Soapbox Engage Blog

During 2020, many nonprofits were more focused on staying afloat rather than growing their services and fundraising opportunities. However, as we shift into 2021, we can take what we’ve learned in the last year and use it to our advantage, shifting back to the road of growth and development. Many are back to focusing on increasing impact rather than just maintaining services.

Growth takes hard work and careful planning to achieve. You’ll need to raise more money, make the right investments, and maintain efficient strategies to make it happen.

Here at Jitasa, we help nonprofits keep accurate financial records and make smart financial decisions. From our experience working in the sector, we’ve pulled together these five essential financial considerations nonprofits should take when planning for growth:

1. Leverage Financial Data to Make Realistic Predictions
2. Look for New Opportunities in Your Budget
3. Choose The Most Effective Campaigns
4. Communicate Frequently Between Teams
5. Remain Transparent With Your Donors

It’s easy to get caught up in certain aspects of the growth process. But if you focus too heavily on your campaigns, you might forget internal communications. Or, if you focus all of your attention on your internal financial data, you might forget to be transparent with supporters.

Creating an effective financial plan will help your organization maintain the balance between all of the important considerations during the growth process. Let’s dive in so you can get started with your plan for organizational growth.

1. Leverage Financial Data to Make Realistic Predictions

Every organization that decides to focus its attention on growth doesn’t know what the future looks like. You know you need to raise more money than you have historically to fund growth, but you’re probably already doing everything you can to maximize each of your campaigns.

This is just one reason growth is so challenging. You’ll need more funds, but obtaining those funds can be difficult and knowing exactly how to raise this money is incredibly overwhelming.

The answers to these questions are in the data you pull from your organization’s past fundraising efforts. Leverage the data you already have to make realistic predictions regarding your growth potential.

Work with your nonprofit accounting department and fundraising team to compile financial reports regarding your past campaigns. See how much you’ve raised with various types of strategies in the past and determine if there are gaps that you can fill to raise more.

For instance, let’s say you raised $50,000 during your last major fundraising event. Your finance team recognizes that 10% more funds were pledged, but never paid out. This was found because there was a discrepancy between what the fundraising team recorded for the fundraising results and what was recorded by the finance department. By strengthening the followup regarding pledges, your team can reasonably raise at least 5% more.

Consider the gaps in your own fundraising and then add strategies to address them in your development plan. Bloomerang’s downloadable development plan can give you a head start in creating this important fundraising tool. With a well-built out development plan, you can find the growth opportunities that are already hidden in your current fundraising strategy to help with growth.

A lot of small improvements can add up to a great increase in revenue for your fundraising. After projecting your new fundraising revenue based on development plan improvements, you can revisit your budget to find new opportunities to save funds too.

2. Look for New Opportunities in Your Budget

Chances are there are opportunities in your budget where you can save some money on certain organizational activities. Remember, growth often requires you to spend a little more on overhead expenses. Consider how you can stretch your finances a little further to account for this increased overhead and carefully plan out how you’ll spend it.

Not only should you carefully plan your spending, but you should also consider how those expenses will help support your organization’s growth. Consider the following examples to see how you might grow your organization by slightly increasing overhead:

• Hire another fundraiser. If your fundraising team is already pushed to the limit, you might consider hiring another professional to expand your team and reach more supporters. Although this is an upfront expense, this action would help you raise more in the long-run.
• Invest in new fundraising software. If you’ve outgrown your current solution, you might need to make a new investment to handle your increased fundraising needs. You might invest in software that offers additional functionality, allowing you to expand your types of campaigns and host more of them throughout the year. For example, you might need to invest in a new event solution offering functionality for virtual and hybrid fundraising events to expand your event capabilities.
• Build a new facility. If your programming has outgrown its current facility, you might decide to expand to serve a larger audience. This means you’ll need to raise funds specifically for this building project, often requiring a capital campaign.

As you can see, all of these overhead expenses are driven by your organization’s specific needs. If you’re still functioning well in your current facilities or your fundraising team has room to raise more as is, there’s no reason to take additional actions like starting a building project or hiring a new staff member.

Generally, the expenses that you have should be driven by some type of nonprofit need. According to Jitasa’s budgeting guide, your overhead expenses should be under 35% of your total expenses. While this is a standard recommendation, all nonprofits do look a little different. However, if you exceed your ideal percentage temporarily in order to allow for growth, don’t worry too much about it, as long as your expense ratio bounces back to it’s usual percentage in the next year or so.

If you dedicate more money to overhead, you might have to also cut back on other expenses. Look for optional overhead expenses that you can cut first so that you can dedicate as much as possible to your programming. For instance, you might choose to stop bringing in breakfast for the team on Fridays or temporarily limit the number of team outings. This will allow you to re-allocate these funds to your growth strategies.

3. Choose The Most Effective Campaigns

With a development plan and fundraising calendar, your organization has a philanthropic purpose already spelled out for every dollar raised. This means that when you start planning a new fundraising campaign, you should have an idea of your expected revenue and an idea for how you’ll use that revenue to fund your mission.

During the planning process, make sure that you choose the best type of campaign that will help you achieve your fundraising goal and fund the project you have in mind. For instance, let’s say you work for a dog shelter and want to raise funds for the following:

• You’re trying to raise $10,000 for new dog crates. You decide to host a peer-to-peer fundraiser because in the past you’ve raised an average of $15,000 during these fundraisers.
• You’re trying to raise $3,000,000 for a building expansion project so that you can host 50 new animals. You decide to host a major capital campaign to raise this large amount of money. You conduct a feasibility study for this major campaign to make sure you have the potential capacity to raise the funds.
• You’re trying to raise $50,000 for dog medical expenses so you decide to host a major fundraising event that caters to 500 people. These events have, in the past, raised around $45,000, so you’ve made it a goal to improve certain elements of the event to raise an additional $5,000.

Your past financial data can help determine which campaigns are most successful for your organization’s next philanthropic project. Effective budgeting and financial planning means that you have planned out how much money you’ll raise and where each dollar will go.

4. Communicate Frequently Between Teams

When your organization is making financial decisions, you’ll need to make sure your finance and development teams are in frequent contact with one another.

When you have open and transparent communication between these two departments, your organization can work as a single unit to create your growth plan.

If you don’t communicate well between these departments, you run the risk of poor planning. For instance, if your finance team isn’t clear about the capabilities or opportunities of your development team, they may craft a budget with a significantly less amount of revenue than is possible to raise by the development team.

While it may seem like a good thing to have a major surplus in revenue, it can actually have some negative repercussions. Planning out your programming and growth strategies with the correct anticipated revenue allows you to strategically place each dollar to best position your organization for growth. When you have more funds than planned for, you run a greater risk of placing these dollars toward an aspect of your strategy that may not create the greatest benefit for the organization. Excess funds should be strategically thought through, not spent on a whim.

Open communication between departments is necessary to effectively allocate each dollar raised by your organization and to make sure your spending is as efficient as possible.

Build processes that enable your departments to discuss finances on a regular basis. For instance, you might plan a biweekly meeting between the two departments to check in on progress and finances.

5. Remain Transparent With Your Donors

When you plan for growth at your organization, you need to keep your supporters informed about all of your decisions. Tell your supporters about your plans for growth! Get them excited about the changes.

There is a stigma that supporters only want to contribute funds to organizations with minimal overhead expenses. Donors want to be sure their donations are going toward programming rather than the less glamorous expenses of salaries or rent.

When supporters understand how those overhead expenses are used to expand programming and grow your impact, they’re much more likely to continue financially supporting your organization.

To remain transparent with your donors, we recommend informing them about financial aspects such as:

• Your nonprofit annual report. Your Form 990 is public information so anyone can access it. However, posting this important form on your website or creating another more comprehensive annual report that explains each of the metrics shows that you are open about finances with supporters and allows you to provide additional context for the numbers.
• Your nonprofit audit. This article explains how audits increase transparency well saying, “When you communicate the fact that a nonprofit audit took place and even the improvements that you’re making as a result of this deep financial analysis, your supporters will know that you take your funding and your financial management seriously.”

When you explain financial decisions to your supporters, always bring the message back to the impact that the decisions will have on your mission. This aligns with the donors’ motivations because they know how their gift supports the cause.

Explain how your financial decisions will help your organization grow and expand its mission. Discuss the new goals that you have and how your programming will benefit from the financial changes you make. This will help ensure that your organization and your supporters are both making plans for the nonprofit’s growth.

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Nonprofit growth isn’t easy. It takes extensive planning to do effectively. However, when you’re able to effectively leverage data to make budgetary decisions, choose effective fundraising campaigns, and communicate effectively both internally and externally, you’ll find that your growth plan is much easier to put into practice.

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Guest Post by Jon Osterburg

Jon Osterburg has spent the last nine years helping more than 100 nonprofits around the world with their finances as a leader at Jitasa, an accounting firm that offers bookkeeping and accounting services to not for profit organizations.