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Contribution Net Income Overview
3M Confidential
Budgeting and ROI
Becky Williams and Susanne Lynch, 3M
Contribution Net Income Overview
• Why budget?• Creating & understanding a budget• Using the budget to establish
operating rhythm• Using ROI to prioritize projects
Agenda
Contribution Net Income Overview
The Board’s Challenge
• Establish goals based on priorities & external factors
• How to communicate goals appropriately
• Predicting the unpredictable nature of fundraising income.
• Choosing which flight path for the organization
Daily choices about trade-offs
Contribution Net Income Overview
• To achieve specific program & financial objectives– Surplus vs Deficit– Evaluate programs to continue or
discontinue– Evaluate & plan for new programs– Performance Evaluation
• To understand where you have been & where you want to be
Why budget?
Contribution Net Income Overview
• Breaking down the Budget– Donations/Fundraising/Grants– Payroll Expenses/Administrative
Expenses– Programs/Projects
• We will go into thedetails of each section.
• Timing
Creating & Understanding a Budget
Contribution Net Income Overview
• Reality:– Fluctuate along with seasons and economic factors.– It’s more about setting goals than predicting
income.– Use the budget as a yearly performance review for
your marketing and fundraising teams.
• Review current year finish
Donations, Fundraising & Grants
Contribution Net Income Overview
• Discuss assumptions and add expectations for the next year.– What Grants will continue/discontinue?– Are there new Grants the team is going forward on?– What changes, if any, are expected with Donations &
Fundraising?– Where are the risks?
Donations, Fundraising & Grants
Contribution Net Income Overview
• Reality:– Use volunteers to keep payroll lean– Find ways to develop relationships with
organizations willing to offer discounts (Renters agreement, supplies, etc)
– Other operating expenses could include; Taxes, equipment, etc.
• Review current year expenses:
Operating Expenses
Contribution Net Income Overview
• Discuss assumptions for spending next year.– Wage increases due to inflation– Premiums?– Changes in contracts/agreements– Expenses related to Programs/Projects?
Operating Expenses
Contribution Net Income Overview
• Reality:– Funding creative, frugal and wide reaching
programs to maximize the organizations impact.– Prioritizing is key.– Needs change unexpectedly – find new ways to
shift money to meet the new needs• Review current year Projects
Programs and Projects
Contribution Net Income Overview
• Discuss assumptions for next year.– Project ending?– New project or program?
Programs and Projects
Contribution Net Income Overview
3M Confidential
Contribution Net Income Overview
• What month is the New Grant going to start/end?
• What month will the program cost come through?
• Annual/Monthly/Qtrly payments.• Analyze history to show patterns &
trends
Timing is Everything…
Contribution Net Income Overview
Timing is Everything…
Contribution Net Income Overview
ROIC: Return on Invested Capital
• Measure the return of an investment– Generally measured in financial terms but
can be applied to non-financial conditions
• The goal of ROIC is to:– Understand both returns and costs– Find the best investment based on certain
criteria– Find a common ground to evaluate
investments
3M ConfidentialWhere do you get the best “bang for your buck”?
Contribution Net Income Overview
ROIC
Who would you invest with? Why?
Bernie WarrenIncome $100 $50
Investment $2000 $500ROIC 5% 10%
Contribution Net Income Overview
ROIC Non-Financial
Contribution Net Income Overview
Non-Financial ROIC
1
2
3
4
5
1 2 3 4 5
Low
I
mpa
ct
H
igh
Low Difficulty HighProject A Project B Project C Project D Project E Project F
• Return can also be measured by how much impact a project can have relative to effort (Simple 1-5 scale)
• Projects in the green area provide a high impact at low difficulty (Very high bang for the buck)
• Projects in the red area have a high degree of difficulty and yield a low impact (Low bang for the buck)
Contribution Net Income Overview
What the Project LeadersWanted
What the Board Wanted
What the Donors wantedWhat the People in Need Wanted
What the budget can allow
What the Volunteerswanted
Funds are limited....
Contribution Net Income Overview
Thank You!