Do you feel it? That sweaty yet chilling sharpness in the air. Your head feels a little woozy. You feel a knot in your stomach. You wonder if it’s allergies. What is it?
It’s budget season!
Whether your fiscal year ends in June, September, or December, the time leading up to the end of your fiscal year and the start of a new one makes the budgeting time of year the most dreaded by direct marketers. And next year’s budget is shaping up to be especially challenging.
The trends coming out of year-end have been anything but clear and promising. Industry benchmarks and online trends have reported softened results. For many, the year-end wasn’t the euphoric season of double-digit revenue increases seen in past years. At the same time uncertainty abounds from all directions. This doesn’t inspire confidence in the fate of next year’s revenue. Regardless, now is the time to implement budget planning strategies that set realistic goals and prepare for future success.
Get a strong cup of coffee (or your caffeinated beverage of choice), take a deep breath and dive in. Follow these eight budget planning strategies to remove the guesswork and build a financial plan that inspires confidence and progress.
1. Analyze File Trends
Start with a comprehensive file audit or analysis. Your key performance indicators (KPIs), such as revenue trends, average gift size, donor value, and retention rates, will help assess the overall financial health of your organization. Understanding these macro metrics is the first step in effective budget planning strategies that drive long-term success.
2. Determine Your Lifecycle Counts
Some of the most important numbers to reference when budgeting are your counts of donors by lifecycle. New donors, multi-year donors and lapsed donors respond very differently. It’s important that you are budgeting by lifecycle group and not by total campaign averages.
3. Review Past Campaign Results
William Shakespeare’s quote, “what’s past is prologue,” should inspire this next step. (And if you doubt the significance of this statement, consider that it is also carved into the National Archives Building on Pennsylvania Avenue.) Campaigns tend to perform similarly to how they performed in the past. If you aren’t making strategic shifts or changing creative focus and your donor counts are about the same, then budget for similar results. Don’t decide that this is the year your year-end appeal revenue will double just because you want it to.
4. Account for Rising Expenses
Costs for social media ads, postage and paper have all increased this past year and will likely continue to do so. Make sure you are accounting for the increased costs to execute the strategies you are planning.
5. Budget Within the Right Channels
In our omnichannel world, we often analyze direct mail, online campaigns and digital ad spends with an eye toward influencers. For example, a matchback analysis has indicated that 10% of your online revenue was motivated by direct mail. Your digital ads were served to donors who gave $10,000 through the general donation page. The influenced revenue is important in evaluating the value of the influencer for future investment, but be sure to budget the revenue in the channel the gift was received, or you’ll end up double counting this revenue.
6. Allocate Funds for Testing and Innovation
You may not know what you want to test now or what great breakthrough awaits, so add in a line item for testing. If you want to know where you are headed next year, you need to test some things this year to point the way. Funds, whether large or small, earmarked for research and development encourage innovation and make you accountable for implementing strategic tests within the year.
7. Cross-Check with the Smell Test
After you have budgeted all the individual campaigns, your budget should amount to a grand total of revenue, expenses and net. Cross check your totals against previous years’ totals to make sure the figures look about right. What is the percentage of increase/decrease you are projecting overall? Does that square with trends in the industry and your file trends? (Review file audit again!) If not, make adjustments.
8. Document Your Budget Planning Process
Write up a narrative of the strategic calculations you made to arrive at specific projections. Include details about segments you were thinking of adding or excluding from specific efforts. Jot down the new ideas or tests you are planning. Keep notes about the influencer revenue you are projecting based on results of other campaigns, so you know what contributes to those big buckets of mysterious revenue, such as a general donation page, white mail, and “other.”
Defend Your Budget with Confidence
After implementing these budget planning strategies, it’s time to defend your budget. Present your findings to leadership with confidence. Set realistic revenue expectations, balancing ambition with practical planning. Organizations that aim too high often resort to aggressive fundraising tactics that alienate donors. Avoid this by developing a well-researched, data-driven budget.
Plan for Growth and Success
Your budget is more than just numbers—it’s a roadmap for future success. By following these budget planning strategies, you’ll create a plan that supports innovation, strategic testing, and financial stability. Take the time to plan properly, and you’ll enter the next fiscal year with confidence in your organization’s financial health.