Every nonprofit leader knows the value of deploying general operating funds to help grow and scale their nonprofit organization. General operating funds are mostly unrestricted dollars most commonly used to pay for things programming support generally won't pay for. These expenses include salaries, rent, utilities, fundraising, and other administrative expenses and overhead.
Traditionally, funders often like to fund projects in which their dollars can go directly to the end beneficiary. The truth is, programs are supported by general operating support because programs:
Are run in buildings that need running water and electricity to operate.
Need a fully salaried Executive Director that can dedicate their full time and attention to running a successful nonprofit.
Need things like insurance, accounting, and legal support to keep everyone safe and in compliance.
This list can go on.
Within the sea of program funding, dollars that can be used to support operations can be hard to come by. Funders are starting to think about this differently and expand their capacity for general operating grants. However, if you ask any nonprofit leader, it's not happening fast enough.
Today, I will share five strategies to help increase your operating funding.
Before we begin, let's start with one important question: Does your nonprofit organization have separate operating and program budgets? This can come in different forms. If not, let's make sure this is done first. Doing so will ensure you have a thorough understanding of which costs are operating expenses and which are program expenses and the totals for each. If you need clarification on which costs are commonly considered programming vs. operating expenses, share a comment below, and we can go into more detail in our next article.
Segment Your Grant Prospects
Once you have identified the total sum of your programming and operating expenses, which potential funders are prospects for operating support versus program support? Do you have enough prospects in the pipeline to fully fund your operating budget? If not, you may need to think about additional sources of operating funding.
Inquire About Corporate Sponsorships
Are you meeting with a corporate foundation to discuss grants? Inquire about their process for sponsorships. The contact person for sponsorships may be the same person or perhaps someone different. In the latter case, there may be an opportunity to ask for a warm introduction. Generally speaking, sponsorship dollars are often unrestricted hence providing more flexibility.
Examine Your Operating and Program Budgets
Do you have expenses that are not properly categorized? Are some of your programming expenses or a percentage of expenses listed as operating expenses when they should be programming? This is not an opportunity to misclassify operating expenses as programming expenses when they shouldn't be, but it is an opportunity to make sure they are correct. Some common culprits are supplies purchased for administrative expenses. A percentage of the supplies are shared with programming, but this percentage is not included as a program expense. Another example is an administrative role that spends a percentage of their time supporting a program, however 100% of their time is categorized as an administrative expense. Always speak with your accountant to make sure you are correctly classifying your expenses.
Explore Capacity Building Grants
Training staff and hiring third-party consultants, fundraisers, and grant writers are considered general operating expenses if their roles are not aligned with any specific program. Stating it a different way, these roles are mostly aligned to and support the general operations of an organization. These expenses are worthwhile and can significantly improve the trajectory of nonprofit organizations. However, they can also be cost-prohibitive, especially for emerging nonprofits. Some capacity-building grants invest in your organization by providing training for Executive Directors, Board of Directors, and other staff. Others provide access to professional services to help advance your nonprofit organization. If any of these expenses are included in your operating budget, capacity-building grants can help offset these costs.
Talk to Current Funders
Do you currently have a funder providing programming support? Do you have a good relationship with them or just submitted a report demonstrating your community impact? Inquire about any opportunities for additional support, including upcoming RFP's. Explain the need and see if they can help in any way. They may be able to help or know another funder who can help.
Which of these tips do you find most valuable? Do you have any tips that should be added to the list?