How do you know if your non-profit budget is big enough?
Why is it that non-profits aren’t accomplishing the results that they—and we—hope they would?
According to activist and fundraiser Dan Pallota in this TED Talk, it’s partly because of an inherently flawed question often posed to non-profits: What percentage of the budget goes directly to programs instead of to overhead?
Pallota argues that that question drives non-profits to keep overhead low, which often means they lack the infrastructure and systems that could help them grow. For instance, if investment in fundraising means that less goes to “the cause”, then non-profits often spend less on fundraising than they should, creating a vicious cycle of no-growth.
According to Pallota, frugality in the non-profit world isn’t always a virtue. What’s more virtuous is to have non-profits dream big dreams, and then create the team (even though it increases your “overhead”) to accomplish those dreams.
Right now, charitable giving in the US has hovered around 2% of the national Gross Domestic Poduct (or GDP) for the last 40 years. If we can increase that 1% to 3% and that extra $150 billion went to health charities, that would triple the contributions to that sector. According to Pallota, “Now we’re talking scale. Now we’re talking real change.”
Pallota ends his talk with a challenge: Do we want to be known as a generation that changed the world because of Apple and Google-sized dreams, or do we want to be known as a generation that made sure charities kept their overhead low?
As someone who not only helps lead a non-profit but financially supports them, a number of questions came to mind after hearing Pallota’s challenge:
Am I dreaming big enough?
Am I willing to invest in the infrastructure we need to grow and equip more teenagers with the lifelong faith they need?
How do I know if we’re spending too much on overhead?
What wise business leaders can look over our budget and help us think about appropriate growth goals, both for overhead and program funds?
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