Consistent and Sustainable - A Petrus Development Show Episode on Budgeting

Andrew Robison, Petrus president, is back on this week's episode of the Petrus Development Show!  Andrew and Rhen spend their time together discussing the all-important topic of budgeting.  While budgeting may not seem like a terribly exciting interview topic, Andrew and Rhen outline why the budgeting process can be transformational for your development office.    

Show Notes:

The moral of this budgeting story is that if you put the time and effort into budgeting, it's totally worth it!  The hardest part, in fact, might be getting started.  But, as Andrew shares, once you get started, you'll be amazed at what your development office can add to your organization's budgeting session.  

In this episode, Andrew and Rhen answer the following questions:

• Why should you spend time on the budgeting process?
• What is the budeting prcoess?  How do you set numbers for income and expenses?
• If you're a new development office, what is reasonable expected growth for your first few years?
• Do you have specific estimates for expected growth over the years?
• What is a good expenses to income ratio for a development office?
• What kind of spreadsheet tool can you use to assist with budgeting?

As Rhen mentions at the end of the episode, Petrus is offering free access to our recommended budgeting template.  If you'd like to receive this resource, please click here for more information.    

INTERVIEW TRANSCRIPT

00:17.55
aggierobison
Hi, well, howdy everybody and welcome to the Petrus Development Show where we talk about nonprofit fundraising and how to do it well. My name is Rhen Hoehn from Petrus Development and joining me today...

00:32.92
aggierobison
...is Andrew Robinson, owner and president of Petrus. Welcome, Andrew.

00:34.92
AROB
How are you doing, Rhen? How are the listeners? Thanks for being here. It's always a pleasure. I love talking about fundraising and the nonprofit world, and all the things that you've got planned for us today, Rhen. It's exciting.

00:46.26
aggierobison
Excellent, great. What's new in your world? How is...how's your spring into, I guess it's probably summer in Texas, going?

00:54.47
AROB
Yeah, um, it's hot. It's already in the 90s during the day. My kids are starting or they're in swim team season already, so swimming in the pool without a heater, which is... Probably, I don't know if you're at that point yet in Michigan, but we hit that point a pretty while ago. So yeah, it's kind of getting into, you know, being outdoors, playing sports again, all that kind of stuff. So...

01:10.27
aggierobison
I like the button-up.

01:19.26
aggierobison
Excellent. I was looking at my photo history, whatever my memory is on my phone, and I have pictures from May a few years ago where it was cross-country skiing. But unfortunately, not this year. But church league softball just started up, so you've got...

01:28.37
AROB
Oh, but yeah, hey, oh that's exciting!

01:37.97
aggierobison
...all the dads, yeah, all the dads from our parish playing some softball. We're playing a lot of teams that have a lot of high schoolers and ours has none. So it's all dads who are past our glory days. Ah, yeah, I had an RBI last night, pretty exciting. Ah...

01:50.56
AROB
Hey, look at you, way to go! Okay.

01:54.25
aggierobison
Lost like 15 to 3, so it didn't really make any difference. I did have one catch of a pop-up that came to me at second base that was exciting, but I also had one that I totally fumbled. I kicked the ball when I fell, but I kicked it right to my shortstop, so he took the guy out. So, perfect.

02:09.84
AROB
It's better off than catching it. It sounds like, yeah, it's good.

02:12.97
aggierobison
Yeah, it worked out better than expected, let's say that. It's been a little bit of a struggle. I haven't played softball or baseball since 7th grade, I think, so working on getting back into shape a little bit, getting the athleticism back a little bit. I've been doing some P90X, which I know you did back in the day. I did...

02:20.74
AROB
Yeah.

02:30.50
AROB
Oh my gosh, Tony Horton, ah, right, ah...

02:32.94
aggierobison
That's right, that's right. When I was in college, I did it pretty religiously and I went from being able to do two pull-ups to doing 24 straight at one point, so it got me in shape twenty years ago. We'll see, ah, it's...I'm stringing in negative territory.

02:39.70
AROB
Nice, okay, sorry, are you starting at two pull-ups now? Is that your baseline again? Okay, it's...

02:51.35
aggierobison
At this point, it's very negative, so we've got a long way to go. I heard you go back in the gym though, after your injury in the fall.

02:55.73
AROB
That's alright, yeah, yeah, yeah, the injury in the fall took me out of really anything active for a while. Um, but yeah, I've been back. I started playing basketball a couple...couple weeks ago, started off taking it slow and now it's full steam, full speed. And actually, I've been going back to, um, I would say, don't tell my wife but she knows, she just doesn't like it. But I've been going back to the gym.

03:25.29
aggierobison
Um...

03:28.19
AROB
Not doing the MMA, but just doing boxing and really, you know, kind of more cardio. So, um, so yeah, it's been... It's been a lot of fun getting back into trying to get back into shape after I was in, you know, the tragedy is that these things always happen when you don't want them to. I was starting to get in pretty darn good shape, working out in the fall before I broke my leg and had to stop. And so now I'm just trying to get back to that level. But it's been, it's been good. The workout today was one-armed punches and so yeah, he bound my one arm like this um with...

03:59.59
aggierobison
So...

04:06.50
AROB
The, yeah, exercise band. And so we had to do bag work with our left, and I thought, "This is gonna be...you know, this is gonna be tough, 45 minutes of that." We did, yeah, 45 minutes. Like, I...I don't know how I'm able to even like lift my left arm right now. It's...

04:23.30
aggierobison
Um, ah...

04:25.45
AROB
It's ah, we did bag work. We did partner drills where it was... It was a lot, but this is good. You know, that's what you got to do, so...

04:31.87
aggierobison
Whatever keeps you from injuring the other leg, because I think if that happens, Cheryl's gonna have you sleep in an RV or something for a while.

04:39.92
AROB
Yes, yes, the ah, ah, the message was pretty clear that if I, ah, have a similar type of accident, then I will be in big trouble. Um, but my buddy of mine told me a couple years ago that in your 40s, like kind of mid to late 40s, that for at least for a man, that you're in peak physical shape or potential to be in peak physical shape. And then as we age, you kind of, you know...just naturally your body goes on this kind of slow, long decline into, you know, not being as able to be as active as much, and you know, so physical elements. And so his theory was you want to start like at the highest possible point if you're going to be on this, you know, decline for the rest of your life. And so, you know, he got really in shape in his 40s, was doing CrossFit and all this stuff. And I thought that's, you know, that's good advice. Like, I'm 42, about to be 43, and you know, I...I want to, I want to, I want to go into my, you know, sort of twilight years in good health. And so...that's kind of where I'm trying to do, you know, and be intentional about working out and exercising, is looking into the future.

05:55.73
aggierobison
Great, makes a lot of sense. That's, ah, that's a good point as we transition into our topic today, which is making a plan for our nonprofits with budgeting. You know, we're coming up at the, not everybody, a lot, but a lot of organizations have their fiscal year ending June 30th, new fiscal year starting July 1st. They're prioritizing in the middle of planning out the budget and making their development plan for the year.

06:19.65
AROB
Yep, that's you're exactly right. And um, you know, at the end of May, if you're just now working on your budget to start July 1st, I'd say you're kind of a little bit behind the curve. You...You know, you really want to go into your late spring having a pretty good idea. But you know, maybe that's not you, maybe you've been looking at it, planning it, and um, you know, you have a pretty good idea and you're listening to this just to kind of refine it. But you know, if you're starting late, like, you know, better to start now than to not start at all, right? And ah, so...

06:47.46
aggierobison
And...

06:52.33
AROB
Ah, you know, this year can be, if your fiscal year does start July 1st and, you know, you're working on your budget now, there's still time to get something in order. Even if you're not ready to roll out July 1st, you have a pretty good sense, and then that puts you in a really good position for next year, right? Like, it's all about, you know, budgeting and planning for the future and strategic planning and all that. It's...It's about starting where you start, and then every year you have a baseline that you can improve on gradually.

07:15.84
aggierobison
Exactly, and I will say, as we get started here, this topic feels like it's probably pretty boring, right? I remember when I started fundraising, you were my consultant. You came up one time and you said, "We're gonna spend this afternoon making a development budget," and I like, "Oh come on, seriously?"

07:26.68
AROB
Ah, no...

07:34.62
aggierobison
But that one thing was probably one of the most transformational things for my fundraising going forward. Like, it shows you where your strengths are in your fundraising program, where your weaknesses are, what can we improve this next year, what's already going well, what can we add, what can we afford to add, and it just changes everything within your program. So it is worth the time and effort to dig into this.

07:52.93
AROB
Exactly right. And I am not a numbers guy. I think I've said on this podcast many times, I am a history major. I wrote papers in college. I did not fill out spreadsheets and do long math equations. And yet, I understand the importance of...

08:04.22
aggierobison
Oh...

08:11.64
AROB
...looking at numbers, at developing financial plans, financial models, and sometimes, you know, you have to, like you said, it might sound boring and it might be boring. And I hopefully not, I think that, you know, the way that we approach it and the way that we're going to talk about it today, it's kind of pretty exciting, pretty cool. Um, but...sometimes it's a moment in time, right? You have to, um, you know, you have to do the workout. You have to get up early and, you know, the alarm clock goes off at four o'clock in the morning or five o'clock in the morning, you have to turn off the alarm, get out of bed and do it, you know? What to? But if you do that enough times, you do put in that work enough times, then eventually...you see the results pay out over time.

08:51.69
aggierobison
Excellent. So by the end of this episode, we're gonna come back and talk about a tool that we used, both my ministry and others...um, organizations I've worked with have used that just makes this process so much more effective. But let's work our way into there. Let's start with why. Why budget, even, and be in the, for the, for in the first place, right? The most fundamental question there. Why...why spend time on this process?

09:12.59
AROB
Yeah, hold on one second...

09:20.57
aggierobison
That's like the best question to transition into this. But...

09:33.22
aggierobison
The clear, my...go.

09:33.44
AROB
Okay, so okay, so your question was, "Why do we even need to make a budget," right? "Why do we need to as fundraisers? Our goal is to go out and bring in as much money as possible for our organizations, right? What does it matter if we have a budget?" Well, there's a lot of reasons. One, it allows you to plan. If you know what your goal is, um, and you know, ah, then you can work your way back from your goal to create your plan, which ultimately your plan is going to affect your actions and your activities. And then your actions and your activities are set up by your daily routine and your daily strategies, right? So it's all about starting with the end in mind with your plan, and then creating, ah, starting with your end goal in mind and then working your way backwards towards, "What do I need to do today to get one step closer to that plan?"

10:25.54
aggierobison
Right. So you're almost having two different budgets that you're looking at, right? You're...you're budgeting how much you're gonna spend on the coming year. But you're also using that to budget how much are we gonna raise and how are we gonna do that with our fundraising, right?

10:36.63
AROB
Yeah, that's a good point. I think it's probably worth a clarification, right? So a budget, you know, in one, in...in your mind, you know, if you're listening to this, you might think, "Okay, what he's talking about is a budget for the development office: how much are we allowed to spend on on events and how much are we allowed to spend on travel," and that's a part of it. But what I'm...also talking about is how holistically, you know, comprehensively, what is your organizational budget? What are the expenses that you need to plan for in order to implement your mission, whatever that is? But then on the flip side, how are you going to maximize your revenue to be able to accomplish that? So just a really quick story: a friend of mine was on the finance council for a very large parish, and they had a large school and a lot of activities, and so they had a really big budget. It was in the millions of dollars. And when COVID started ramping up and they saw collections dropping, then the natural tendency was to say, as a finance council, to say, "How are we? What are we going to cut? How are we going to lower that income? Sorry, that excuse me...How are we going to lower that expense side so that we don't put ourselves in a bad position by spending too much?" Which is a prudent way to look at it, right?

11:48.55
aggierobison
Okay...

11:53.55
AROB
Um, because you don't want to put yourself in a position where you're accruing debt and all of that. So...it's prudent and it's smart. But what his question was is, "Why is that the only option? Why is decreasing our expenses the only option? Why can't we look at increasing our revenue?" And that...that's less...that's also a prudent decision as well. But it's also a um, kind of a more mission-oriented decision as well and a mission-oriented outlook. It's...it's this attitude of abundance. It's, "If we go out and we do what we need to, to serve our people, to serve our, to accomplish our mission, and we put ourselves in a position where we are trying to generate more gifts, more dollars, more revenue to be able to fund that mission, then at the end of the day, we are in a position where God is going to bless our work," as opposed to, "What are we going to cut and eliminate so that we can make do with the the scarce amount that we know we have coming in?"

12:52.49
aggierobison
Great, listen, there's no word I was looking for. There's just Christie mentality and there's the abundance, yeah.

13:04.68
AROB
Yeah, it's abundance versus scarcity, yeah.

13:10.11
aggierobison
Right. So having more of an abundance mentality rather than a scarcity mentality, that makes a lot of sense.

13:12.70
AROB
Yeah, you know, and everybody's, you know, everybody's situation is impacted by your experience, right? Your lived experience in the past, your lived experience today. And so sometimes it can be hard to kind of shift gears and think about it. But that's why creating these budgets when you're in a space that you're not in crisis or you're not in, ah, you know, sort of that scarcity mode, that fear-driven mode, that's where you can really make long-term plans, cast a vision, and then align your finances to accomplish that mission.

13:47.71
aggierobison
Great. So let's start with talking about how to set that budget for your expenses, you know, the programming you're gonna offer, the things you're gonna spend money on. What is that? What can that... What does that process look like or what are some different versions of what that process looks like?

14:03.82
AROB
Great. Are you asking about that goal-setting one? Okay.

14:05.79
aggierobison
Yeah, I think, does that work? Or did you have anything else you want to talk about? You...

14:11.72
AROB
No, that's fine. Yeah, yeah, so, so you asked about the process, right? Um, there's a, you know, there's kind of ah, a very common practice for how budgets are set and how development goals are assigned, and that...that's the word I'm using, is "assigned," um, but then, ah, but then the offices that I've been in that are most, that function the best, are they have a kind of a different approach, right? So option A, when you're developing your budget for the year, is the...

14:28.81
aggierobison
Are...

14:44.40
AROB
The the pastoral side of your organization, right? Your, your, whatever your organization is, the, the, you know, sort of the client-facing, the, you know, participant-facing, the ones that do the work, the programming, they come in and they say, "Hey, here's all of the the money that we need to be able to do what we want." And then they set the goal, and then they tell the development office, or somebody tells the development office, "Here's your goal in order for the programming to happen at the level that the other side wants," right? Then it, you know, "We need a million dollars this year," or whatever that is, and maybe it's the same as last year, maybe it's an increase, you know, who knows? And then the development office says, "Okay, well then we'll go out and, where's it, raise $1,000,000," so that's...that's kind of how most budgets are set. The offices that I've been in and that I advocate for with our clients with others is a different approach. It's a, "Let's...let's engage development in the ah, conversation about programming expenses and needs and all of that, look at history, and help them to understand and to be able to inform what is possible," right? So um, you know, so the the development officer, ah, certainly after they've been there for a while, they know, "We grew our monthly giving, you know, by 25% last year, and I think that's going to continue to grow. So I feel comfortable with, you know, setting our goal at, you know, x percent higher," or, "You know, major gifts, we...we finished a campaign a couple of years ago, people are finishing in their pledges. I feel like major gifts are, we can see an uptick in that, that's really going to allow us to increase our our revenue this year," or the opposite, right? Like, "A lot of our donors, you know, we saw a lot of giving last year, but um, you know, this changed or these circumstances change, and I...I think that we're not going to see that level of income from this section of our of our donor pool. We're going to try to make that up otherwise, but it's, there's some risk associated with that, so we're not going to be able to see that increase." And so they can inform, and then the programming and the development work together to actually set a goal that is an an income goal that's aligned better with what the development office sees possible and what the programming needs and wants in order to be able to implement their goals.

16:56.88
aggierobison
Yeah, that makes a lot of sense. So one of the questions we get a lot, and I'm afraid to talk about it before, and I really like how you've kind of approached it, is, "Okay, we're just starting out fundraising. We have no idea what is even possible. You know, what's...what's up, the right expected growth from our first year to our second year? From year zero to year one," right? Can you talk about kind of what that progression looks like in in growth and fundraising, especially early on in a fundraising program?

17:24.50
AROB
Yeah, sure. Absolutely, so um, so Petris, we use the three words "form," "build," and "grow" a lot. So I'll kind of use those in what you're talking about, year one, year two, year three, and, and, you know, just sort of disclaimer out there, right? We work on twelve-month, ah, you know, um, ah, cycles, but that doesn't mean your donors do, right? So sometimes, you know, these...these are going to be kind of extended or or shortened, but just kind of think about year one, year two, year three in goal setting, right? So year one, going from zero to one, when you've never done any development, you have a lot of opportunity for people that want to give to your organization and have never been approached with intentionality or with strategy. And so you start getting intentional about fundraising, meaning you send newsletters, you send appeal letters where you ask for funds, you update your website, those kind of like little shifts...um, you schedule coffee and and meetings with donors who you know have have loved your organization. Those little shifts will see your revenue and, from going from zero to one, shoot up, so it's kind of like boom, right? Just that little bit of intentionality and that little bit of strategy will help you to...um, what you're doing is you're forming systems and you're trying new programs, and so your revenue will bump up significantly in year one. Year...year two, so going from year one to year two, is when those systems, they've kind of, they've, they've had...

18:44.66
aggierobison
Right, right...

18:56.50
AROB
That initial impact on on your donors. Um, so they're going to continue to give, but you're not going to see in, you're going from year one to year two, a similar type of growth pattern, right? You're going to kind of slow down while those systems, those newsletters, those appeal letters, those monthly gives, you, they start churning, and they start kind of generating consistent, sustainable revenue, not zero revenue to some revenue, it's kind of, it's consistent, sustainable. So that's where you're kind of building on, you know, so "form," "build," "grow," you're building on that foundation to go from, you know, shooting up, and then you're kind of, you know, slow growth in year two, um, and so your growth in your in year two, I guess, so year one to year two, is going to be moderate because you're, you're kind of churning those processes. But in year two, a lot of development officers, they've kind of got those systems going, those processes are in place, now they can start cultivating and doing more discovery, so they can start spending more time out with their their benefactors and their their perspective donors and their donors. And so they're starting those relationships, right? So that's a good thing. They're not generating revenue just yet, but it's a good thing to start those relationships. Year three is "grow," so we've got "form," you built the foundation, "build," you're building on that, and then year three, in, in every office that I was a part of and in, ah, organizations that we work with as clients of Petris, year three is your, that's...that's the sweet spot.

20:29.37
AROB
That's where your systems are in place from year one, your foundation is there. Year two, you've built those relationships, you've cultivated, you've discovered. You know, you've done more discovery. Year three is when you see that. So if you're looking at, you know, the video of this, you see kind of a sharp shoot up from your zero to one, right? Low-hanging fruit, and if you haven't been asking, year two you kind of slow down a little bit, and year three, boom, you're off again. And so that's where a lot of that, that development of relationships, that development of processes, that starts to really pay off. And year three is when revenue is really going to start jumping.

21:06.47
aggierobison
Do you...do you ever, maybe a rule of thumb for what those percentages of growth look like from year one to two, and two to three? Is it a hundred percent growth? Is it 10% growth? What's...what's reasonable?

21:06.49
AROB
Off the charts.

21:16.46
AROB
Yeah, yeah, so um, and you know, so these are ballpark, in it. It's all going to depend on, kind of, you know, a lot of different factors, right? But going in year one, it's not unreasonable to expect a hundred percent increase in your giving just in year one.

21:23.30
aggierobison
I...

21:32.76
AROB
But it's because you're starting from a low level, right? So if you're starting at, you know, um, a thousand dollars a year, and all of a sudden you raise, you know, two thousand or five thousand dollars a year, like that's a high increase, right? So you're looking at, you know, as much as 100% or even more increase in year one.

21:33.77
aggierobison
Right.

21:48.99
AROB
Year two is going to slow down to where you're maybe at, maybe 50%, maybe kind of 30 to 50% growth in year two. But it's because your your starting number is a little bit bigger, and you're starting that kind of churn, that slow increase in revenue. Year three is when you can, um, start seeing more dollars, but the percentages are down. So year three, you're still looking at like a 20 to 30% increase in year three. But it's, it's a lot more dollars because you're you're just starting at kind of a higher level. So um, and then kind of beyond year three, what I tell people is, if you can, you know, initially when you're kind of just getting, you know, building a development program for the first five to ten years, it's not unreasonable for you to see 10 to 15% growth year over year in your revenue, revenue, your, ah, your fundraising revenue. Um, and that's a good thing. And you know, finance councils and boards, they're gonna want to see bigger numbers. But like, if you can get 10% growth year after year for the first ten years of having a development office, like man, you're in a, you're in a tremendous spot because the sustainability of putting those practices in place is going to mean that that increase can continue year after year after year, as the development office grows, as your staff, you know, as a programming then grows because you have more revenue. It's just going to, ah, continue to feed that.

23:12.15
aggierobison
Yeah, exactly. And if you don't have kind of historical data from where you're starting from, right? If you either haven't raised any gifts, or if you maybe just weren't recording those gifts somewhere, I think that the key here is just to start, right? Like, get some data this year so you can start moving forward and and seeing what those trends...

23:25.35
AROB
Yeah, yep.

23:32.00
aggierobison
...are, right?

23:32.89
AROB
Yep, set your alarm and start waking up, right? Like, you know, we keep going back to this working out reference, or sign up for the softball team, right? Or, you know, put in that first P90X DVD. Do you have DVDs? Are you doing the the online...?

23:42.85
aggierobison
I...I did buy the DVDs. I like it, yep.

23:47.80
AROB
Ah, good. Good. So but that's your first step, right? You had to buy and own the DVDs and find your DVD player, hook it up so that you're ready to go. Without those kind of very basic steps in place, you're not doing P90X. It's the same thing with budgeting. You have to start, and even if the the first basic steps seem so simple, it's using this this spreadsheet that we're talking about, it's setting up a meeting with, you know, the the development office and the the programming side to talk about revenue. It's like those very basic things that seem like so elementary, you shouldn't even have to do them. But if you're not doing those things, then there's no way you're going to be able to have anything to build on.

24:28.44
aggierobison
Exactly. So as you're ramping up these activities in your fundraising office over time, you're gonna have some expenses there, right? It costs money to take somebody out for coffee or lunch, just send up mailings.

24:36.80
AROB
Yeah.

24:42.65
aggierobison
Do you have maybe a rule of thumb of what your kind of expenses to income ratio should be for fundraising? Because there is going to be a cost of doing business.

24:48.70
AROB
Yeah, totally, so this is, ah, ah, I don't want to call it a loaded question or a tricky question, but in the nonprofit world, sort of outside of, you know, kind of a little bit outside like the ministry space, and by that I mean like kind of smaller nonprofits. So when you start looking at like mega nonprofits, like Red Cross, like major hospitals, you know, these kind of global efforts, there is a, there is a movement to eliminate overhead and expenses of fundraising to the point that if, you know, there are websites that track how much money is coming in versus how much is spent. And if you're not in like the, you know, 95 to 90% range, meaning that you're spending, you know, $1 to raise $100, or you're spending $5 to raise $100, then you're kind of, you know, seen as irresponsible, and you know, almost kind of demonized as being an inefficient fundraising office. And I...I am here to say, especially if you're in, you know, a smaller shop or if you're in, you know, something that has kind of a nascent or a new development office, that number, those numbers do not apply to you. Um, when I worked at St. Mary's at Texas A&M, which they've just, they've raised over $50,000,000 in the last ten or fifteen years for multiple expansions, new church and annual fund, just a huge, thriving program. But when I worked there in the early 2000s, our goal every year was forty. We wanted to keep our expenses for raising money...

26:21.41
AROB
...less than 40% of what ultimately was brought in in revenue. And that number was fine, everybody was good with that. Now, I can't tell you what their number is now or percentage, no idea what that is. But I can tell you that at that time, as we were growing, that 40% level was perfect for us. It allowed us to be able to invest in development, it allowed us to be able to spend money like you're saying. You have to spend money to bring in money, so we were able to spend, you know, do a car raffle, we were able to have an appeal letter, we were able to host events, we were able to, you know, hire staff and have that staff travel to go see people. And all of that generates money, but we were doing it in a responsible way.

27:01.66
aggierobison
Exactly, and in some ways, if you have that ratio at zero, where you're spending no money on fundraising, you're you're failing the organization and people it serves, right? Because you're not growing, you're not investing in the future of the organization. So in the early years, it might be almost negative, right? You might hire a new development director...

27:20.89
aggierobison
And it might take a couple of years when them actually kind of raise their salary back and then circle room beyond that, but it's an investment in the long term where you are gonna start seeing the ratio go down. So...

27:27.96
AROB
Yeah, I've...I've used that kind of, on that one point, right? So a lot of people do say, you know, if you're just starting a development office, right? Your development expenses are the salary of your development officer, right? That, you know, you kind of, not even thinking about the other things. And so I get that question a lot, like, "What should be our goal for our new development officer, ah, in terms of raising money to kind of cover his or her salary?" And so the the rule of thumb that I tell, you know, new executive directors or pastors who are kind of just embarking on this is, in year one, if you, if that development officer can raise enough to cover his or her salary, you're you're in a good spot, right? So that's one x.

28:04.90
aggierobison
And...

28:05.62
AROB
So you know, whatever their salary is, you know, they want to be able to cover that with with fundraising revenue in year one. In year two, you're probably looking at two, maybe three x their salary, and that's reasonable, right? We talked about going from, you know, ah, zero to one year, right? There's ah, there's a sharp increase. Year...year two, you're kind of, you know, slowly burning, you're starting to get that kind of churn, that's, you know, two to three x. In year three though, that number should be five to ten x their salary to what's raised, and that's not an unreasonable expectation. Um, there's a lot of factors, right? So don't go and, you know, ah, kind of call your development officer into your office today and say, "Hey, Andrew said on this podcast, you know, this," like, there should be, now you have some numbers to like look at and engage, um, there's a lot of factors involved in that. But that's not an unreasonable expectation. In year three, you're looking at five to ten x return on just that fundraiser's salary alone in revenue.

29:00.78
aggierobison
Great. So let's move it. We mentioned earlier this spreadsheet, this tool that we used on, that we use other organizations to kind of start this budget and planning process for the fundraising. Um, I'm sure we move into this...

29:14.38
AROB
You can say something like, "I...I know the spreadsheet's not there for us to look at right now, but can you just sort of explain the sort of broad strokes? What it is?"

29:16.88
aggierobison
No...

29:25.90
aggierobison
Yeah, ah, okay, so like we mentioned earlier, we...we have this tool, this spreadsheet that we've used in the past. I myself used it in ministry, and we've used it with a number of clients that help us kind of create that budget, create that development plan for the year. Could you kind of just explain, I know we can't see it here on a podcast, we can't pull it up in the video, but could you explain at a high level, what...what's involved with the spreadsheet, right?

29:48.97
AROB
Yeah, it's remarkably simple. That's the way fundraising is, the fundraising is simple, it's just that it doesn't make it easy, right? So this tool is remarkably simple in that you, ah, in your A column, you list out all of the different fundraising activities that either have happened in the past, so kind of historical activities, or that could be implemented in your development office, right? So it's just simply, you know, you go through your year and, you know, if you're on a fiscal year like we talked about earlier, right? Your back-to-school appeal might be kind of number one, and then your fall newsletter, and then your end-of-year appeal, and then your matching gift, and then your, you know, your your spring event. And you just sort of go through in that A column and list all the things that could generate revenue. And then at the bottom, you put a couple of of ongoing efforts like major gifts or direct solicitations or online gifts or monthly gifts. So you know, kind of list, ah, those things that are just ongoing, they don't have the time, right? So that's in your A column. So what would that be? Your your're, up and down, ah, axis, right? So then...

31:19.56
AROB
On your rows, you go across on all your rows, and the first couple of ones are historical: what's been brought in, your goal for this year, um, and then how you are, kind of where you are in achieving that goal, are you at 0% or you 50% or 100%? And then the next 12 columns are your months of the year. So if you're doing a fiscal year, you can do June or July through June. Calendar year, January through December. And then as the year goes on, so this is kind of utilizing it as the year goes on. When your Christmas appeal goes out or your end-of-year appeal, and it generates, you know, $5,000 in revenue, well, and it's in December, most of that's in December, let's say. So and you're going to fill in, in that cell, $5,000. And then that's going to go back to your goal. So that's kind of the utilization of it. The the nice thing about, you know, that intersection between kind of the programming and the development...

31:42.13
aggierobison
Right...

31:56.52
AROB
...side, right? Like how do they even set this budget? Is when you put in all of your fundraising activities in your A column, and then the dollars that you think they're going to generate, it might look like $100,000 is your kind of how much you see coming in. And then your programming office says, "That's great, Andrew," or, "That's great, Ren, but can you do one hundred and fifty this year because that's, you know, all the things that we want to implement, that's going to be one hundred and fifty thousand dollars budget?" And you say, "Okay, I don't know, but let me look at the spreadsheet." So then you start looking at, instead of saying, "Yeah, we can do it," or, "No, we can't," you say, "All right, are...ah, what I've budgeted for our increase for our Christmas appeal is 5%, maybe we could do 10%, so let's do 10%," right? "And we're not doing, ah, you know, a spring raffle this year, we don't have a budget to do a spring raffle, but let's say we do a spring raffle. Yep, we'll do a spring raffle," and that could generate this. So you start kind of like chipping away at that delta.

32:38.56
aggierobison
Could be...

32:53.79
AROB
And then at the end of it, you say, "All right, I budgeted $10,000 for personal solicitations, but I mean, if I'm serious about this, I could do $20,000." So then you you kind of make those changes, and then you come up with your number, and you say, "All right, it's one hundred and forty thousand. I'm going to go back to the programming side and say, 'Can you make what you get? I...I feel comfortable at one hundred and forty, so let's set your needs budget at one hundred and forty.'" And then you're once at 150, and I'm going to do everything I can to to get to that number. But you see it, it...it gives you perspective, and it gives you a process for even creating your budget.

33:28.00
aggierobison
Right, it allows you to sum up, okay, what's our total revenue raised each month by each month, and what's our total revenue raised by each development activity. I then compare that year to year, right? I know I'm in a situation where one newsletter raised an extraordinary amount compared to normal...

33:36.77
AROB
Yeah, yeah.

33:43.98
aggierobison
...and being able to go in and see, okay, why is this month so much higher than we anticipated, so much higher than previous years? Was it because of this newsletter, and this newsletter we had one gift attributed to it that was actually from, you know, something, some extraordinary gift that we wouldn't normally expect to receive, right?

Here's the edited version with corrections for spelling and grammar:

34:03.31
aggierobison
And now, are you behind where you hoped to be for the year? Are you ahead of it? Are you gonna hit that annual goal and complete, you know, where you need to be to cover the budget for the year?

34:11.76
AROB
And as you're looking to future years, you know, cash flow might be an issue at your organization, all right? You know, June and July are always low in cash, and you don't know why. And then you look at this schedule of development activities, and you say, "Well, we we have nothing planned for June and July." And so, you know, part of that is maybe it's not strategic, and part of it is we just never thought about planning an event. But if if that's a major stressor on the organization, and we need to rectify that, well then now we have the data to support doing something in June or July.

34:44.30
aggierobison
Yeah, exactly. One thing that I found interesting is, you gave a presentation on this topic at the RENEC conference last year's fundraising conference, and you presented this tool, this spreadsheet, and showed it to the people there. And one thing that came up that kind of overtook the rest of the talk was monthly giving. When people laid out their monthly giving, it feels like a small thing, all these, you know, twenty-five, fifty dollar a month gifts. When you add them all up together and show, "Oh, we have this much coming in this month, and it comes in the next month, and maybe it grows a little bit because you've added some more," and the next month...

35:03.19
AROB
Ah...

35:19.34
aggierobison
For a lot of people, that monthly giving piece becomes the biggest line item on their development budget, their plan. That got a lot of people thinking like, "Oh, I should be spending some time on my monthly giving." So it helps you kind of visualize where their dollars are coming from, where should I be spending more effort, maybe where should I be spending less effort...

35:21.50
AROB
Hey...

35:36.76
aggierobison
...to make this development program grow.

35:39.57
AROB
Yeah, a hundred percent, you know, monthly gifts...um, the average monthly donor lasts for seven years, and they don't decrease their gift, and they in more, more cases than not, they increase it. And so if you can add three monthly gifts averaging $50 per donor a month, and you put that, you think, "Oh yeah, well you know, what difference is that going to make?" But then you put it into a spreadsheet, and you know, you start with, um, you know, I'm not going to do the math, but you start with $100 a month in June, in July. And then by the time you get to the next June, you're at, you know, um, $1,200 a month. And then you think, "Okay, well now we're starting to see it." And then you roll that, just start planning for the next year, and all of a sudden your July is starting at $1,200 a month. And you roll that out over 12 years, it's like, "Wait, wait, this is like real money here." And it's just about being intentional about your strategies and fundraising. Um, but it...until you until you kind of get strategic about making the financial plan, you don't, you don't realize things like that are as impactful as they are.

36:44.54

aggierobison

Yeah, exactly so this tool will have ah available for you to download for free. You can go get the spreadsheet and we'll have it landed as a template so you can plug in your own development activities your own numbers and start using it to make a development plan for your organization. Well so there's some some examples. Ah, how it could be laid out in in the tabs and on the spreadsheet. So go to petestevolment.com/ 1 4 4 this is episode one forty four of the petest development show so petestdeolment dot com slash 1 4 4 you'll be able to access that spreadsheet now owner for free and start using it for your organization. Great well anything else to say about budgeting and and kind of forecasting for your nonprofit as we wrap up here. Andrew.

37:17.30

AROB

Awesome! That sounds fantastic.

37:28.61

AROB

As as a non numbers guy I can definitely um I can sing the praises of going through a budgeting and a financial planning process year every year for your nonprofit organization. And the the benefits that it will lead to are not just now but they are long into the future and so if this is a process you do and you don't like the way it's done consider redoing it this year with some of the tips that we've we've laid out here if this is a process that. You've never thought about because you're you know you're just trying to survive the next month like go through this process and see what what is possible and what what the potential is long term with with right strategy and intentionality and that will give you encouragement and hope and. Ah, vision that then ultimately you go share with your donors. You get them excited about it and then the reality is going to meet the vision.

38:30.86

aggierobison

Absolutely and I would share 2 2 quick tips from my experience in fundraising with this budgeting process. You got to spend the time to track the numbers right? and don't don't wait till the end of the fiscal year to go back and track all the numbers of the previous year I set a calendar reminder for myself every month go in update all of them numbers for last month and so I could track it and see how but it's progressing through the year it's super valuable to spend that time even though it can be tedious kind of boring to do all that updating and kind of related to that you got to have a good database system that allows you to attribute these gifts like okay, this gift came in because of the ah. Advent appeal letter. This gift is a recurring monthly gift right? to be able to go in and run report saying all right, show me all the recurring what the gifts from last month. Show me all the gifts that came in from the advents appeal that just makes this whole process easier and makes your whole everything in your life easier. We did up the episode of the podcast a couple months ago but databases. If you're using a spreadsheet to track your data. Ah you know your your your donor data your kind of information the gifts coming in not just kind of the summary of it. Go get yourself a good donor database. Excellent. Well thank you for joining us here today. Andrew.