Measuring the ROI of Grant Seeking
Tldr: Return on investment is a far better measure than approval rate. An approval rate of >50% means you might not be stretching enough to ensure growth or long-term sustainability.
“What’s your approval rate on grants?”
Over the last 17 years that I’ve been a grant consultant, I’ve been asked this question by dozens of prospective clients. I hate that question and here’s why:
It’s not a good measurement of grant-seeking success. I’ll prove it.
Let’s say you are considering two grant consultants (or employees) for your organization: Abe and Bob. You ask the question, “What was your approval rate on grants last year?” They answer:
Abe | Bob | |
Proposal Approval Rate | 75% | 46% |
Who is the best grant professional? Abe, obviously.
But let’s add some context.
Abe | Bob | |
Approval Rate | 75% | 46% |
Proposals Submitted | 4 | 100 |
Now who is the better grant professional?
You might still say Abe - maybe he was more discerning about which grants he pursued. Perhaps Abe didn’t waste time seeking 54 grant opportunities that didn’t pay off.
Let’s keep adding data.
Abe | Bob | |
Approval Rate | 75% | 46% |
Proposals Submitted | 4 | 100 |
Number of Funders Pursued | 1 | 68 |
Number of Clients | 4 | 14 |
Wait a second!
Abe only has four clients and has only solicited grants from ONE funder?
Okay, maybe Abe isn’t quite the go-getter that Bob is, but his success rate is still much better. If your goal is to get a grant from that ONE funder, Abe might be a better choice.
Let’s look at one more data set:
Abe | Bob | |
Approval Rate | 75% | 46% |
Proposals Submitted | 4 | 100 |
Number of Funders Pursued | 1 | 68 |
Number of Clients | 4 | 14 |
Total $ Awarded | $75,000 | $2,659,636 |
Total charged to clients | $80,000 | $175,000 |
Abe is terrible.
That one funder he pursued only gave grants of $25,000 each. He got three of them, but he charged each of his clients $20,000 for writing the grant! Three of his clients earned a measly 20% back on their investment, but that one poor organization lost the entire $25,000.
Overall, for every dollar Abe’s clients paid him, they got only 93 cents back.
Suddenly, Bob is looking much better.
He has a broader number of funders and his clients made more than $15 from every dollar they paid him! This is called the return on investment (ROI).
How does this compare to the national average? No one is actually sure what the “average” ROI for grant seeking is, but one estimate I’ve seen from the Association of Fundraising Professionals is $5:1 (this includes the cost of both seeking grants and managing awards).
Hurrah for Bob! Bob is our hero! The return on investment for his services are fantastic.
THE TAKEAWAY
Whether you are hiring a consultant or trying to measure the value of your staff grant professional, you can see why the approval rate just isn’t the best measure of success.
In fact, I suggest an approval rate of more than 50% is NOT a point of pride.
Yes, I’m saying if you don’t FAIL at least half the time, you are not doing well. Based on my experience, clients with approval rates of 50% or more aren’t stretching -- they are going after the same funders over and over (like Abe). It might feel great to have those high approval rates, but, in the long run, it’s dangerous.
Here’s why.
Even if your goal is to maintain your current level of grants, there will always be entropy: Foundations sunset (close), they change geographic focus, or they decide you need to diversify your funding and cut you off.
At the same time, it might take two or three years of proposals before a new funder is truly ready to consider your application (you learn a lot from applying), so if you wait until you lose funders before you try to replace them, you could be in trouble.
Consistently pursuing more than twice as many grants as you expect to be awarded means you will always be working toward gaining new funders.
Hearing “no” more often than you hear “yes” feels discouraging when it happens, but focusing on the ROI helps! Remember, “no” usually just means, “not this time.”
How do I answer the question, “What is your approval rate on grants?”
I ask clarifying this question:
“Do you want to know my approval rate or do you want to know my ROI?”
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