Budgeting for the next fiscal year? A sustainable business plan can help keep your programs’ hard-won victories visible. This way your leadership team and board members can make better decisions based on mission impact, not just dry columns of dollar figures.
You could budget the basic way …
- Look at what programs cost this year.
- Estimate additional costs next year.
- Try to shoehorn it all to fit in next year’s revenue estimate.
… but in doing so you’d lose context, stories, the big picture of how your mission activities are driving toward your vision of a world changed for the better. There’s a better way.
- Plug this year’s expense figures and a mission impact rating into a simple spreadsheet.
- Generate a bubble chart showing where each program fell on profitability (income-expenses) and mission impact this year.
- Do the same thing with next year’s projected expenses and desired mission impact.
- Compare the two bubble charts and ask your leadership team and your board: Are these programs fulfilling our mission and moving the world toward our vision of a better future?
The resulting charts are matrix maps, and the idea behind them comes from Jan Masaoka’s excellent book Nonprofit Sustainability: Making Strategic Decisions for Financial Viability. Here are really brief instructions on making your own spreadsheet like the one above:
- Profitability: This is Revenue (how much money the program brings in, from all sources) minus Expenses (explained below). To keep things readable, I haven’t shown the Revenue column in the example spreadsheet, but you’ll need it.
- Mission Impact: Assess the mission impact of each program, 1=well below average, 5=well above average, against several criteria. Jan’s book, and I, recommend starting with these criteria: alignment with core mission, excellence, and filling an important gap. After that, you can develop your own.
- Expenses: Every expenditure directly attributable to the program. This figure determines the size of the bubble on the matrix map, so you can tell at a glance which are your big programs and which are the small ones.
Visualizing your budget with a matrix map shows you the whole picture of how spending money creates mission impact. Comparing this year’s matrix map with next year’s shows you clearly how you’re moving toward your vision of a world changed for the better. That way, your leadership team and board can make better budget decisions.
What about you? How would a visualization tool like the matrix map help your leadership team and board make better budgeting decisions? Tell me in the comments or on Twitter: @johnmfulwider
P.S. At a June 4, 2013, workshop I’ll walk you step-by-step through making your own matrix map. I’m speaking at HBE Becker Meyer Love’s Nonprofit Round Table, which is for the accounting firm’s clients and non-clients alike. It’s a gigantic bargain at zero dollars, and lunch is included. Register here: http://hbecpa.com/event/
P.P.S. If you can’t make the June 4 workshop, read more here about the Sustainable Business Planning for Nonprofits workshops I occasionally schedule. To get notified when I schedule the next one, please subscribe to my email newsletter.
P.P.P.S. Man, I just keep going on, don’t I? I’ve got a spreadsheet I can give you that’s already programmed to generate the cool bubbles for your very own matrix map. All you have to do is ask nicely: john AT johnfulwider DOT com
P.P.P.P.S. Last one, I promise. If you want to get another read on sustainable business planning and matrix mapping—and you should, because you really can’t get enough knowledge about this powerful tool—read this article from Blue Avocado. It’s by Steve Zimmerman, one of the coauthors with Jan Masaoka of the aforementioned Nonprofit Sustainability. (Yep, I said “aforementioned”—just be glad I didn’t say “hereunto appertaining.”) In case I didn’t make it clear earlier, the matrix map is not my idea—it’s Steve’s, and Jan’s, and Jeanne Bell’s (the third and final coauthor of the book).