March 20, 2017, by Sara Lowe
Did you know that for-profit businesses spend an average of 10% of their budgets on marketing, and nonprofits spend an average of 3%? The truth is that nonprofits are in a tough spot. They function based on funding from donors, yet donors don’t want to necessarily see their money going towards an ad campaign, but rather towards building a house or feeding the needy. Donors want their support to fund programs, not promotion.
At the same time, this does not diminish the importance of having a solid marketing budget for your organization. How are you supposed to raise awareness or host fundraisers for your cause without the necessary amount of funds allocated for those purposes?
According to Urban Institute, over 5% of our country’s total GDP (Gross Domestic Product) is dedicated to nonprofits, which is roughly $906 billion. This also accounts for 7.5% of the total employment in the US. However, the nonprofit sector hasn’t grown as a percentage of the GDP in over 40 years. Could this be perhaps to a lack of funding being allocated to marketing? When your organization isn’t achieving its potential reach to donors, volunteers, etc., it’s not going to accomplish everything that it could be accomplishing.
What is an appropriate amount for your marketing budget?
So how much should your nonprofit be spending on your marketing budget? There are usually two approaches to this question – a set dollar amount per year or a percentage of your annual budget. People who believe that marketing and communications expenditures should directly reflect a nonprofit’s evolution and size of budget tend to prefer the second approach. The advantage of developing a budget based on your organizational finances is that it’s organic. Communications spending grows as does your organization.
Nonprofit Marketing Guru Nancy Schwartz says that the allocation of marketing funds should be from 9-12% of your annual organizational budget (start with 10%). Just as with any type of business, this amount will change depending on the size of the organization.
According to Royall Advertising Agency, “In the early stages of any business, for-profit or not-for-profit, the business should spend a higher percentage, up to 10-15% in the non-profit realm, and 20-30% in the for-profit realm of their revenues on marketing and advertising. As an organization grows, that percentage should come down on a sliding scale, slowly adjusting to around the 5% mark for non-profits as they approach $10 million in revenues. The largest non-profits may get away with much less than 5% (in the 3% range) due to economies of scale, but these organizations should show significant revenues in the hundreds of millions.”
To sum up:
On average, nonprofits today are spending 3% of their total revenue. Like any organization, nonprofits need to dedicate the sufficient amount to promoting and spreading their message. Does your nonprofit need to expand its marketing budget? We hope this article will help your nonprofit decide to dedicate the appropriate amount of funds to marketing in order to increase your impact in your community.
If you would like to share your own personal experiences regarding nonprofit marketing budgeting, please comment below or feel free to reach out to us at SocialPump. We’d love to hear from you!