Movie Mondays

Fun weekly videos to help nonprofits raise money, steward donors, and inspire board members

Overhead Ratios: How to answer your donors’ questions

Episode #254

How do you respond when a donor asks about how much of their dollars go to funding your overhead?

For many folks, this can be a tricky question and one that brings some tension to the conversation.

In this week’s episode, Peter Drury  shares a terrific tip on answering the question about your overhead ratio. And perhaps after you watch the video, you will actually WANT donors to ask you that question.

Peter is the Director of Corporate & Foundation Relations at Seattle Children’s Hospital.  He’s also the creator of the “Beyond Cash Fundraising Management Dashboard”. This is a terrific resource that helps organizations prioritize and save their time.  It makes fundraising a predictable process. If you want to know more about the dashboard, go here: nonprofitbestpractices.com

If you’d like to talk with Peter in person, you can find him at the 2016 Nonprofit Storytelling Conference.  He’s giving a presentation called “Storytelling with Data”.

If you have any stories or advice on answering questions about “how much of each donated dollar goes to overhead?”, please share it with everyone else. Leave it in a comment box under the video.  Thanks.

Also, if you’re not already a Movie Mondays subscriber, sign up for your own free subscription so you won’t miss out on future movies. Click here for Your FREE subscription to Movie Mondays.

For your own free subscription to Movie Mondays, click here.

Comments

  1. Christopher Davenport says

    If you have any stories or advice on answering questions about “how much of each donated dollar goes to overhead?”, please share it with everyone else. Thanks. 🙂

    Reply

  3. Trudy Soucoup says

    I really like this – it is an approach I have taken for many years. However, I would love to hear from a donor to hear if this really answers their question. Is it too much info? Is it really the question they are answering. If they were hoping for a pat percentage answer – they may think I am disseminating to avoid the answer. I don’t know. What do you think?

    Reply

  4. Kay High says

    Good video. . .I really think the Overhead Myth link that Daniel provided is one of the best tools to refer to however. I have never actually been asked this question by individual donors, but by foundations. I think our individual donors get it more than we give them credit for. Keep these coming Chris!

    Reply

  5. Claire Axelrad says

    I’ve been asked this question many times. One of the ways I’ve answered is with my own question: If you could invest 20 cents to get a dollar, would you? If you could invest 50 cents to get a dollar, would you? If one dollar was old, wrinkly and ripped and the other was mint, would that matter to you? Maybe not. If you’re a collector, it would matter a lot. Change that to 20 cents to buy a bag of fresh produce vs. 50 cents to buy the same. If one were old and rotten and the other was fresh, juicy and nutritious (and would last a full week), you begin to understand. All things are not created equal.

    Part of the problem with measuring overhead is that every nonprofit does it differently. So we’re comparing apples to avocados. Some put a bunch of salaries into “program”, while others consider it “overhead”. Some put a percentage of “fundraising” into “program”, rationalizing that some of this is “marketing” and a way to support/get the word out about their services. And it’s all completely valid. There are no uniform standards for counting these things.

    It’s one of the reasons Charity Navigator is changing the way they give stars. And, of course, there’s Dan Pallotta’s argument that we’re not spending ENOUGH on overhead. After all, it costs money to build programs. It even costs money to fundraise. If, in the end, you create more value by having slightly higher overhead, then why not? Plus there’s the fact that a start-up or younger organization will have a higher overhead than a large, well-established one. It takes the same amount of time to write an appeal letter that will be mailed to 200 people as it does to write one that will be mailed to 30,000 people.

    So, there’s really no one simple answer to the overhead problem. It’s like the Goldilocks story. You don’t want to spend too much or too little. You need to spend the “just right” amount to get the job done.

    If you’ll forgive another analogy, cutting corners just to “look good” to your donors is not going to get the job done. It’s like cutting your medications in half because you can’t afford them. One aspirin won’t take away your head-ache if you need two.

    Reply

  7. Peter Drury says

    I’m really enjoying reading everyone’s comments ~ Keep ’em coming! And I agree that we are only scratching the surface here. Also, I agree that #OverheadMyth is a solid convener of this conversation, and an important resource for folks to know.

    If you’re on Twitter, my handle is @seattledrury and there are definitely people talking this up there, as well. Please feel welcome to join the conversation.

    In the end, if we are all elevating the overhead/investment conversation, it’ll help the whole sector!

    Reply

  8. Beth Ann Locke says

    So glad this was replayed… it is important for us to know how to talk about all this…. and to speak from a place of understanding rather than “fear” of having the “wrong answer”. Thanks so much, Peter!

    Reply

  9. Cathy J Sharp says

    Thank you Peter and Movie Mondays, for addressing this, it is helpful. Working for an organization with an overhead rate of less than 10% on a budget of $40m mainly because government funding sources can find ways to penalize us if it is higher, I hope you’ll forgive me if I lean toward the Palotta philosophy, who I’ve followed for some time now, and express myself rather strongly! What I would like to tell anyone who asks that question is “100%” because fundraising and admin costs are all part of our mission. All the logic mentioned, that lights must be on, computers must be bought, audits must happen, are good and reasonable. But coming out of the old culture where charitable work was originally done by volunteers has kept the sector in the infamous starvation cycle for decades, fostered by the IRS and watchdog groups who require us to separate it from other costs. Personally, I got into fundraising for exactly the same reasons a social worker did: to help others using my skills. So why should my salary be relegated to the too often “reviled” category of overhead? But methinks I rant too much! Yes, I know about the watchdog’s letter to the public regarding overhead (finally and a step in the right direction) and I know I won’t actually answer the question that way! This, and the logic of others like Claire Axelrod, is very useful to respond to the question, especially so I don’t come off like a raving lunatic because this issue makes me crazy!

    Reply

  10. Johnathan says

    Man this is a great video. You really knocked it out of the park on this one with your clarity. I used to wonder what was the best way to explain this one. You gave me an interest now to share.

    And like you said, the donor is actually taking a step closer to our org!

    Clare, I also really liked your comments on how some people count this as program and others count that. It’s not necessary subjective but objective.

    Reply

  11. Leo Donaghy says

    Great way to deal with this, as more and more donors are asking questions. I like the way you unpackage it Peter and especially like when you say it’as an opportunity to get closer to the donor as they have made a move at getting closer to your org. Well done.

    Reply

Trackbacks

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.