The matter of overhead, i.e. administrative costs, is still and will probably always be a big
deal for nonprofits.
The idea of keeping overhead really low is baked into the
psyche of nonprofit organizations, the public and donors alike.
Still, it does cost money to be in business.
Thankfully, more donors are beginning to recognize that for
a charity to serve the community, it has to stay in existence.
The standard for overhead spending right now seems to be in
the 20% to 25% range, certainly no more than 35%.
Truthfully, there is no single "right" ratio.
Some charities have substantial indirect costs. Others can
and do survive nicely on 15% or less.
The right amount is the no-frills amount that you need to
keep your doors open.
For instance, food-based charities may spend quite bit on
utilities, storage space, racking and material handling equipment.
Another that is based on volunteer staffed community
outreach regarding education might need no more than a phone and a website.
Recently I had a nonprofit that wanted a press release
written to tell the community that they were shutting down. Their main source
of income was fees for services, but they simply didn't have enough clients to
cover their operating costs.
One fact I learned
was that they had kept overhead to 7.5% of donations. There was no set budget
for non-program costs.
One of the casualties of that approach was that they did not
advertise beyond having a website.
I did the press release and two weeks later, I got another
call. Could I do a press release
retracting the closing?
When the first press release ran, they got over 70 calls
wanting their services.
Up to that point, it seems hardly anyone knew they existed.
I'm happy to report that they remained in business, and have
since created a budget for marketing.
Don't get hung up on meeting some artificial figure that
doesn't work for your business or charity.
Sit down, develop a realistic organizational budget and
stick to it.
To serve others, you first have to survive.
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