Budget for the Organization You Want to Be

Copying, pasting, and increasing your previous year’s budget by 2 percent is what I’d call Budgeting 1.0. It gets the job done, but it misses the opportunity to use your budget as a tool to think about what you want to be different. In our second Nonprofit Quarterly webinar on budgeting, Jeanne Bell and I made the case for Budgeting 2.0, or what we call “advanced budgeting.” We define this as an approach to budgeting that gets you closer to the organization you want to be.

Budgeting for Time and Attention

A big part of advanced budgeting is recognizing and accounting for all the work of your organization. Just as we advocate accounting for true program costs when it comes to grant budgets, consider your true organizational costs when doing annual budgeting and multi-year strategic plans. This can include factoring in the true cost (mostly in terms of time and attention) for things like advocacy, collaboration, evaluation and learning, supervision and mentoring, professional development, or research and development.

Budgeting for Change

Advanced budgeting is especially necessary if there’s a shift you’re preparing for, whether that’s a leadership transition, business model pivot, or new strategic priorities. There may be a transition period you need to fundraise for to be sure you’re covering your true program costs through this shift. For example, if you’re looking to stay relevant by becoming more innovative and flexible, you’ll need time for research, networking, and trying things out. If a new executive director is coming on board, recognize there will be differences in between a leader who has been at your organization for 30 years as opposed to one. Budget for that learning curve, and possibly even a funding dip as relationships are established.

Budgeting to Reflect Your Values

Budgeting for the organization you want to become means acknowledging and addressing what you’re choosing not to do. This can be hard. It may also mean there’s a revenue question you need to figure out. However, remember that a budget inherently reflects your priorities and your values. Reallocating resources or fundraising for a change can be an opportunity to lean into your values and focus on your unique value proposition. What are your priorities in the next 3-5 years? Where do you need to scale back so you can ramp up in other areas? What is taking away resources without truly helping to advance your mission? (We’re big fans of using a matrix map to help answer some of these questions.)

Advanced budgeting makes you accountable to your values. For example, if you say becoming a more equitable organization is important but you haven’t budgeted for learning and staff development opportunities or tools to advance your nonprofit’s cultural understanding and capacity, where will that time and money come from? If transparency and trust are core values but the staff responsible for making your budget a reality can’t access it or have a part in creating it, there’s an incongruity. If you want your staff to be deeply connected in the community, what infrastructure do you need to invest in to make that possible?

Advanced budgeting takes more time. It may involve a different type of risk or uncertainty. It also requires taking the long view. However, as I predicted in a previous blog, within a six-year span, every nonprofit will experience at least one major change or transition. Budgeting 2.0 will prepare you to start adapting and changing and preparing now for the organization you want – and likely will need – to be in the future.