This week we had a wonderful conversation with a fundraiser who reached out to us with an all-too-common fundraising dilemma: “I need to set a fundraising budget, but I have no idea where to start!”
I confess that I have more than a few gray hairs from the budgeting process throughout my career. A typical budgeting process usually goes something like this: a fundraiser works hard, pulls out all the stops, and manages to JUST reach their goal. Their reward? An arbitrary increase to the next year’s fundraising goal.
That’s not to say organizations shouldn’t strive for growth! On the contrary: the budgeting process is a chance to step back, look at an organization’s success, and determine the best areas for growth. It’s a time to build momentum and work toward both short-term and long-term goals.
For this to be successful, the process needs to be strategic and data-informed.
Problems arise when goals are set based on ill-informed targets. A 20% increase in revenue may be a realistic target, or it may be completely out of reach, given an organization’s current staffing level and internal resources.
This is a major contributor to the turnover crisis in the fundraising profession. Good fundraisers are given arbitrary goals, and either walk away because they don’t have the support to achieve those goals, or, worse, lose their jobs when the goal is not met.
This problem arises when organizations focus on results and not the processes behind them.
A year of fundraising is full of nuance - from surprise gifts to donor attrition, the factors that influence a final revenue are often too numerous to count.
The solution to this is to measure activity instead of results.
My “aha moment” with this came earlier in my career when my organization lost a major funder. We were cruising along, on track to hit our fundraising goal, when all of a sudden, a major corporation that gave us funding year after year decided to suspend their giving.
The major controversy (and ensuing media coverage) was the farthest thing from my control. We cultivated the funder, did all of our reporting, and built a relationship…but the factor outside of our control is what was reflected on our bottom line.
We pivoted and were able to cover for some of the lost revenue, but this was when we needed a tracking system that accurately measured the health of our fundraising process.
When you’re developing an annual fundraising budget, consider the distinct activities that will feed into the final revenue number:
How many donor visits are being conducted every week?
How many email and direct mail solicitations are being sent?
How many grants are being submitted?
How successful are your events? And how many resources - both financial and staff time - are going into them?
This is where you consider your closing ratio and sales math. Assess how much activity it took to achieve goals in previous years and work back from there. Did it take five new donor visits to secure every $1,000 of new support? Then you’ll need another 50 visits if you want to raise another $10,000.
As you go through the year, this is how you’ll separate the signal from the noise. You may run into a situation where a major funder falls through because of a situation outside of your control - but if you keep tracking activity, you’re likely to recover and maintain success over the long term.
It’s also a place where you can find areas of improvement that may not have been noticed otherwise. Maybe your team is having a great year because a surprise major gift came through. That’s great, but you don’t want to rest on your laurels - if a team member is using strong revenue as a chance to lower their activity output, it’s important to coach them and maintain those numbers regardless of revenue.
Ultimately, this process is where successful fundraising budgets are created.
Your organization may have major needs in the year ahead. If you need a major increase in revenue, it’s time to look back at your activities from the year before and see where new revenue can be created. Instead of trusting your fundraising team to wave the magic fundraising wand and bring in new dollars, look critically at where output can be increased.
Here are some key questions to consider as you go through that process:
Is your staffing level adequate for the goal you’re setting? If your team is at capacity but you need to increase revenue numbers, it’s time to expand the team. If you have to add 100 new donor visits over the next year, that’s likely too much for a small team to handle. Be prepared to hire and train the staff you need to achieve organizational growth.
Does the team need any new tools? This may be a CRM, new email platform, or consultant to help streamline an area like event management or grants. Consider the ways this could free staff to focus on other areas and increase fundraising activity.
Are any fundraising initiatives underperforming? Look at any areas where activity isn’t leading to results. This is an area where events are often seen in a new light: if staff time is being sapped by events, it may take focus away from donor visits and other areas that can generate revenue. Consider shifting focus from underperforming areas so staff can spend time on more proven areas of fundraising success.
Budgeting is a hard process, but when you base a budget on activities and strategically assess the resources you need to achieve a goal, it can be empowering for fundraisers and management staff.
If you’re struggling to set your budget or need help measuring activity, we’re here to help! Reach out to Team Kat & Mouse today to schedule a free consultation.
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