Because of the large transfers of money involved, grant applications can be quite extensive and require in-depth financial credentials as well as writing that is both narrative and technical. With all the complexity of the grant application process, they get filed as things to look at later, once you have your feet on the ground. What I want to tell you is that looking at grant applications from day one will get you to that point faster. The questions a grant application will ask of you are the questions you should ask yourself at the outset of a building a new organization. Bringing any idea to life with other people can feel miasmic, utterly confusing, maze-like. The closest thing I’ve found to a road map are the questions a grant asks of you.
Here’s what you need to have:
To be considered for most grants, you need a legal status. Think of the funding as a liquid being poured; you need an appropriate vessel to catch it in. Most of the time that means having a non-profit tax ID, a 501 c 3, but not always. Rarely do grants directly pay individuals, but they do exist, and they’re also called fellowships or scholarships. We won’t go super in-depth about legal status options in this overview. After reading thinking about the actual questions a grant asks, you’ll be able to see more clearly what legal formation best fits your idea. Don’t shoehorn yourself into a 501c3 formation for the sake of grants, it won’t work, pick that which best fits your goals for your plan and find grants that are appropriate afterwards.
An Annual Budget and a Profit and Loss Statement
The comparison of these two documents outlines your current status; how well what you are doing adds up to what you aimed for this year.
The Annual Budget is a list of all of your different incomes over all of your different expenses. It is a projection based on your realistic expectations of the financial activity you will undertake during the coming year of operation. You will see the term fiscal year, and be asked what yours is. Fiscal year is an arbitrary 12 month period set by individual organizations that is offset from the calendar year. It is set as the unit of the organization’s cycle. For the organization I work at, the fiscal year begins July 1st and ends June 30th. This tells the funder what time frame your numbers correlate to.
Like I said, this is arbitrary, whatever makes most sense for your particular organization. If the Jan-Dec calendar year makes sense for your organization to plan around, use that.
A budget is each way you make or spend money written out as line items and grouped into logical clusters, like this:
Some line items are one time happenings, like an event where you sell merchandise. Others will occur over a certain period of time, or the entire year. Think about everything you’re going to do for the next year and turn it into this format. A calendar helps.
Keep it realistic, but don’t get paralyzed. There is no penalty for your numbers not matching up at the end of the year, if you’re not doing something illegal. Spend time to make sure all of your key players have input and understanding of what each line item means, that this really represents what you folks want to do over the next year, because once you finalize an annual budget you don’t change it, it becomes a static point to which you compare your efforts.
Profit and Loss Statements are the month to month running record of how close you are to your budget. Using the same line items you defined above, you record how much you actually made and spent. You can do this by simply throwing all of your receipts into one box and totaling them up once a month right before your monthly meeting and copy pasting the spreadsheet you made your budget on and filling in the monthly totals.
-If new expenses or income streams come up that you didn’t budget for, that’s okay. Record them in your profit and loss statements as new line items. Don’t make up a yearly total for new additions, this shows the gains or losses were unanticipated and it is perfectly okay to do that.
So for any point in time, you and any potential funders can review how accurate your plans were. It doesn’t matter if none of the totals match, or even if you show a deficit, what’s important is to show that you’re keeping track. This demonstrates that you know how to handle money to any funder who might want to give you theirs. Getting into the rhythm of creating a yearly budget based on detailed financial statements is fundamental to grant writing, but beyond that, to having any hope at all of succeeding in the long term.
There are definitely still vagaries here if you’ve never thought about how to categorize your idea into a budget. Allow yourself to question everything about your project when looking at it in these terms, because if you’re serious you’ll have to eventually and the sooner you do the better. Think about what you’d like to get paid for your work, and plug that in your expenses for a second too to see how it makes your net income look. IT IS PERFECTLY FINE IF YOUR YEARLY TOTAL COMES UP SUPER NEGATIVE. You are trying to provide something to the community after all, and that has value that doesn’t necessarily come back in monetary form. Don’t sugar coat it on paper, make it look like it actually looks like, and shift what you plan to do until your budget is something you are okay with. This is to help you, not to make you look good. What will look good is looking back five years from now to see how far you’ve come.
What else? You’ll definitely see something like:
‘Briefly describe your organization’
Briefly being key. We all have a stormy, impassioned 10 minute ramble about why our cause is important. This is where you cook that down to a professional description with a word limit. Things you should say here:
- Your mission statement.
- The people your organization serves.
- The real-world context that led you to action.
- How established you are.
- Why your solution has potential.
Give an overview of where you are now, and just a sentence or two about how you started and where you’re going. Every other question will be space for elaboration, so end this on an open door and a high note.
‘Describe the program for which you seek funding’
What’s the difference between this and the first question? Hierarchy. Organizations run programs. Organization is the house, program is what they come there for. If you only do one thing, you are a single program organization. Use this space to get into the operational details of your project. If you do more than one main thing, specify here which of those you think the grant should fund.
Now you get specific. Zoom in on the new services you are providing, and who will benefit from it. State the mechanism by which their money becomes a tangible outcome. Tangible is a broad category. You can make almost anything a reportable outcome if you document it properly.
If you’re having trouble locking this down, do some serious thinking about your idea. You have to able to define it to do it effectively, grants or no.
You get where I’m going with this? The answers to typical grant questions are the same answers you need to know for yourself as you set up a new organization. And the sooner you answer them the sooner you’ll be ready to receive grant-level income. Here are some more questions that grants will ask:
- How many people will your program serve?
- How will your impact be documented?
- What makes your program unique?
- How does your solution produce lasting change?
- What are your plans for sustainment beyond the term of the grant funding?
Write five hundred words on each. Arm yourself with this knowledge before you go forward, and make life easier on yourself. My challenge to you, if you have a new idea or a project that doesn’t have a funding strategy is to answer these questions and see how it affects your approach.
There are no guarantees in the world of grants or otherwise, that is why the best actions are those that prepare you for all cases. Having a well-considered plan written is like that- the very act of putting your thoughts to paper will allow you articulate your vision better in every situation you find yourself in. I really hope this helps and wasn’t too confusing. Write me if it this kicks something off in your brain—making projects real is the best topic in the world, what do you think?