November’s surprising election and the ensuing political shakeup has spurred fear in the nonprofit sector.
Much is still uncertain when it comes to the Trump administration’s impact on nonprofits and charities, but many worry that a Trump tax plan, along with cuts in federal discretionary spending and government programs, will force nonprofits to find a way to do even more with even less.
And as a marketing firm that serves the nonprofit sector, we’re already seeing the fallout.
Marketing and communications are some of the first line items nonprofits choose to cut when uncertainty hangs over their heads or when finances get tight. But that’s a huge mistake. Marketing, communications and fundraising play a critical role in organizational growth, sustainability and mission achievement, and cutting their budgets at the wrong can time can make a tough financial situation even more precarious. These expenses investments are not overhead, but unrealistic expectations from funders are driving too many nonprofits to treat them that way.Marketing isn't overhead, but unrealistic expectations from funders are driving #nonprofits to treat it that way. Click To Tweet
The solution begins with recognizing the problem. In this two-part post, I’ll dive deep into the seven deadly sins that result from treating a nonprofit marketing budget as overhead and explain exactly how they harm nonprofit organizations. But don’t worry–this post is not all doom and gloom. I’ll also show you how you can overcome each deadly budget sin in order to set your organization up for sustainability and success for the causes and communities you serve. They deserve it, and so does your organization.
Deadly Sin #1: You have no marketing budget
Perhaps the biggest mistake your nonprofit can make when it comes to marketing is having no budget at all.
Organizations of every size and shape require some sort of marketing, communications and/or fundraising support to advance their missions. Your nonprofit is not an exception to this rule due to your unique model or structure, no matter how convenient an excuse that may seem for failing to invest in marketing. Marketing supports goals like:
- Engaging prospective donors and convincing them to give their hard-earned money to your cause
- Recruiting program participants or end-users of the services your organization provides
- Driving brand awareness and affinity that establishes your organization’s credibility with government funders and foundations
- Attracting volunteers and community support
- Generating support for and organizing action around issues about which your organization advocates
- Driving social and behavioral change
While it’s unlikely that your organization is focused on every goal on this list, you’ll be hard-pressed to find a nonprofit that can’t relate to at least one or two of them. And so every organization needs a marketing budget. Yes, that even includes organizations that don’t feel they need to fundraise.
When nonprofits fail to establish a marketing budget, they’re contributing to what the Stanford Social Innovation Review has bluntly called the Nonprofit Starvation Cycle, in which nonprofits are “left so hungry for decent infrastructure that they can barely function as organizations—let alone serve their beneficiaries. The cycle starts with funders’ unrealistic expectations about how much running a nonprofit costs, and results in nonprofits’ misrepresenting their costs while skimping on vital systems—acts that feed funders’ skewed beliefs.”
It’s bleak, but it’s true. And there are few areas of investment more misunderstood by funders (and more skimped on by nonprofits) than marketing and communications.There are few areas of investment more misunderstood by funders (and more skimped on by #nonprofits) than #marketing… Click To Tweet
That’s due, at least in part, to our good friend the IRS, which has failed to provide specific instructions on how nonprofits should account for marketing and communications in their financial filings. The ambiguity around reporting on marketing spend leads many organizations to allocate their marketing and communications expenses to their programs, and keeps marketing from obtaining the dedicated budget it deserves.
Thankfully, according to the 2017 Nonprofit Communications Trends Survey, only 7 percent of nonprofits spend little to nothing on marketing and communications beyond their staff salaries. But an additional 19 percent have no firm budget and find the money for marketing and communications only when needed, and that’s nearly as problematic.
When you develop your budget on an as-needed basis, every tactic, initiative and experiment becomes a major ask because you have to find a way to pull money from somewhere else. Even worse, budgeting on the fly makes it nearly impossible to track and measure the impact of your marketing and communications spend. How can you figure out which investments are driving your goals forward and which ones are falling flat when your marketing budget is a frenetic mix of as-needed one-off activities? You can’t. And that lack of accountability makes it difficult to make the case for deeper marketing and communications investments in the future. So the vicious cycle continues.
Deadly Sin #2: You’re allocating too little for marketing and communications
Any marketing and communications budget is better than a non-existent one. However, trying to drive meaningful nonprofit marketing initiatives with inadequate investments is a losing battle. Without the funds to support their goals, your marketing and communications team will simply spin its wheels and will end up with little to show for its time and effort.
So how can you figure out what your nonprofit should invest in marketing? It depends who you ask. Most nonprofits that have a marketing budget use one of the following methods to establish it:
- The percentage method: Marketing, communications and fundraising (which many nonprofits group as a single line item) occupy a certain percentage of the organization’s total budget–usually somewhere between 5 and 15 percent of the total–depending on the size of organization, its structure and its mission focus. This method makes it possible for your nonprofit marketing budget to scale as the organization scales.
- The dollar method: Marketing, communications and fundraising are given a set dollar amount based on past expenditures. This method simplifies projections and makes expectations clear.
- The incremental method: Incremental budgets set up a specific percentage by which marketing, communications and fundraising budgets will increase or decrease on a regular (usually quarterly) basis based on immediate past performance.
All of these methods are inherently flawed, especially the first two. But I’ll get to that in a minute.
For now, simply do some quick math. With staff salaries included, does your nonprofit marketing budget (or marketing/communication/fundraising budget) represent at least 5 percent of your organization’s total annual operating budget? If not, you’re grossly underinvesting in an area that holds huge potential to spur your organization’s growth and mission impact.Does your marketing budget represent at least 5% of your nonprofit’s total annual operating budget? Click To Tweet
Deadly Sin #3: You’re basing your nonprofit marketing budget on anything other than goals and expected outcomes
Meeting a basic investment requirement (that 5 percent figure) is a start, but budgeting strategically is far better.
Despite its widespread use, the percentage method is a highly ineffective tool for developing a nonprofit marketing budget. It assumes that your marketing and communications should follow the growth of your organization, when in fact, it’s the other way around. Your marketing should be a growth driver. The dollar method is even worse. It bases future investments on past spending, which is almost sure keep your organization’s growth and impact stagnant. And the incremental method is only slightly better. It forces nonprofit marketing and communications teams into a rollercoaster ride in which they can never adequately plan their work or optimize its effectiveness based on the results of their initiatives.
Instead of defaulting to one of those three flawed methods, your organization should adopt what we call “adaptive, goal-based budgeting.” This approach bases your marketing budget not on a percentage allocation or on past performance, but on marketing’s expected (and measurable) impact on your organization’s broader strategic goals.
Wondering how it works? Download our free resource: The 11-Step Guide to Adaptive, Goal-Based Budgeting for Nonprofit Marketing, Fundraising and Communications and get smart about building a better nonprofit marketing budget.
The beauty of adaptive, goal-based budgeting is that it’s totally accountable. Each dollar spent on marketing, communications and fundraising has a meaningful return on your organization’s goals, and budgets are constantly optimized so that the tactics and initiatives with the highest returns take priority. This allows marketing to occupy the growth driver role it deserves and truly further to your organization’s impact rather than simply supporting it.When it comes to developing your #nonprofitmarketing budget, adopt what we call “adaptive, goal-based budgeting.” Click To Tweet
I’ll be back soon with the four remaining nonprofit marketing budget sins, but for now, it’s time to get to work. If you don’t have a marketing and communications budget, build one. If your nonprofit marketing budget is under 5 percent of your total operating budget, advocate to increase it. And if your marketing budget and communications is not aligned with measurable goals that stem from your organization’s broader strategic goals, evolve it. The social sector needs to prioritize marketing and communications, now more than ever, in order to maximize its impact on the people, causes and communities it serves, and we’re here to help.