Two reasons donors question your overhead spend
It’s no secret that it costs to run a charity. A charity with no overheads is one that wont last long.
So if most people understand this, why is the question of overheads one that comes up so often?
Here are two reasons why, and two actions you can take to address it.
- You spend too much on overheads
The simple truth is that some organisations do spend too much on overheads. I read of one charity that had only 17% of funds raised going to program work, the rest went back to fundraising!
If your marketing is all smoke and mirrors don’t be surprised when people see through it.
There is no one size fits all ratio or percentage benchmark, but if you’re not entirely confident with the percentage of fundraising going to administration costs then I’d suggest it’s time you (and your Board) take a look at operational performance.
- You under-communicate value
Assuming your overhead spend is justified, then your issue lies entirely with perceived value.
The good news is perception is something you can influence!
Here are two ways you can limit, or even avoid, donors questioning your spend on administration and overheads:
Increase Transparency
Transparency is your friend! If you’re not doing anything wrong, then you have nothing to hide.
The more open you are about how money is spent the less people have to doubt.Take people on the journey and spell out how funds are allocated and how all functions work together to enable your organisation to make a difference. Show how the end justifies the means.
If you’re finding it difficult to prove the expense is worth the outcome, start by examining how you track and report on performance. Clear and consistent reporting puts the information at your fingertips to be able share with supporters regularly.
It doesn’t need to be your topline messaging, but making this information easily and readily available to supporters, even before they’re looking for it, goes a long way to building trust. It also equips you to respond with confidence and speed any time someone questions your financial integrity – “I’m so glad you brought that up! We outline exactly how the funds are spent over HERE <links to website>.” You may even find you can convert your biggest doubters to your most loyal fans.
Communicate Value & Impact
On the other side of the coin is showcasing the impact and immense value your organisation brings to the world.
You can never under communicate impact!
People are giving because they believe in the cause and they’re hopeful their gift can help make a difference. When we’re immersed in the details everyday we tend to assume that everyone knows what we do – don’t assume! Most people know very little about what your organisation does and the impact it makes.
Communicating impact is broader than dedicated activities like your annual Impact Report (although that should remain part of your plans). It should frame the way you approach brand and communications, the lens through which everything is filtered. Every interaction you have with an existing or potential supporter should communicate the value you bring and the impact you are having.
Find ways to highlight your impact through every interaction with both potential and existing donors and you remove the tendency to question value.
People have no issue spending money when they perceive the investment matches the return. It’s up to you to showcase the value and impact.
Are you looking to refresh how you present the value and impact of your work? Find out how we can help.
