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How to Build a Proven Simple and Easy Funder-Friendly Budget

If you follow my work, you may have noticed that my advice on writing a grant proposal usually focuses on the written part — called the "narrative" section. But a full grant proposal actually has at least one other component: the budget. Both parts are crucial to grant success and, along with administrative pieces, comprise a total grant proposal package.

Your grant proposal narrative will point the way to your proposal budget; the process is straightforward. In fact, the more directly your narrative flows to the budget the better.

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A Thumbnail Sketch of Your Grant Proposal

The good news is that the budget is usually much shorter than the proposal narrative — as brief as a single page.

Creating a program budget should be fairly easy once you have nailed down exactly what your proposed program looks like. At that point, you know what items you need. You just have to figure out (or at least estimate) what each item will cost and how those costs will be covered.

If you have never actually tallied up all of the expenses involved in your program, this process may uncover costs that you had simply glossed over before. A full list may prove to be quite an eye-opener.

Another piece of good news: In many organizations, budgets are created jointly by several members of the grant team. That means that if you are not so great at spreadsheets and finances, someone on your team can help you out.

As a good grant writer, your focus needs to be on making sure the numbers are reasonably accurate from a funder's point of view and that the proposed work has some plan for financial sustainability.

Your grant proposal's budget needs to tightly align with your proposal narrative. In fact, some funders read through your budget before slogging through your narrative. So, the budget needs to provide a consistent "thumbnail sketch" of what you're proposing. You want to encourage the funder to want to know more and potentially get on board.


Two Kinds of Grant Proposal Budgets

Your grant proposal will be seeking funding for either your entire organization (usually called "general operating support") or for a specific program or project your organization is doing or is planning to do. So, you will need both an organizational budget and a program or project budget for each grant proposal.

Organizational budgets tend to be somewhat complex, depending on the organization's structure, and are developed by the organization's management, finance department, and the like. That budget will most likely be approved by your board of directors on an annual basis.

On the other hand, program or project budgets are built by the finance department, program director, or development director. Sometimes, the grant writer will need to take the lead on getting these budgets together — in consultation with others.

Remember: Plan for Both Expenses and Revenue

Your budget should contain two distinct parts: Expenses and Revenue. That is, you'll account for both money you will need to spend AND money you expect to receive to pay for it all.

On the Expenses side, you will probably be asked to separate "direct" and "indirect" expenses. What's the difference?

Direct expenses pertain only to the proposed program at hand. That is, you would not incur those expenses without the particular program. Typical direct expenses include dedicated staff time, mileage, equipment, and supplies — all as described in the proposal narrative.

Indirect expenses are often called "overhead" or "administrative costs." They include costs for items that your organization would have to pay for anyway, but that you are also using for the proposed program. That includes things like rent, utilities, office software, accounting, and some fundraising expenses. Some funders don't support indirect expenses at all; others usually cap them at 10 to 15 percent.

The expenses you are budgeting for should be carefully researched and calculated according to the best estimate you can find, referring to the prevailing rates in your area.

Some funders will ask exactly which of your expenses you plan to use their money for. That's a fair question. Remember that some funders have restrictions on what they will or will not fund. For example, many funders will not fund debt, salaries, rent, videos, or publications.

And what about the Revenue side? Many people forget to include this important second part of a program's budget. Grantmakers want to know what other support is already lined up, or at least your other pending or planned proposals. Think about how you can show that your proposed work has several sources of revenue and is sustainable beyond the specific grant you are requesting. For example, can you list several different funders, individual donors, events, or in-kind donations?

So, take a deep breath and realize that building a funder-friendly budget is easier than you might think. Even if you are not a wiz at finances, remember that you can get help from other grant team members with financial or accounting expertise.

Your prospective funders are looking for a strong budget paired with a strong written narrative. Make sure that's exactly what you submit to them.

For more detailed information on how to create an entire grant proposal package, join me in the Grant Writing and Management course track on TechSoup Courses.

Additional Resources

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