Untying the Budget Knots

25 Apr Untying the Budget Knots

I am working with an organization right now that needs to reboot their fundraising systems. They sent out their fall appeal last year and their renewal notices this year using email. It was a well-meaning but misguided attempt to save money – because their fundraising hasn’t been all that good lately.

They didn’t even send renewal notices to everyone on their list because they didn’t have email addresses for everyone.

I suggested that they mail a sequence of renewal letters, using paper and envelopes and stamps. Their initial answer was that there wasn’t money in the budget for stamps.

I’ve been writing a lot about budgeting enough money for fundraising because that is what I’ve been thinking about. (See How Much is Your Obsession with Overhead Costing You?)

It’s a serious issue for lots of land trusts.

If you trim your expenses to balance your budget in lean years, that seems like responsible management. But if, by doing so, you compromise your ability to raise money, you’ve shot yourself in the foot.

It’s easy to see how this can happen. The staff all work together. If the budgeting process leaves a gap between what can be raised and what needs to be spent, it’s only fair to ask everyone to share the pain equally. Right?

But sometimes……

• Cutting the fundraising expense budget means you don’t have stamps to send out the renewal mail.
• And that means that you’ll have to use email.
• And that means that you won’t get the same amount of money back.
• And that means program cuts will be even deeper.

Three weeks ago, I rhetorically asked whether a donor should support an organization with low overhead and a low “net” return over an organization with higher overhead but with more money made available to programs.

This is a similar situation. Wouldn’t you want this organization to choose spending the extra money on stamps to raise more net money for programs? Even if it was no longer in the budget?

To avoid this predicament, I have the following suggestions:

1. Start by separating out the fundraising budget. Consider how much fundraising will cost this year separately from what everything else will cost. This will be most helpfully done on an activity by activity basis.

2. Ask how much the program side needs fundraising to raise as a “net” figure. This could be an annual calculation, or better yet as a strategic plan, three-year calculation. Treat that number as your fundraising goal.

3. Clearly understand these fundraising goals, both short-term and long-term. Clearly understand how this year’s fundraising activities contribute to those goals.

4. Instead of assuming that cutting expenses across the board will be necessary to close a budget gap, consider whether adding expenses to the fundraising budget might result in raising more money. This strategy might be even more helpful if you are looking at budget periods longer than 12 months.

5. When cuts are necessary, have a very clear projection, activity by activity, of what will be spent and what the projected return will be. Instead of reducing expenses by some arbitrary percentage across the board, reduce them by eliminating a particular activity entirely. In other words, don’t put yourself in the position of eliminating stamps. Eliminate an entire appeal – or a specific event – and include the lost revenue in the elimination.

Cheers,

-da

Photo by Lukas Budimaier courtesy of Stocksnap.io.