A charitable leader recently told me he was discouraged, and a little bit paralyzed, by his operating budget. They were spending a lot of staff and volunteer time on four annual events that were not producing net revenue. It seemed there was a disconnect between gross and net. In spite of the hard and soft costs related to mounting the events, the board was insistent on continuing the events because the gross revenue number artificially boosted their revenue numbers.

This made me think about how we budget in our sector and how our collective decisions can have unexpected results.

Before you open your spreadsheet

1. Ask the board about their budget expectations.

• What is the board hoping to see from the budget process?
• Why do they want a balanced budget?
• Are they looking for cost containment?
• If they’d like to see innovation, how do they envision resourcing it?
• Do they want the budget to be tied to strategic direction?
• What does their goal of sustainability mean to them?

2. Determine development revenue target.

Intuitively, we know that the boards expect us show year on year increases to giving revenue. The dilemma we face as advancement professionals is counting on our donors’ consistency. One major donor’s decision to give will have an unexpected positive impact, with the opposite also being true.
Build your budget from the bottom up, appeal by appeal, and donor by donor. This detailed approach helps you to spot donors at risk. It may also shine a light on initiatives that are flagging, and others that show promise and need an injection of spending to increase giving. At the end, you’ll have a real number with a rationale behind it.

3. Propose a pilot project.

A strategy for introducing advancement innovation is to propose a pilot project. Identify the request for the board to invest $X in the budget, with hopes of a break-even $X achievement in the pilot phase. The board’s risk is modest and, if you are happy with how the pilot goes, you can roll it out in the second year with confidence and board support.

TIP: By seeking a board member to champion your pilot, board members will feel greater ease in giving it a green light!

4. Present budget numbers externally, and stretch numbers internally.

Boards and senior leadership may ask advancement staff to put forth a “stretch” revenue goal. They do this because they have a new expense (think renovation or purchase of pricey computer software) that they need to pay for.

The stretch goal is called that for a reason. To deliver on the stretch target, the advancement team has to find new and untapped sources of net revenue. It’s risky.

A successful approach can be to present the conservative, we’re-sure-to-get-here budget and—for board and senior staff only—also present yourstretch budget. Explain your strategies, measurement criteria and the potential risks to achieving the stretch budget. As soon as you hit the stretch target, leadership can proceed with the new expense item.

5. Turn cost-cutting upside down.

Cost-cutting may seem like the right move in a tough financial picture; a simple way to balance a budget. It also means cutting mission-critical programs and/or administrative staff, and/or fundraising and/or marketing costs.

While cost cutting is a swift way to bring a budget into balance, cutting programs (and the staff who lead them) impacts mission delivery. When mission-centric programs are cut, donors may withhold their giving, making matters worse.

Instead, advocate for improved advancement practices, reconsidering prospect management, major and planned giving programs, annual appeals, donor stewardship and communications strategies.

Raising resources builds the organization. Cutting mission-driven costs is a race to the bottom.

6. Look hard at events.

This may be a time to wind down, or even end, a fundraising event. Think about the true net proceeds (including the time spent by staff and volunteers). Explain how you will use your new found time for greater fundraising impact. Avoid the temptation to speak about the value of “engagement” and “friend-raising” to rationalize continuing a money-losing event.

7. Talk with your trusted suppliers.

What recommendations can they make to improve your revenue outcomes, or reallocate spending for greater impact?

8. Consider your levers.

Among all the revenue-generating programs you run, is there a lever that you can push a bit harder on in order to achieve some quick wins? Can you back off on other initiatives, such as those with a longer runway, to pay more attention to bringing more money in now?

9. Talk to your leadership volunteers.

Arrange one-to-one meetings with board members seeking their advice and counsel on what needs to be in your budget.

• Are there development opportunities being missed?
• How do they think we could build better donor relationships?
• Can they see themselves personally being more involved as a giver?

Presenting a development budget is an art and a science. Ask for input, scrutinize your revenue streams and consider the investments you make in every development program. And set a stretch budget! You’ve got this.

Sandra Baker, CFRE is the Director of Advancement at Hamilton District Christian High, and a charitable sector consultant.