When fiscal year budgeting hits full swing, many nonprofits are faced with a common and complex challenge: how to best allocate their limited funds, not only for immediate needs but also for organizational sustainability.
Traditionally, the conventional wisdom has steered nonprofits to direct the lion’s share of their budget toward program costs. Fundraising and administrative expenses have historically been viewed skeptically, as they seemingly divert funds from the nonprofit’s primary mission…at least on paper. However, a pivotal study led by business professors Telesilla Kotsi of Ohio State University and Alfonso J. Pedraza Martinez of the University of Notre Dame, which examined the distribution of spending in nonprofits, is challenging this conventional wisdom. The research demonstrates that investment in fundraising and administrative aspects can, in fact, increase a nonprofit’s resilience. Furthermore, according to ceplan.com, every dollar invested in fundraising eventually averages an ROI of $3–$4.
Taking the insights from this research into account, we see that budgeting judiciously for fundraising efforts, inclusive of grant seeking, is not an expense but an investment in the future. It helps nonprofits to:
- Enhance Capacity: When you allocate funds for grant seeking, you are equipping your organization with the means to pursue a broad range of funding opportunities, while mitigating the risk of relying on a limited number of revenue streams.
- Build Relationships: Fundraising requires fostering relationships with donors, grant foundations, and community partners. Investing in these relationships solidifies an organization’s foundation for sustainable fundraising in the future.
- Professionalize Operations: Spending on skilled management and professional expertise ensures that your nonprofit runs efficiently and is well-prepared for scaling up in response to increased funding and expansions of your program.
As nonprofits work through their fiscal year planning, it is essential to reconsider the narrative around spending for fundraising and administrative functions. By identifying them as integral to the grant seeking process and overall organizational health, nonprofits can create a budget that not only supports immediate program needs but also strengthens long-term resilience.
