Don’t Be Scared of Overhead: Why It’s Ok For Nonprofits to Spend on Technology and Fundraising Costs

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Is your non-profit scared of overhead?  Does your board spend lots of time wringing its collective hands over whether you spent 14% or 17% on fundraising this year?  Do you have trouble justifying nonprofit technology cost to board members?  Are fundraisers worried about facing ire from donors about that 3% extra your organization spent on administrative costs this year?

If so, your non-profit needs to rethink its view of these expenses.  Your non-profit needs to move from a culture of worry, concern, and scarcity to one of positivity and abundance.  Because non-profit administrative and fundraising costs are nothing to be scared of.

Good Work Requires Real Investment

 Why do you work at your non-profit?  It’s probably because your organization does good work – maybe even amazing work – helping people, educating children, saving lives, or strengthening communities.  The same is true for your staff members, your board members, your volunteers, and your donors… they work with your organization because you are doing great work.

The truth is, though, that all good work requires a real investment in order to succeed:

Fundraising Costs

Your non-profit needs to raise money in order to carry out its mission.  Without fundraising, your organization would cease to exist.  Fundraising costs money.  You need to pay for development staff, your donor database, materials, mailing costs, events, etc.  If you need to spend 1%, 2%, or 5% more on fundraising, and doing so enables you to help 100, 200, or 5,000 more people, isn’t it worth it?

Of course, you shouldn’t waste money, and you need to keep a constant eye on the return on investment you are getting for your fundraising expenditures.  But it costs money to raise money.  At many non-profits, the more you spend (up to a point), the more you raise, and the more you raise, the more good you can do in the world.  Thus, instead of being a negative thing, your fundraising costs are a great thing because they allow you to carry out your mission.

 Administrative Costs

Like fundraising, the money you spend on administrative costs is essential for carrying out your mission.  Without an office, a copier, paper, pens, and electricity to keep the lights on, your non-profit would cease to exist.

As with all of your expenditures, your organization shouldn’t waste money. Being a good steward of your donors’ gifts requires you to keep a close eye on expenses and to cut costs when you can.  But far too many non-profits try to cut costs simply to get their overhead expenditures down, without thinking about how an extra 1% or 2% spent on overhead might positively affect those your organization was created to serve.

Our client Epilepsy Foundation was using DonorNation built on the Salesforce platform.  After enduring yearly challenges on cost overruns, missed functionality, and low staff adoption they implemented StratusLIVE, a complete nonprofit solution built on the Microsoft Dynamics platform.  The nonprofit technology spend cost enabled Epilepsy Foundation to have better donor management and fundraising.  Their overall fundraising contributions increased by 21% and average donor gifts increased by 32%.

Explaining Fundraising and Overhead Costs to Stakeholders

Let’s be honest.  The primary reason so many non-profits fret about fundraising and overhead costs is because they are worried what their key stakeholders (and primarily their donors) will think about them.  In my experience, the reason so many donors and others are focused on overhead is because we, as non-profit fundraisers and leaders, have trained them to be suspicious.  We try to hid the numbers, we act defensive when it comes to fundraising costs, we boldly proclaim that we are keeping overhead to a minimum.  We’re digging a hole that is negatively affecting our organizations and our missions.

I like to tell non-profits that when it comes to explaining things to our donors, our board members, and our other stakeholders, often things are only weird if you make them weird.  Instead of trying to explain away overhead costs to donors and others, and in return making them think something is suspicious, be truthful and positive about what you are spending.  If a donor asks about overhead tell her, “Mrs. Johnson, we spend 20% of what we raise on fundraising and overhead. That 20% allows us to raise enough to serve 200,000 people per year!”

You’re proud of the programs your non-profit offers.. If you’re keeping an eye on costs and ROI, you can also be proud of the fundraising and administrative costs you incur in accomplishing that work.

Nonprofit organizations struggle with unstable funding, retaining donors, and have high standards for transparency.  StratusLIVE built a solution on the Microsoft platform, to help them drive change in their community, increase impact and have greater employee engagement.


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