Don’t Hide Overhead From Your Donors — They’ll Understand

There’s a common misconception in the nonprofit sector that organizations must do everything they can to reduce or eliminate overhead. 

At first glance, that seems like a practical idea. Nonprofits exist to make the world a better place. They solve real issues affecting our communities — feeding the hungry, providing education to children and giving second chances to unhoused populations. 

Many believe success means funneling as much revenue as possible into programs and the overall mission while keeping overhead costs — such as administrative expenses, support staff, accounting, human resources, executive teams, fundraising costs, training and salaries — as low as possible. 

The assumption is simple: If overhead is too high, donors will complain about how their gifts are being used. They might even threaten to stop giving altogether. As a result, many nonprofits operate from a place of fear. They adopt a sacrificial mindset, run lean operations and spend as little as possible on non-program expenses. 

Related story: Don’t Overlook Your Nonprofit’s Infrastructure Needs

Naturally, this perception has real consequences. By viewing overhead as antithetical to their missions, nonprofits contribute to many issues plaguing the sector — poor pay and burnout, high turnover, and a lack of innovation — all in the name of keeping expenses down. 

Why It’s OK to Talk About Overhead

Here’s the thing: In almost every conversation I’ve had with donors about overhead, they understand that it is necessary to fulfill the mission. More specifically, they recognize that a nonprofit can’t function without investing in its people, technology and other essential resources. 

In other words, it’s OK to talk about overhead with your donors. They get it! 

Why? A lot comes down to transparency and storytelling. If you can explain to donors how your organization’s overhead costs help retain the fundraisers they have relationships with and support the mission, they will feel more confident about where their money is going. More importantly, it shows them that you’re committed to a long-term vision and can clearly explain the reasoning behind budget allocations. 

After all, overhead is about more than just keeping staff happy. It covers professional development (such as new research on best practices), technology (updated computers and systems) and marketing (publicity to increase awareness and impact). These are all vital to supporting fundraising programs. 

How to Discuss Overhead

A practical way to discuss overhead with donors is by including it in the official ask. Overhead typically accounts for 25% to 35% of an organization’s total budget. This is significant. For example, a nonprofit with a $10 million budget needs to secure $3 million in unrestricted funds to cover overhead costs. 

Let’s say a donor is interested in supporting a food bank program that costs $100,000 to operate on weekends. Instead of asking for that flat amount, explain that you’ll actually need $130,000 to cover the overhead necessary to run the program effectively. It’s not an arbitrary addition — it’s a reality your donor will likely understand and support. 

Conversely, donors also recognize the downsides of running a lean, low-overhead operation. They see why their major gifts officer left for a higher salary elsewhere or why they don’t receive meaningful insights about their gifts’ impact. Ironically, by cutting overhead, many organizations end up sacrificing program effectiveness, donor relationships and the increased revenue they need to advance their mission. 

The bottom line? The mission is about more than just fundraising programs. It’s about creating a workplace that values staff, equipping employees with the tools and structure to generate revenue, and planning for the future. 

If you can explain the value of these costs with clarity and transparency, you’ll never have to worry about losing the donors you’ve worked so hard to cultivate. 

The preceding post was provided by an individual unaffiliated with NonProfit PRO. The views expressed within do not directly reflect the thoughts or opinions of NonProfit PRO.