For those of you on a July-to-June fiscal year, now is probably the time that you are deep into thinking about your Fiscal Year 2020 budget. But when you’re in charge of projecting contributed income for the coming year, there can be lots of pressure to get the numbers right in a way that demonstrates how the development department can support the work while setting realistic expectations for everyone in the organization.
So, we’ve polled our consulting team and have collected for you some of our favorite tips for taking on your FY20 contributed revenue budget.
The first thing that comes to mind is to clearly distinguish between a goal and a budget. I see these terms conflated sometimes. A budget is usually conservative and careful. What’s the minimum needed to cover programs and admin costs?
The goal is, or should be, aspirational. I don’t ever want a budget tied to a “goal.” If that’s the case, one of two dangerous things can happen:
1. You are low-balling your goal and leaving money on the table because you’re just trying to reach the budget figure.
2. The budget is inflated because it’s tied to an aspirational fundraising goal that may or may not be reached due to any number of circumstances.
It’s important to start this habit of distinguishing the two as immediately as possible. It’s a pragmatic approach that helps to manage expectations across staff, board, and all other stake-holders. Make your goals aggressive, but don’t stitch the budget to it. You can always adjust your budget upwards after the money is raised.
Simultaneous to building the fundraising line of your budget, create a pipeline for how you expect the funds to come in. Name the expected income avenues (i.e. institutional, individual, government). Additionally, create a supporting document that breaks down expected gift amounts from the entities in each avenue. These amounts should be based on early conversations that you are having within your network. When you begin to activate on your plan, the pipeline can then serve as a roadmap for your fundraising.
Remember your pipeline should ideally account for 2-4 times the amount you hope to raise, as you need to consider the possibility of getting a few “no’s” along the way.”
Don't be afraid of an "unidentified" line item. This certainly should not be a huge percentage of your budget, but if you've plugged in the realistic estimates and are falling short of a balanced budget, plug the remainder into "unidentified." Of course then you'll need to work to identify where it's coming from. This money can be found within some of the LOIs you're submitting to various foundations or at a few prospect lunches that you have on the calendar that might feel a bit more like a gamble. Once you have a target/goal number, you can build out a plan to achieve it.
With regards to your Gala, I think there is a misconception around expenses vs. income. It’s possible that expenses could make up around 40% of your gross income, sometimes more. Some people feel like it should be a much smaller percentage, but without underwriting for the event expenses, that’s not always the case.
When you are budgeting your institutional giving line, never assume there will be increases in the new fiscal year unless you have been specifically told by the funder to expect it. There are so many factors that govern institutional giving, from the stock market to the whims of the trustees, that even looking at a giving history can sometimes be unreliable. It is reasonable, and even realistic, to expect some increases and some new funders along the way, but you can plan for those by incorporating a modest “Unidentified” line (described above!).