Pareto Squared

If you are a fundraiser, you hopefully already know all about the Pareto Principle, or 80/20 rule (if not, check it out here).

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.

Lost you?

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.

Sean