Scaling Up Your Nonprofit Budget for YOY Growth

As your nonprofit progresses over time, stagnation becomes the enemy. To reach more clients, you’ll need to widen your net in a variety of ways: expand your reach, broaden your plans, and hire more employees. Before you can focus on these facets of your business, however, you’ll want to look closely at scaling up your budget.

With your nonprofit’s growth will come the need for more money. Scaling up your yearly budget might seem daunting, but there are a number of ways to approach the touchy topic of funds. 

Fundraising: To grow and thrive, it’s incredibly important to diversify your fundraising to increase cash flow and avoid depending entirely on one source of donations. For example, if you’ve done a successful phone banking campaign, look into something completely different, like an event, to draw in a different audience of new donors. Be aware that not everyone likes to donate the same way; try accepting one-time donations as well as recurring gives, and make donating easy with technology like QR codes, donation apps, and an easy-to-navigate website. 

Grants: Donations can ebb and flow, so utilize grants to bolster your budget. Large, prestigious grants are enticing but may have many applicants, so consider going after smaller, lesser-known grants, as well – and apply for more of them. Keep in mind, though, that grants are not a quick fix and have their own set of complex rules that come with their own costs, as well. 

Consider Costs: As your nonprofit grows, so will your costs. Be sure to factor employee costs, supplies, and overhead into your expanding budget. Remember to upgrade your technology, as well. For example, ensure your website can handle more traffic as interest (and donations) increase. As a general rule of thumb, overhead and administrative costs should only be about 25% of your organizational budget, with the other 75% going toward programs or direct services. You’ll be expected to speak to this breakdown by potential funders and donors who want to ensure their money is going mainly toward your mission, not your office snack drawer. Don’t forget to account for inflation. It will affect both your costs and your revenue fairly equally, but you may need to check trends on big-ticket items, like rent, and tweak your budget accordingly. Additionally, time spent is an easy cost to forget, but it’s very important to include in your scalability calculations.

Assess Data: Use what you know to direct your money to where it will be used most efficiently. Take a close look at your return on investment (ROI) data; calculate it by dividing your fundraising revenue by your fundraising expenses. You can use this information to make better decisions about future fundraising. It’s also a good idea to have tangible facts and figures for your stakeholders. Compare your data year-to-year to look for patterns, leverage your successes, and identify opportunities. Would increased funding help struggling facets of your nonprofit?

Keep Employees Happy: Strike a balance between raises for hardworking employees and spending funds to hire new employees. It’s much more expensive to hire and train new personnel than it is to keep existing employees, so invest in the people who make your nonprofit great - we’ll discuss employee burnout another time! Additionally, consider your overarching goals: all nonprofits strive to make the world better. Nonprofit employment culture should be a reflection of the same values and standards you hold for the social issues you’re trying to solve. As such, for the sake of both morale and human decency, it’s imperative that employees are granted a livable wage. You can find a wage calculator here: https://livingwage.mit.edu

Reinvest Your Profits: Consider the myth of a profit-free nonprofit officially busted: yes, a nonprofit can still generate a profit! If you’re growing, you’re making money, and you’ll need to factor that in as you scale up your budget. However, remember that as a nonprofit, there are no shareholders, and money can’t be divided among “owners.” Thus, all profits must go back into growing the business. Reinvesting is key to scaling up and growing your span and team. Putting together a year-over-year (YOY) increase to scale up your budget can feel like a shot in the dark, but your board and your accountant should provide you with data and advice to make informed decisions. There will always be some risk when you push your budget goal beyond last year’s, but that’s why it’s important to use these tips and be ready with new ideas to diversify. 

Need help scaling up your budget? Mockingbird Analytics can help! Contact us now for personalized advice, and get ready to grow your nonprofit.