There’s a common misconception among nonprofits and it goes something like this:

“Every last penny we can get our hands on should go directly to programs. And we’ll pinch that penny until it screams.”

I agree that programs should be funded. In fact, they should be so well funded that you have all the supplies and equipment you need, plenty of staff, and no waiting list.

However, sometimes it’s not healthy to spend everything on programs.
You need to spend money on building up your capacity to continue to do your good work.

This means investing in staff and infrastructure.

The Myth of the Shoestring Budget is rampant. Lots of nonprofit leaders seem proud that they are uber-lean.

I think it’s a huge problem.

You just can’t grow an organization when you aren’t willing to spend money to hire more staff, pay current staff better, invest in their training or get them the tools they need.

And let’s face it – most nonprofits are nothing without staff. They need people to actually deliver service and run the programs.

The critical piece is this: when your organization doesn’t have enough money coming in, you can’t fully serve the ones who are depending on you.

Organizations that are proud of their shoestring budget are likely underfunded. It kills me when I find one that is not only underfunded, but proud of it! Really? What’s there to be proud of?

It stems from a mindset about money. When you believe completely in your dream to change lives, you’re more likely to do whatever it takes to raise the money you need. When you believe that there’s a limited amount of resources out there, and that it’s going to be hard to raise the money you need, you’ll struggle.

Simple as that.

Nonprofits led by people with a scarcity mindset tend to be underfunded. Those lead people who are dedicated to their big vision tend to find a way to fully fund their programs.

Here’s the real difference between fully funded and underfunded nonprofits.

Underfunded Fully funded
Focused on “fundraisers” and events Focused on donors
Make decisions based on what’s in the bank Make decisions based on the need in the community and their vision to meet that need
Live from one cash infusion to the next (grant to grant or event to event) Has a steady stream of revenue all year long
Most revenue comes from one main source (one grant or one big event) Has diversified revenue streams and money comes from many sources
Lives with a poverty mentality – pinches pennies Committed to doing whatever it takes to be successful
Settles for whatever they can get Not good with status quo and will find a way to overcome it
All about the money All about the relationships

It’s all about what you want to work toward. If you want to make your big vision a reality, then work to fully fund your programs. Refuse to buy into the myth of the shoestring budget.

Donors are savvy these days. They know you need good systems and support to effectively run an organization. They also know you need good staff and that you have to pay them fairly.

Don’t try to do everything on the cheap. It shows you’re a serious organization when you spend money on things like staff and Board training.

Just in case you need them, here are some reasons WHY you should invest in yourself and in your organization.

  • It’s the best return on your investment.  For a nonprofit, there’s no better place to invest money. Staff development is the most important key for future success.  The dividends from investing in your knowledge are many – new skills, new resources, improved commitment, an attitude adjustment – the list goes on.
  • It ensures the future success of your organization.  If you want to make sure that your organization is around in 1 year or 5 years or 20 years, invest in it today!  How else will you keep up with the latest trends in fundraising and nonprofit management?
  • It shows that you’re serious about what you’re doing.  People who are serious about success invest in themselves.  They attend workshops and conferences to increase their knowledge about their field.  They do what it takes to make sure they’re playing at the top of their game.
  • It demonstrates your commitment to your mission.  Leaders of organizations that have risen to the top of the pack have the attitude of doing whatever it takes.  They are uber-committed to their mission and the people they serve.  You better believe they are investing in their people!
  • It shows you are committed to being around for the long haul.  By investing in yourself and your nonprofit, you show that you are committed to long-term success, not some flash-in-the-pan adventure.

Investing in yourself and your team is one of the smartest things you can do. And turning your back on the Myth of the Shoestring Budget is another smart move.

It’s acceptable to spend up to 20% of your revenue on fundraising, management, and administration.
If you spend it wisely, it should come back to you in spades.

Comments

comments

  1. I love the underfunded/funded side by side comparison. It really is the poverty mentality and the corresponding inability to focus on relationships that really hobbles some organisations. Also the advice to be willing to do whatever it takes is key.

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