There are some small businesses out there that operate as nonprofit entities. Some are even a part of a larger nonprofit organization, like Goodwill Industries’ thrift stores. If you direct a nonprofit business, a large part of your income may be thanks to local, state, or federal grants and in-kind donations. If that’s the case, you must take extra consideration regarding the resources needed for your project when calculating your “ASK” – how much money you hope to receive.
When creating an operating budget for a nonprofit, it’s easy us to come up with tangible resources for budget creation; income vs. expenses. The main focus should be based on an honest projection of income. If you try to budget activities, events, and projects first and then try to find the necessary funding, you create unnecessary stress and pressure in an already tough process. It also ends in a budget deficit if those needed funds aren’t found. Before jumping into a budget process, start with preparing a projection of the organization’s income and expenses based on the previous year.
Project forward by going backward!
Sound silly?! What you’re doing is looking at your past actuals to create a starting point for your future goals. Once it’s written down in front of you,
you’ll be able to better see patterns of income and expenses.
You also have to remember the value of your time. Nonprofits are often dedicated to furthering a specific social cause or advocating for a specific point
of view. It’s hard to change focus from a service mind to a business mind, but that’s what separates the small-time from the big leagues. The large
entities that are able to reach out and successfully serve others while equally understanding their internal revenue needs are…well, honestly
they’re ROCK STARS!
Regardless of which sector you serve, getting into a business state of mind is most important. You first need to figure out how much your service costs you. You can’t determine how much your ask is unless you know roughly how many hours the job will take and what you need in return in order to make the impact your seeking to make. Try using this two-step approach to determine your cost:
1. Calculate what your rate should be based on your expenses
Add your labor and overhead costs then divide the total by your hours worked. This is the minimum you must have in order to pay your expenses and pay for your time (volunteer’s time).
2. Investigate the marketplace to see if you should adjust your rate up or down
There’s no shame in checking in on your competitors. I guarantee that they’re watching what you’re doing. That’s how you grow and learn and help others move through challenges.
Once your calculations are complete, you’re able to easily put into words your need based on impact. You will be confident in your ask because you did the homework to back it up. Move into a business state of mind and you’ll be able to focus on both your needs as a service provider and the needs of those you’re serving.
It’s a win win!