Deficit budgets often get a bad rap in the nonprofit world. We’ve been taught that running a deficit signals poor financial management, a lack of planning, or a looming crisis. But what if I told you that a deficit budget, when used strategically, could actually be a powerful tool?
In this episode, I break down the difference between an accidental deficit and a strategic one. I’ll explain why a well-planned deficit can help your organization navigate uncertainty, maintain mission-critical work, and set the stage for future growth. The key is intention—knowing when, why, and how to use a deficit budget as part of your larger strategy.
In This Episode, You’ll Learn:
- The difference between an accidental deficit and a strategic deficit
- When and why a nonprofit might choose to run a deficit budget
- Key questions to ask before deciding on a deficit strategy
Key Takeaways:
- Not all deficits are bad. Accidental deficits can create instability, but strategic deficits can be a valuable tool for growth and sustainability.
- Intentionality is key. A strategic deficit should be time-bound, have clear objectives, and include an exit plan.
- Risk-taking can be smart. In an unpredictable funding landscape, a strategic deficit can give you the runway to adapt and emerge stronger.
Steps to Consider Before Using a Strategic Deficit:
- Assess your external environment. Are funding shifts or sector changes on the horizon?
- Evaluate your internal capacity. Do you have reserves that can be strategically deployed?
- Get board buy-in. Ensure your leadership understands and supports the rationale for a strategic deficit.
- Define your exit plan. How and when will you return to a balanced budget?
Want to work together?
Apply for the Next Level Nonprofit Accelerator, a high-touch coaching and training accelerator for established organizations that want a smart, powerful playbook for taking their growing organization to the next level.
Connect with me!