calculator graphs pens crumpled paper shutterstock_257826142Budget, fudget, smudget.  If you are like many of our clients, that time of year when the budget is due can be stressful. Well, we are here to help! There’s no need to worry about budgeting, because we have developed proven methods to put together a solid budget based on past results.

When preparing your organization’s budget, there are a lot of questions to answer. Most importantly, you need to understand the make-up of your file. You must answer questions like, “Have we acquired enough new names to replace lapsed donors?”, “Are retention rates holding up?”, “Can we expect to sustain average gifts”? Without answers to these types of questions, your budget will be more like a fudget, or even worse, a smudget.

Our 3-step approach
The foundation for building a budget for our clients is the Donor Discovery File Audit (DDA). The file audit looks at major donor groups, like new donors, second-year donors, multi-year donors, and lapsed donors. Based on retention rates for each major group, we can project revenue for the next 5 years. The DDA gives us a solid projection for how much revenue can be generated from your current house file.

Additionally, we run projections for each campaign, using current RFM (recency, frequency, monetary) counts which are applied to last year’s results. We apply global lift assumptions when necessary; for example, if you are rolling out a package that lifted revenue by 10% in a previous test.

And finally, we run a campaign-level proprietary budget tool, which uses the forecasted counts for each major group in the DDA, coupled with the percent of the group that was mailed in the prior year, as well as performance for that group in the prior year. For example, the DDA might project you will have 10,000 second-year donors in the upcoming year. In your matching gift campaign 95% of those donors were mailed with a response rate of 10%. For this group, we can project 950 donors to this campaign (10,000 *.95 * .10). Apply last year’s average gift, and you have a solid budget projection.

Budgeting doesn’t have to be a stressful process. Using proven tools, we can develop a solid forecast, and your days of fudging or smudging numbers will be over!

Deana Ashbaugh is Senior Strategy Director at Innovairre Communications, which supports more than 500 nonprofit organizations around the world. For strategies to maximize results in 2016 and beyond, contact us at Answers@ Subscribe to our newsletter here, and follow us on LinkedIn and Twitter.