The Fund Development Plan: The Roadmap For Consistent, Long-Term, Sustainable Nonprofit Funding
STAGE FOUR
The purpose of a Fund Development Plan is to create a sound roadmap for generating revenue. It is not called a budget or funding strategy or fundraising goal. It is called The Fund Development Plan because it’s a Plan designed to help raise funds. The Fund Development Plan serves as the GPS guiding the strategy behind most of the fundraising efforts of the organization. Many organizations decide to host a gala, golf tournament, or sell cookies to “raise money” for the organization, but they’re not attached to an overall strategy designed to consistently fund the organization long-term. The Fund Development Plan helps nonprofit leaders:
Identify organizational expenses
Prioritize funding goals
Establish (short, medium, and long-term) funding strategies
Develop funding methods that align with the organization’s financial, social, and capital resources
But most importantly, it helps nonprofit leaders make informed decisions based on priorities and resources vs. random, often reactionary, decisions on how to raise money.
Developing The Plan
There is a Four Step process for creating a Fund Development Plan that nonprofit leaders can use to successfully navigate toward long-term funding and ultimately expansion and sustainability.
The goal is to help you quickly and consistently fund your organization. Therefore, plans such as this one will not be some long drawn-out 50-page document. You don’t have time for that. A simple, one-page, high-level document is all you need.
STEP ONE: Identify The Organization’s Annual Expenses
The first step is to identify your organization’s annual expenses. This process is very important because as a business owner (which every nonprofit leader is) you should know how much revenue is required to cover operational expenses. Otherwise, your fundraising goals will be flawed, potentially requiring you to scramble to cover unaccounted-for expenses. These unforeseen shortfalls are often the cause of layoffs, program discontinuances, and inconsistencies in direct services to communities.
There are several ways to approach this exercise. And none of them are wrong. Do whatever is going to help you get the most accurate account of your organization’s expenditures/expenses.
If you have a detailed organizational budget, start there
If you have an itemized accounting of your expenses (ie, bank account, accountant statement of expenses, etc.). use those
If you don’t have any of those, pull out an old school notebook with lined paper and label one column “Expenses” and other “Costs” and start filling it with anything you can remember.
Capture All of your organization’s expenses for the year
Remember, these are the costs for the year (12 months). Because when you’re strategizing to raise funds, it should cover your annual budget.
Think about all the things you purchased for your organization, whether YOU paid for it out of pocket, or there was a fundraiser to cover the cost, or a donor who paid for it. Just be sure to list them all. Often times when community leaders are building their budgets, they don’t list a lot of their expenses because they just pick up a roll of tissue for the office when they make their Costco run or grab a ream of paper here and there. List the toilet paper too!
Next, list all the things you were able to get donated. These donations are called in-kind contributions. These need to be accounted for in your fundraising because there is no guarantee that your generous donor will continue to donate and if it’s important (e.g., Printing. You have a donor to donate the printing of your annual signature gala program. That’s important). If, for some unfortunate reason, this person/company is unable to donate their printing services next year, you will still need the program, so better to plan for it and not incur costs than to bank on someone donating it and not being able to cover the costs if they can’t. Make sense? So list all the donated and in-kind services (take the market value price for services – hourly rate) and products next.
And if you are just starting out, think about all the expenses you will have and list them all.
Now you have the most important information you need for designing a Fundraising Strategy: the actual amount of money you need to fund your organization for the entire year!
As an Executive Director, you must know how much it costs to run your nonprofit. Even if you are in your first year of operations and don’t have a paid staff, knowing your real bottom line numbers will help you in so many ways.
Are you feeling overwhelmed looking at that number? You shouldn’t! This is the best part. Now that you know how much money you really need, you get to determine which expenses are crucial for everyday operations, and which ones are “nice to have” expenditures.
STEP TWO: Prioritize Your Fundraising Goals
Now that you know what needs to be purchased and what expenses your organization has, now it’s time to rank them so that you don’t get stressed out trying to fund everything at once.
The goal is to help you strategically plan your fundraising efforts by prioritizing which expenses are Urgent, Important, or Can Wait. These selections are important, so be sure to carefully prioritize (but you can always adjust later!)
Next to each expense, rank them according to priority:
Urgent (High Priority)
Important (Medium Priority)
Can Wait (Low Priority)
You may have to do this exercise a couple of time until you rank them with objectivity. You don’t want all of your expenses to be high priority, it’s not true and it will cause you unnecessary stress trying to fund everything at once.
STEP THREE: Strategically Determine When You Will Fundraise for each Goal
You’ve identified your organization’s expenses (Goals), You know how much they are (Costs), You’ve determined how necessary each is to the organization’s operations (Prioritized), now it’s time to determine when you will fund them.
This step helps the Executive Director and Board of Directors map out when and how they will fundraise to cover each expense.
Short Term – Now, up to the next year (0 – 12 months)
Medium Term – From two to four years ( 2 – 4 years)
Long Term – Five or more years off (5 +)
Your funding strategies gain more clarity when you assign a time period in which it needs to be funded. It also helps you and your board strategically plan ways to fund each prioritized goal so that it doesn’t overwhelm you.
The GPS for funding your nonprofit
For example, salaries are very important because, without staff, it’s very challenging to run an organization. Many people get caught in the dangerous trap of believing a nonprofit organization can run with volunteers. The challenge with volunteers is that you run into situations where the organization HAS to get things done and the volunteer DOESN’T HAVE TO DO IT. They volunteer their time, therefore you can not make them do anything.
When goals and objectives are tied to a grant, you have to be able to hold people accountable. Paychecks are the best way to ensure accountability. So salaries are Urgent and Short Term. If you’re strategically planning to grow your staff, some positions may be Important and Medium/Long Term, but for the sake of maintaining a sustainable organization let’s go with Salary | High | Short Term.
Go through your Funding Goals and assign the time frame each needs to be accomplished.
STEP FOUR: Assign a Funding Strategy to Cover Each Fundraising Goal.
For example, many grant-making organizations prefer to fund program expenses. So, you may want to assign your annual gala, golf tournament, or end-of-year direct mail campaign funds to cover salaries. Assign things that are typically covered by grants (materials, supplies, equipment, etc.) to Grants. Be specific, so that you know exactly what funding effort will cover which expenses. For example, maybe all the money you raise from your Giving Tuesday campaign will go to fund snacks during the year. You know how much that’s going to be now that you’ve gone through all of your expenses for the year and totaled those up.
The Bottom Line: You want to be intentional about your fund development activities. Know how much you need to raise (by calculating how much all of your expenses are for the year). Next, Prioritize those expenses as Urgent, Important, and Can Wait so you’re not wasting time, money, or effort funding random things. Then determine when you need to fund those prioritized goals (6 mos, 12 mos, 24 mos, etc.). Again, helping you to be intentional about your fundraising activities. Lastly, look at your fundraising activities. Assign them to each expense so you know which fundraiser will cover that expense.
This will also help you with managing (and not burning out your volunteers). Once you’ve decided which fundraisers you will have, you can post the dates and activities and allow your friends, family, board, and volunteers to sign up for what they want to participate in. This process also helps you to diversify your funding streams. The more help you can garner to bringing in revenue, the more variety of ways you can bring it in. Giving people a choice helps to keep them engaged and helps to free you up from doing everything.
Now you have a solid Fund Development Plan and a roadmap for funding and growing your nonprofit organization.
Click here for the step-by-step Fund Development Plan template that guides you through the process and results in a beautifully color-coded document (for those of you who are visual like myself!)