Summer is in the rearview mirror and that can only mean one thing: budgeting time is here.
Might we suggest you take a moment to move those antacids back to your desk?
Most of our clients are on a calendar-year budget cycle. That means they are currently focused on their 2020 budgets. Development officers have the unenviable task of trying to predict what the contributed revenue number should be for the upcoming year when the current year has three critical months yet to go.
Although most of our clients use some form of zero-based budgeting, when it comes to development goals, nonprofit leaders have a tendency to use the current year’s campaign forecasted goal and then set the following year’s goal to grow by 3%, 4% or 5% or more.
And if that wasn’t challenging enough, often the contributed revenue line is increased again to help balance the upcoming budget. A 5% increase on top of a goal perhaps not met from the prior year, additional contributed support needed to balance the budget and then toss in pledge shrinkage – the 2020 goal now represents a 14% increase. Staff, volunteers and perhaps even some donors face January already feeling defeated.
The very best advice I can give to development officers and senior teams when it comes to setting contributed revenue goals is to underpromise and overserve!
Consider applying some of these best-practice budget disciplines to setting your upcoming goals:
- Review each of your $1,000+ gifts/pledges. Are they renewable for this next year? Can they be upgraded. What might the low/high 2020 gift range be?
- Are there some large gifts in 2019 that aren’t renewable for 2020? These create big swings in expected revenue. Swallow hard and make the list.
- How does your LYBNT (last year donors but not yet this year) and SYBNT (previous donors but not this year or last year) lists look? Can some be renewed and even upgraded from their previous levels? Hint: There is gold in these hills if you work the list!
- What pledge shrinkage rate (pledges that won’t pay by 12/31/19) will you have for this current year? What might the extrapolation of pledge shrinkage be for next year? I like to recommend budget for 5% shrinkage.
- Are there new sources of contributed revenue? This could take the form of an exciting new fundable program launch or new donor prospects. Be conservative but work them into your projections.
Lastly, as we look to 2020, remember that just like the market, philanthropy doesn’t like uncertainty. Presidential election years are full of uncertainty.
Is it ok to have a flat or reduced contributed revenue goal from the year prior? It doesn’t feel good, it doesn’t stroke our egos much but … YES! Build a realistic budget for 2020. When you underpromise and overserve, the antacids stay in the drawer!