

Sound familiar?

Here’s the uncomfortable truth: both the trustee and the fundraising director are partly right and partly wrong.

The sector benchmark is indeed £4 returned for every £1 spent — a 25% cost ratio or 4:1 ROI. The NCVO and Institute of Fundraising both cite this figure. Most charity finance committees treat it as gospel.

But this “simple” ratio masks extraordinary complexity — and misapplying it leads to disastrous decisions that cripple fundraising capacity and doom charities to stagnation.

The real questions aren’t “What did we spend?” or “What did we raise?”

The real questions are:

This post will give you the frameworks to answer those questions properly — so you can distinguish strategic investment from wasteful spending, defend smart fundraising budgets to skeptical trustees, and actually measure what matters.

How Efficient Is Your Fundraising? Benchmark Your Performance in 5 Minutes →

Understanding the £4-for-£1 Benchmark (And Its Limitations)

Let’s start by validating the benchmark, then deconstructing it.

Where the 25% Rule Comes From

The NCVO/ICAEW standard: £4 returned for every £1 spent on fundraising.

This means if you spend £100,000 on fundraising in a year, you should generate at least £400,000 in donations that year. That’s a 25% cost ratio or 400% ROI.

Sector-wide data supports this:

So the benchmark is real and widely accepted.

But Here’s What the 25% Rule Doesn’t Tell You

1. The Timing Problem

A face-to-face fundraiser costs £242 to acquire (sector average). That donor typically starts giving £15/month.

Year 1 calculation:

But watch what happens over 5 years (assuming 60% retention for regular givers):

Cost ratio over 5 years: 30% (£242 cost / £799 revenue)

That’s EXCELLENT efficiency. But you’d never know it from the year-one snapshot.

2. The Method Matters Problem

Different fundraising channels have radically different economics:

Face-to-face: High upfront cost, long-term return (ROI timeline: 2-3 years) Direct mail: Moderate cost, medium-term return (ROI timeline: 12-18 months) Digital ads: Low-to-moderate cost, fast return but often lower lifetime value (ROI timeline: 6-12 months) Legacy fundraising: Very low annual cost, very high long-term returns (ROI timeline: 10-30 years!) Events: Variable cost, immediate return but high resource intensity Major donor cultivation: High time investment, transformational returns (ROI timeline: 6-24 months)

You cannot judge all methods by the same annual benchmark.

3. The Growth vs Maintenance Problem

Maintaining current donor base: Should achieve 15-20% cost ratio if you have decent retention Growing donor base: Will require 30-40% cost ratio in growth years (you’re investing in acquisition)

A charity spending 35% of income on fundraising could be:

You can’t tell the difference without context.

→ Read: Why 60% Donor Attrition Is Killing UK Charities

Why Last Year’s Numbers Tell You Almost Nothing

Here’s the single biggest error charity boards make:

They judge fundraising efficiency based on the income that appears in the same financial year as the expenditure.

This is wrong. Profoundly, dangerously wrong.

The Lag Between Investment and Return

Real-world example:

A £1.2m charity launches a face-to-face campaign in April 2024:

The board looks at the 2024 accounts:

Trustee reaction: “This was a disaster. We should never do face-to-face again.”

But the reality:

Those 250 donors will (with 60% annual retention):

Actual cost ratio: 55% (£60k cost / £109k revenue)

And some of those donors will upgrade, give one-off gifts, and continue beyond 5 years.

The ROI is excellent. But it’s invisible in year-one accounts.

The Legacy Problem (Even More Extreme)

Legacy fundraising is the most cost-effective channel in existence — but only over decades.

Typical legacy programme costs:

Typical annual legacy income timeline:

If you judge legacy fundraising by year-one ROI, you’d never do it.

If you judge it over 10 years, it’s the single best investment you can make.

How to Think About Timing

The principle: Match the measurement period to the investment timeline.

Annual snapshots are useful for cash flow. They’re useless for strategic ROI assessment.

Realistic Benchmarks for Different Channels

Let’s get specific. Here’s what you should expect from different fundraising methods:

Face-to-Face (Street/Door-to-Door)

Year 1 cost ratio: 80-150% (you’re underwater) 3-year cost ratio: 35-45% (breaking even to profitable) 5-year cost ratio: 25-35% (strong ROI)

Why it works:

Red flags:

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

Direct Mail (Acquisition)

Year 1 cost ratio: 80-120% 2-year cost ratio: 40-60%

Why it works:

Red flags:

Digital Advertising (Facebook/Google)

Immediate cost ratio: 40-80% for appeals 12-month cost ratio: 30-50% if converting to regular giving

Why it works:

Red flags:

Legacy Marketing

1-3 year cost ratio: Often >100% (you’re investing) 5-10 year cost ratio: 5-20% (exceptional ROI)

Why it works:

Red flags:

Events (Gala Dinners, Fun Runs, etc.)

Immediate cost ratio: 30-60% for established events Can be 80-120% for first-year events

Why they work:

Red flags:

Major Donor Cultivation

Cost ratio: 5-15% (extremely efficient)

Why it works:

Red flags:

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

THE REAL EFFICIENCY FORMULA: DONOR LIFETIME VALUE

Why Cost-Per-Acquisition Means Nothing Without Retention

Here’s the metric that actually matters:

Donor Lifetime Value (LTV) vs Customer Acquisition Cost (CAC)

The formula: LTV = Average gift × Gifts per year × Average donor lifespan CAC = Total acquisition cost

The target: LTV:CAC ratio of at least 3:1

Example: The Face-to-Face Calculation

Acquisition:

Scenario A: Poor Stewardship (35% retention)

Scenario B: Good Stewardship (60% retention)

Scenario C: Excellent Stewardship (60% retention + upgrades)

The difference between poor and excellent stewardship: £198 per donor.

At scale (500 donors): That’s £99,000 over 5 years.

Same acquisition cost. Radically different efficiency.

This is why retention is the multiplier for fundraising efficiency. You can have the cheapest acquisition in the world — if donors leave immediately, you’ve wasted every penny.

Why Your Fundraising Might Be More Expensive Than You Think

Annual cost ratios miss several hidden expenses:

Hidden Cost 1: Staff Time (The Biggest One)

The problem: Your finance report shows “£50k fundraising expenditure” but doesn’t account for:

Real cost: £50k hard costs + £40k staff time = £90k total fundraising cost

Your “25% cost ratio” is actually 45%.

Hidden Cost 2: Infrastructure

Do you factor in:

These are fundraising costs even if they’re not in the “fundraising” budget line.

Hidden Cost 3: Opportunity Cost

The question: What else could your staff be doing?

If your fundraising coordinator spends 15 hours/week on manual data entry and gift processing (because you don’t have proper systems), that’s:

Poor systems don’t just cost money. They cost opportunity.

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

Hidden Cost 4: Failed Experiments

Not all fundraising works. That’s okay — experimentation is necessary.

But if you’re not tracking ROI by channel and stopping what doesn’t work, you’re burning money.

Example: A charity runs Facebook ads for 3 years generating £20k annually at £18k cost (90% cost ratio).

“It’s almost breaking even, so we keep doing it.”

But the reality: That £18k x 3 years = £54k could have been invested in face-to-face (proven 30% 5-year cost ratio) or major donor cultivation (10-15% cost ratio).

Opportunity cost: £30-40k in lost efficiency over 3 years.

The Efficiency Assessment Framework

Stop asking “What’s our cost ratio this year?”

Start asking these questions:

Question 1: What’s Our LTV:CAC By Channel?

Track:

You need a CRM that tracks acquisition source and lifetime giving. Spreadsheets can’t do this at scale.

Question 2: What’s Our Retention Rate By Cohort?

Track:

If you acquired 500 donors in 2023 at £100 each (£50k investment) but only 100 are still giving in 2025, your effective acquisition cost is £500/donor, not £100/donor.

Question 3: What’s Our Multi-Year ROI By Campaign?

Track:

This requires cohort analysis, not annual snapshots.

Question 4: Where Are We Investing vs Maintaining?

Divide your fundraising budget into:

A charity in growth mode should expect 30-35% overall cost ratio. A mature charity in maintenance mode should achieve 20-25%.

Question 5: What’s Our Cost Per £ Of Usable Income?

Not all income is created equal:

Adjust your efficiency calculations for income quality, not just quantity.

The Strategic Decision Framework

Invest When:

✓ LTV:CAC ratio is 2:1 or better (even if year-one cost ratio looks bad) ✓ Retention rate is 45%+ (your stewardship is working) ✓ You’re building long-term capacity (legacy programme, major donor pipeline) ✓ Infrastructure investment has clear ROI (CRM saves 10 hours/week = £13k/year value) ✓ Market opportunity is time-limited (government match, major donor considering legacy)

These are strategic investments that will pay off over 3-5 years.

Cut When:

✗ LTV:CAC ratio is <1.5:1 after 3 years (channel fundamentally doesn’t work) ✗ Retention rate is <30% (acquisition is wasted because you can’t keep donors) ✗ You’re repeating failed experiments (doing the same thing expecting different results) ✗ Staff time is dominated by admin (systems investment would free capacity) ✗ You’re in maintenance mode with growth-level spending (mature charity shouldn’t need 35% cost ratio)

These are resource drains, not strategic investments.

The Nuanced Cases:

“We spent £30k on a new channel and raised £25k”

“Our legacy programme costs £20k/year and generates £40k/year”

“Our cost ratio is 35% but we’re growing 15% annually”

“Our cost ratio is 22% but income is flat”

Why You Can’t Measure This Without Proper Infrastructure

Everything in this post depends on one critical capability:

Tracking donor lifetime value by acquisition source and cohort.

You cannot do this in spreadsheets at any meaningful scale.

You need:

✓ CRM that captures acquisition source for every donor ✓ Integration between donation platform and CRM (automatic data flow) ✓ Cohort analysis dashboards showing retention and lifetime value by source and year ✓ Multi-year revenue tracking by campaign ✓ Staff time tracking (at least rough allocation to fundraising activities)

The ROI on this infrastructure:

A £15k CRM investment that reveals:

That’s £65k in value from a £15k investment. And it compounds every year.

Without systems, you’re flying blind. You’re making £50k+ budget decisions based on incomplete annual snapshots, instinct, and trustee opinions.

Moving Beyond the 25% Myth to True Performance Management

The 25% cost ratio is real. It’s just not the whole story.

Efficient fundraising isn’t about hitting an arbitrary percentage in annual accounts. It’s about:

The charities that will thrive in 2025 aren’t the ones spending the least on fundraising.

They’re the ones spending strategically and measuring ruthlessly.

They track LTV:CAC by source. They understand cohort retention. They judge campaigns over multi-year timelines. They invest in systems that enable data-driven decisions.

And their boards trust them because the data tells a story annual snapshots never could.

Where does your charity stand?

Are you defending fundraising budgets with vague assertions about “long-term value”? Or with hard data showing LTV:CAC ratios, retention rates by cohort, and multi-year ROI?

Are you making strategic decisions based on annual cost ratios? Or on lifetime value analysis?

Are you tracking fundraising efficiency in spreadsheets? Or with systems designed for the job?

The efficiency gap is widening. The charities with data win. The ones without data guess.

Take the 5-Minute Charity Health Check — Assess Your Fundraising Efficiency Against Sector Benchmarks →

Because in 2025, “We think our fundraising is efficient” isn’t good enough anymore.

You need to prove it. And that requires the right measurement frameworks, the right systems, and the right strategic mindset.

Efficient fundraising isn’t cheap. But wasteful fundraising is expensive.

Know the difference.

FURTHER READING