An old friend and I were catching up the other day and she observed, “Your approach to philanthropy has really changed since you joined a board, hasn’t it?” While I’m not sure that it’s been a change in only one direction, I do know that leading a board has made me a better consultant, more cognizant of the tough realities of non-profit management and tied into the calendar. And that means it’s budget planning time… I’ve been diving through the waves and waves of non-profit budget planning tools available, both to make sure we’re doing the best possible job as a board, and to take a look at what’s out there, as I wear my “consultant” hat. But first, a few thoughts on the budget process before the tools are needed…
It may be cold comfort for those who recognize themselves in these situations, but here are the budget and goal-setting processes we hear too often:
- The budget is set as a mandate from on high and the goal is delivered, Moses-like on tablets carried from the top the mountain...
- The year’s impact goals are never really set and the budget is forced to fit the fund development projections…
- …and that projected goal is developed with a shrug of the shoulders – “Who knows what we can raise next year? We’ll know when we do it…”
- …or the budget and goals for the coming year are dictated by donor interest, “We’ll do what our donors support. How should I know what our budget should be until our donors tell us what they want?”
Being a responsive organization that can build visionary plans and achievable goals does not involve carrying stone tablets, delivering divine proclamations. And being a donor-centric organization stops considerably short of doing whatever “The Donor” – whoever that mythical being is – wants accomplished.
On to the ideal!, says the consultant side of me.
Ideally, the organization’s leadership will begin with an annual review of the strategic plan: where has progress been made? What progress is next? Which strategic goals need adjustment? Which have been accomplished? And from this review of the agreed upon, multi-year strategic plan, the year’s tactical goals for creating impact and outcomes should emerge. Then the team asks themselves: what is needed? What investment of time, equipment, or resources is needed to achieve this goal? Is it new staff? New phone system? And a first pass at the budget is developed from the strategic goals to the impact goals sought in the next fiscal year.
Simultaneously, the fund development team is building their goal from their gifts received and name-by-name projections (you are doing name-by-name projections on your table of gifts, right?!). The projected goal is hand-built and movement toward key thresholds like reaching 20% of the philanthropy goal from board giving is established. This name-by-name projection is added to the projections for the broader channels of funding, based on program tweaks or overhauls (and the budget costs for those factored on too!) to arrive at an achievable goal.
THEN, these two are compared and any gap is discussed calmly, with a spirit of “Can Do!” give and take. Cuts are made or more cost-efficient ways to do things are uncovered and the goal grows with innovative ways to increase giving and other revenue sources.
Isn’t that exactly the way it happens every year? Riiiight. Perhaps in consultant-land… Back here in reality, it is seldom that tidy. But that doesn’t mean we can’t strive for it.
Here are the TWO things (just 2!) we can’t cut corners on:
- You must create impact goals tied to the revenue needed to achieve them. We are doomed to bad business planning and low sights when we don’t know what it costs to deliver the change we seek to make.
- You must hand-build that philanthropy goal from the ground up, person by person at the top of your table of gifts and campaign by campaign
If you find yourself applying a flat percentage increase to your fundraising goals or to build your new budget number:
STOP RIGHT NOW.
TURN AROUND AND GO IN ANOTHER DIRECTION.
Success in impact and in fund development requires that your goals must be tied to reality. If you’re having trouble writing a persuasive case for support or convincing donors to give, it’s probably because you don’t have a great answer to this question.
So, to those tools to get this done:
I mentioned in an earlier blog piece, the embarrassment of riches that the wonderful folks at the Wallace Foundation have provided through their new Financial Planning Toolkit.
- For those going through the budget planning process – especially board leaders – here’s a practical, step-by-step guide for leading this in your organization: Five Step Guide to Budget Development from the FMA. This readable .pdf is suitable for sharing with the whole board.
I was also happy to find a thoughtful piece on when to run a surplus budget, break-even budget, or deficit budget from Blue Avocado written by Jeanne Bell called “Nonprofit Budgets Have to Balance: False!”. Did you know you had a choice? You do.
Need even more? The National Council of Non-Profits has an extensive toolkit specifically on the budget building process.
A final thought: my board experience has also taught me that it is just as important that your fund development committee (and fund development staff!) be conversant about your 990 – the ultimate reflection of this entire process – as your finance committee. Donors deserve to know how your budgeting and spending choices will carry out their giving wishes – that’s the best stewardship and the right way to be donor-centric.