Many of these same concepts can be applied to preparing the budget of the overall nonprofit organization.
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Number One: Income First!
The biggest mistake we can make in preparing our budget is doing the expense side before we establish our income goal for the year. The well-run shop knows it must live within its means. Make a chart listing your primary sources of gift income; direct mail, grants, events, major gifts, etc.
Assign a goal to each gift income source. Create a “table of gifts” showing how you will achieve your major gift goal. Other large gift income sources may also need some explanation. Your overall gift income goal is the “sum of the parts.”
Two: Cost of Fundraising. Be intentional!
What cost of fundraising goal do you want to achieve for the year? 16%? 21%? 25%? Too often we learn our cost of fundraising at the end of the fiscal year. Set a goal for the number you want to hit. Every shop deals with “gray areas” like publications and alumni relations in a different way and adjusts cost of fundraising up or down, accordingly.
Cost of fundraising as a percentage of your gift income goal will yield your total development budget for the year.
Three: Salaries and Benefits.
A general Rule of Thumb is salaries and benefits will equal about 75% of your development budget. If your shop is at an earlier stage of development, and you’re investing in staff, that percent might be higher. Determine what total salaries will be for the year, and then benefits. (YourFinance Office will need to help. Good. It’s a positive thing to get them involved.)
Four: Operations. You’re in the home stretch!
The total development budget, less what you have anticipated for salaries and benefits, gives “what’s left,” or what you have in Operations budget to run your shop. Just fill in the line items so they add up to what you have to work with.
Tip: Use “Zero-Based Budgeting.”
With the Operations budget, start from scratch each year. Don’t assume attending the same conferences, the same direct mail program, or the same events. Make every expenditure justify itself. That will give you the opportunity each year to consider new, fresh ideas.
Pay close attention during the year on how you’re doing on income and expenses.