The Great Budget Excus … um … Debate
It's that time of the year — somehow we skipped Halloween, and all the holiday decorations are showing up in the store. I think I even received my first fundraising appeal last week with Christmas labels in it.
What else does this time of year bring? That's right — many, many, many fundraisers and marketers are working on budgets for next year. There are so many moving parts to the creation and negotiation of nonprofit fundraising budgets. I get it. I did it. I did it for lots of years. I understand the pressures, and I certainly have lived all of the scenarios:
- The organization had a bad year so we need to cut the budget everywhere.
- The XYZ program had a bad year so that program needs to cut that budget.
- We need to fund other priorities so we need to cut the budget in various places.
- Congratulations, you have a 20 percent increase in your budget. (Oh, wait, I think I fell asleep and was dreaming.)
- We'll keep your budget flat (yay!), but we need you to raise more money with that budget (booooo).
So, before you read further, yes, I have a particular soap box on this issue. But I absolutely know how this all works. With that said, it bothers me that our view of the budget can be so short-sighted.
I believe that when budget adjustments need to be made we often think of it in the way of black and white. Yes, in the end we are dealing with a math equation. We have to meet a specific expense number, and we have to meet a specific revenue number. But the path that we use to get there seems problematic.
- The CPDR Plan: Let's look at where Cost Per Dollar Raised is the highest and remove those programs so we are spending less but the net revenue is not negatively impacted (and might actually go up). This is absolutely a short-term method. If an organization uses this approach to handle a budget issue, it will eventually catch up to it. We see this when some of the higher-margin programs such as acquisition, lapsed recapture, warm-prospect conversion, etc. are cut. Granted, the first-year impact is not really felt, but in future years we all know what happens — it creates the "forever asterisk" on the financial reports because making changes that affect the future donor funnel will always show up as two- to three-year negative impact on what typically is the better margin programs.
- The No New Strategies Plan: Since we have to cut our budget on our current program, all plans for new strategies are to be put on hold. Why, oh why, do we do this? This approach makes one very large assumption: the current program is flawless and nothing else could help it. Since many of our budget issues come from performance issues within the program itself, I always find it odd that the first thing we do is stop thinking of changing anything. Granted, "risk" has to be measured and only low-risk strategies should be considered, but sometimes in the toughest of budgets you can actually deploy new strategies that completely uncover new opportunities to save money, reallocate money, etc.
- The No Creative Testing Plan: Since we have to cut our budget on our control, we surely cannot launch any new creative strategies. For the same reasons as discussed in the above bullet, this is simply implying that your control is the best it can be. While I wouldn't suggest frivolous testing, make sure you are looking at some of the industry's most successful strategies and whether should be a part of your program.
Here are some questions to ask yourself as you go through this process:
Vice President, Strategy & Development
Eleventy Marketing Group
Angie is ridiculously passionate about EVERYTHING she’s involved in — including the future and success of our nonprofit industry.
Angie is a senior exec with 25 years of experience in direct and relationship marketing. She is a C-suite consultant with experience over the years at both nonprofits and agencies. She currently leads strategy and development for marketing intelligence agency Eleventy Marketing Group. Previously she has worked at the innovative startup DonorVoice and as general manager of Merkle’s Nonprofit Group, as well as serving as that firm’s CRM officer charged with driving change within the industry. She also spent more 14 years leading the marketing, fundraising and CRM areas for two nationwide charities, The Arthritis Foundation and the American Cancer Society. Angie is a thought leader in the industry and is frequent speaker at events, and author of articles and whitepapers on the nonprofit industry. She also has received recognition for innovation and influence over the years.