Even though inflation has cooled, that doesn’t mean balancing the budget is any easier for most of us. Households, businesses, and nonprofits—we’re all trying to find a way to do more with limited resources.
Here are five ways we’ve seen organizations increase capacity without inflating costs.
1) Get into the details of your budget
Leaders often think about cost-cutting once a year: during annual budget season. But managing the ongoing effects of inflation on your budget and operations requires far more diligence.
We recommend digging into costs by line item at least quarterly.
Go beyond the big-ticket items, like salaries and office rent, and pay extra attention to the small-dollar items. Printing, office supplies, office equipment, and software subscriptions all add up quickly. You very well may be paying for services your team no longer uses. As well, nonprofits and small businesses may be able to find discounts or excel with free tools. Check out the roundup of our favorite free productivity tools for ideas.
2) Make sure you’re spending enough in the right places
Every budget has two sides: revenue and expenses. If inflation is making your budget tight, then you want to focus on both sides of the coin. That means cutting costs where you can while also investing in activities that can increase revenue.
For nonprofits, that means spending time and money on activities that boost fundraising.
For example, prospect research, donor appeals, donor meetings, grant writing, and, surprisingly, strategic planning. A nonprofit strategic plan will enable you to find areas where spending isn’t matching impact—and areas where you’re getting outsized results (and could most easily increase revenue). Some organizations even involve select donors in their planning process, such as through interviews and surveys, which can help them feel even more invested in your work long-term. Strategic plans can also help streamline grant writing and donor communications, saving you time while raising more money.
3) Build your capacity without burdening payroll
In digging into your budget and programming, you may also identify areas where you still need more capacity. This is when it’s time to get creative. Consider innovative solutions, such as a staff swap, that can provide temporary capacity and create growth opportunities for team members.
You may also try out targeted consulting contracts. For example, if your fundraising team is struggling to find time to craft regular impact reports or donor appeals, a skilled copywriter could quickly ease the burden, freeing up critical staff time for donor meetings and strategy.
4) Be honest with donors and stakeholders about your impact and challenges alike
It can be tempting to hide your organization’s challenges behind glowing impact reports. But you’d be surprised how many donors and other stakeholders truly want to hear about setbacks, challenges, and lessons learned. Obviously, you don’t want to portray your organization as a sinking ship but demonstrating how you’ve confronted and managed challenges can actually emphasize your organization’s resilience.
Plus, remember that donors and stakeholders are people too! They may be making the exact same calculations you are. Plus, making authentic and consistent connections doesn’t cost anything extra.
5) Focus fundraising on donor retention
For nonprofits, retaining donors is far more cost-effective than bringing in brand new donors. In fact, Nonprofit Quarterly estimates that it costs ten times more to acquire a new donor than it does to keep a current one.
And the key to donor retention is donor relations. If you’re running a nonprofit, there is never a bad moment to assess your donor relations strategy. At Funding for Good, we recommend looking at the last 12 months and addressing the following:
- How often are you connecting with your donors? Consider personal outreach, general outreach like newsletters, and funding appeals.
- What methods are you using to connect—email, direct mail, meetings, events?
- In your communications, how often are you providing impact reports vs asking for money?
- What percentage of your donors renewed or increased their gifts over the last 12 months? What about in the prior year?
This activity should reveal any gaps in your donor relations strategy. If your renewal rates are great, then it’s time to really dig into building your donor pipeline (while maintaining what is already working).
