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"WE DON'T NEED A BUDGET": A COMMON MISCONCEPTION SLOWING YOUR GROWTH

Updated: Jul 18, 2023



**Warning –This post might sting a little, but before you start reading, know that it’s coming from a place of understanding with the hopes of encouraging you to make a few positive changes for your mission’s benefit.**


It isn’t uncommon for organizations to reach out to me, requesting help raising money. I mean, I am a nonprofit consultant, after all, and raising capital is what I do . . . well, a part of what I do. The conversation often goes like this:


ME: I love fundraising! It’s my favorite!


ORG: *silence because they can’t believe that I truly do love fundraising*


Sidebar: For the record, I do love it. Every great mission needs a greater purse behind it so the work can continue. No money? No mission.


ME: So what’s your overall organizational budget, and how does this fundraising initiative support that budget?


ORG: What? What do you mean by a budget? We don’t have a budget.


ME: You don’t have a budget? Then how do you know how much money you need to raise to support

expenses?


This question is met with various versions of “We’re just an all-volunteer organization” or “I’m not a math/financial person,” but all lead to “No, we don’t have a budget.”


If you’ve been following along so far and don’t understand the issue. Please allow me a moment to be frank: EVERY. SINGLE. NONPROFIT. needs a budget, no matter the size or structure. Without one – and a well-developed approach to achieving your organization's financial goals – you’ll spend way too much time scrambling for funds.


Another important reason why you NEED to have a budget? Donors, foundations, and other funders must feel secure and confident when they give you money. They want to know that their funds will be well-spent and carefully managed. How do you provide that security if you don’t know where your dollars are going?


By now, I hope I’ve converted you into a budget believer.


If I can hazard a guess, your jaw is probably clinched, and your shoulders are tensed as you feel overwhelmed about pulling together a budget for your organization. Take a deep cleansing breath, relax your muscles, and know this: Building a budget isn’t difficult. It’s as simple as documenting income in and income out. If you can coordinate your household budget and balance your personal accounts, you can do the same for your nonprofit organization.


For example, if your organization’s annual expenses total $250,000, that means you need to raise at least $250,000 to break even. Simple, right?


After you determine how much money you need to operate, you need to determine how you will acquire the money. Grants? Events? Major gifts? Individuals? Campaigns? All of the above?


Income can be generated from two sources – fees for services/programs and donations. If you are an organization that does not offer fee-based programs/services, then 100% of your income needs to come from fundraising, and that income should be as diversified as possible.


If more than half of your money is from a single funding source, you must branch out and consider additional revenue streams. For example, I worked with an organization that funded 85% (!!!!) of its expenses with one grant! What if that grant source cut back or changed its focus area? The organization likely would go under.


At the organization where I was executive director (a humane society), we had fees for services and donations, each totaling approximately 50% of our income. The monies from fees for services came from fees associated with adoptions, our low-cost spay/neuter clinic, and our low-cost pet wellness clinic. The monies from fundraising came from events, a direct mail/digital marketing program, a monthly giving program, grants (mostly restricted), and bequests.


Leading up to each fiscal year start (ours was July 1st), I developed a budget for the new year based on previous years' income and expenses while also considering potential outliers. I would list out expenses for the coming year and then figure out where the money was coming from to cover them. For example, let’s again say you need $250,000 to cover expenses and you have no fee income; your income might look like this:




Obviously, this example is simplified, but the purpose is to show that once you have a budget, you can then build goals for each source and adjust as needed throughout the year. Will your projections be “best guesses”? Of course. There is no way to account for every outlier, but at least you have realistic goals.


On the expense side, you’ll need to account for operational expenses (utilities, salaries, copy paper, postage, event fees, etc.) and, again, try to achieve a positive balance in relation to your income.


To help you get started, I’ve developed a budget template you can use in Excel or Google Sheets. I have not included formulas because you may need to add or delete categories depending on your organization, as some income or expense areas may not be applicable.


This template comes from six years of refinement as an executive director, and I hope you find it helpful and easy to use! You can download it HERE. (NOTE: The budget template was built in Google Sheets, and you can make a copy and share it to your Google Drive for editing).


If you have any questions or comments, please feel free to reach out to me at Julie@TheNonprofitMaven.co. Happy budgeting! (And I mean it!)




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