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Steps to develop an NGO financial sustainability strategy
August 05, 2007
1. Firstly, determine what your current budget of expenditure is,
i.e. start with what you have. Break this down into:
(a) core operational expenses
(b) programme/project expenses
(c) capital expenses
2. Further break
down your core operational (or overhead) expenses into what is the
biggest (and most important) expense and the smallest (and least
3. Develop a
minimum budget (what you need to cover to survive) and a maximum
budget that will allow you to deliver on all your programme objectives
as well as allow you to put away some financial resources into a
4. Now make
a list of your current external donors and how much they are currently
funding and over which period. Please note the commitment of those
donors who have pledged to continue funding and over what period.
5. Make a list
of your own income activities and how much income is generated per
annum. Determine which income activities are financially viable
and which are a drain on your financial resources.
the percentage of own income in relation to external funding. Set
yourself an objective of increasing own income by a certain percentage
that is achievable e.g. from 10% of your total core operational
budget (excluding programmes) to maybe 30% over 3 years.
7. Now develop
plans how this will be achieved over those 3 years e.g. increasing
fees for services, increased marketing to attract more customers,
utilizing investments to maximize interest, diversifying services,
develop more income generating activities without becoming distracted
from your core focus, etc.
8. Ensure that
in all your budgets for programme expenses the donors make a sizeable
contribution to administration costs, at least 10%-20% and reflect
salaries as far as possible as a programme/project implementation/coordination.
9. Develop a
cost containment strategy i.e. how to minimize the cost of running
your organization, e.g. staff containment, multi-skilled staff members,
use of volunteers, negotiating discounts from key service providers,
e.g. external auditors, insurance companies, bank, etc.
10. Make a list
of your potential external donors and plan when to submit funding
proposals to them. Categorize the potential donors in order of high
potential and low potential. Focus your energy on the high potential
a comprehensive research strategy and communication strategy to
cultivate unknown donors. Remember, this is a continuous process
and cannot be started when current donors contracts come to an end.
Research can include Internet browsing, accessing donor directories,
collecting annual reports of organizations operating in your sector,
referrals by your strategic partners, scrutinizing relevant newspapers,
telephonic enquiries, attending strategic forums, etc.
12. Make a list
of your strategic partners and indicate what value they are adding
to your organization and its programmes. Try to convert the value
into rand and cents so that it can be reflected as a saving in your
budget of expenses.
a risk management strategy in the event of funding gaps, i.e. how
will you respond should promised funding be delayed due to unforeseen
circumstances? Will you cut or withhold salaries, apply for a bank
overdraft, borrow funds from other programmes/projects or maybe
use your reserves?
Frank Julie, independent development consultant and author of "The
Art of Leadership and Management on the Ground" (A practical
guide for leaders and managers to develop sustainable organizations
for permanent social change)
To read more
about the book, view its detailed contents and comments from community
leaders and academics around the world, please go to www.frankjulieblogspot.com.
To order the book and get a free list of donors in South Africa,
please e-mail Zandile Stols (PA) at firstname.lastname@example.org
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