12 May Pareto Squared
If you are a fundraiser, you hopefully already know all about the Pareto Principle, or 80/20 rule.
This rule tells you that 80% of revenue will come from 20% of your donors.
But you might not yet have heard about Pareto2 or Pareto Squared.
This rule only works across a large data set, and across a few years, but it is another useful thing to understand if you want to maximise future income.
What is it?
80% of revenue will come from 20% of donors.
Well, 80% of that revenue will come from 20% of them.
20% of my top 20% donors, which is 4% of all my donors will give me 80% of 80% of my revenue – which is 64% of money.
So 64% of revenue will come from just 4% of donors.
Beautiful – and, if you are good at following up mid value donors, major donors and bequests, surprisingly accurate.
Here’s a video explaining it.