The Tooth Fairy is Not a Viable Development Strategy. Or, the Budget Meeting That Changed it All.

I'll never forget the budget meeting where everything clicked into place—though not in the way anyone intended.

We were reviewing next year's projections, and the numbers looked impressive on paper. A 25% increase in revenue. Three new staff positions. Program expansion into two additional counties. The board was energized. "This is what growth looks like," someone said, beaming.

Then our Development Director spoke up, her voice careful. "Can I ask where these new grant projections are coming from? Because I don't see any in the pipeline that would get us there."

The silence that followed was excruciating.

"Well," the board treasurer said eventually, "we're budgeting aspirationally. You'll figure it out. You always do."

I watched her face change. Not anger exactly—something quieter and more devastating. The look of someone who'd just been handed an impossible task and told it was reasonable. I'd seen that look before. I'd worn that look before. And in that moment, I realized we were about to lose another talented development professional to burnout, not because she wasn't good at her job, but because we'd built a budget on wishes instead of reality.

This is Part Two of my exploration of frugality versus scarcity in nonprofit leadership. If the first piece was about shifting our mindset around resources, this one is about the brutal practicality of what that actually means: we have to budget from reality, not aspiration. And that requires us to do something our sector is terrible at—saying no to growth for growth's sake.

Read More: From Scarcity to Frugality: Reimagining Nonprofit Sustainability

The Tyranny of Perpetual Growth

Here's what nobody wants to say out loud: the pressure to grow year over year is killing nonprofit organizations and the people who run them.

We've imported this metric directly from corporate capitalism, where the only measure of success is increasing shareholder value. But nonprofits don't have shareholders. We have missions. We have communities. We have human beings whose lives we're trying to improve. And yet, we've somehow accepted that unless our budget grows by X percent annually, we're failing.

I've sat in too many budget meetings where the conversation starts with "What's our growth target?" instead of "What can we sustainably accomplish with our actual resources?" The cart isn't just before the horse—we've forgotten the horse exists entirely.

This manifests in three particularly destructive ways that I see over and over again.

Budgeting for Deficits (Or: The Rainy Season We're Forecasting)

Let me be blunt: if you wouldn't budget a deficit in your personal household finances, why would you do it for your organization?

I know the counterargument. Big companies leverage debt all the time! They take strategic losses to position for future growth! But here's the thing—big companies have credit lines, investors, and bankruptcy protections that nonprofits don't. When a small nonprofit runs a deficit, there's no safety net except the one we're supposed to be providing for our communities.

Budgeting a deficit means we're planning to spend money we don't have. We're hoping that somehow, magically, resources will materialize to cover the gap. And when they don't—because hope isn't a fundraising strategy—we're left with brutal choices: deplete reserves that were meant for actual emergencies, cut staff mid-year, or simply don't pay ourselves what we're owed.

I've watched organizations rationalize deficit budgets with phrases like "we'll make it up in individual giving" or "we're applying for several large grants." But without those grants actually secured, without individual giving trends that support that projection, we're not budgeting. We're wishcasting.

And the real cost? Staff burnout. Depleted reserves that take years to rebuild. Executive Directors lying awake at 3 AM wondering how to make payroll. Development teams working themselves into the ground trying to manifest money that may never come.

We're not planning for a rainy day anymore. We're forecasting an entire rainy season and acting like we'll figure out shelter when the storms hit.

Read More: 7 Reasons You Aren’t Getting Grant Funding

The Toll of Unrealistic Goals

There's a particular kind of violence in setting fundraising goals without any plan to achieve them.

I see it constantly: boards decide the organization needs to raise $500K next year because that's what the programs will cost. Never mind that they raised $350K this year. Never mind that there's no major gifts pipeline, no grant calendar, no donor cultivation strategy. Just a number on a spreadsheet and a development team wondering where their board got these figures.

Spoiler alert: there is no money tree. The tooth fairy is not a viable development strategy.

What there is: a development director who will spend the year feeling like a failure despite working 60-hour weeks. An executive director who will apologize to the board quarterly for "falling short" of goals that were never realistic to begin with. Program staff who will watch colleagues laid off mid-year because the imaginary money didn't materialize.

I remember a conversation with a development director who told me, eyes welling up, "They keep asking me what I'm doing wrong. But I hit 105% of last year's numbers! The problem isn't my performance—it's that they added $200K to the budget without asking if I could raise it."

She left six months later. Not because she wasn't good at fundraising. Because she was exhausted from being blamed for not achieving the impossible.

This is happening everywhere. Executive Directors are leaving the sector in droves. Development Directors are burning out faster than we can train new ones. And we're acting mystified, like we can't see the direct line between unrealistic budgets and unsustainable working conditions.

No Room for Error (Or: Why This Year Should Terrify Us)

Let's talk about 2025 for a moment.

Government shutdowns. Slashed federal grants. Foundation priorities shifting. Corporate giving freezing. Individual donor hesitancy. If your budget didn't have padding built in—if you were already stretched to capacity—this year probably broke you.

And here's what haunts me: we knew this could happen. We've been through recessions before. We've watched funding cycles shift. We know political winds change. And yet, how many nonprofits budgeted like everything would stay stable?

When we don't build cushion into our budgets, we're not being optimistic. We're being reckless.

I think about emergency funds in personal finance—that advice to have 3-6 months of expenses saved. Why? Because life happens. Cars break down. Jobs get lost. Appliances die. We don't budget personal finances assuming everything will go perfectly, so why do we budget nonprofits that way?

If we're not padding our budgets with reserves, contingency lines, and realistic worst-case scenarios, we're not being strategic. We're crossing our fingers and hoping nothing goes wrong. And when everything goes wrong—as it inevitably does—we act surprised.

What Success Actually Looks Like

I want to offer a different framework. One that might feel uncomfortable at first, but I promise, is far more sustainable than what we're currently doing.

Growth does not equal success. Full stop.

Quality over quantity. Impact over scale. Sustainability over expansion. These aren't consolation prizes for organizations that "failed" to grow—they're legitimate measures of success that our sector has devalued in service of capitalist metrics that were never designed for mission-driven work.

I'd rather lead a small, mighty organization that pays staff well, serves its community deeply, and will still be here in ten years than a rapidly growing one that burns through people and money before collapsing under its own weight. I've seen both. I know which one actually serves the mission.

There are so many ways to measure success that have nothing to do with budget size:

• The depth of relationships with people we serve

• The quality and innovation of programs we implement

• The staff we retain year after year because they're not burning out

• The community trust we build through consistency and reliability

• The sector knowledge we share because we're not constantly in survival mode

Some of my favorite nonprofits are "small." They've been the same size for years. And they're doing extraordinary work because they're not constantly destabilizing themselves chasing growth.

The Real Cost of This Cycle

We need to name what's happening: we are losing incredible talent because of unrealistic budgets.

Executive Directors are leaving. Development Directors are leaving. Program staff are leaving. Not because they don't believe in the missions. Not because they're not good at their jobs. But because they're exhausted from being set up to fail.

When we budget aspirationally instead of realistically, we're essentially telling our teams: "We need you to do impossible things, and when you can't, we'll question your competence." That's not leadership. That's institutional gaslighting.

I think about all the talented fundraisers who've left the sector entirely. All the visionary program designers now working in corporate jobs. All the strategic thinkers who gave up because they couldn't keep performing miracles.

What would be possible if we retained that talent? If people stayed in the sector for decades because the working conditions were sustainable? If institutional knowledge accumulated instead of constantly walking out the door?

Retaining talent starts with reasonable goals. It starts with budgets that reflect reality. It starts with leadership that says, "We'll do what we can sustainably accomplish" instead of "We'll promise anything and figure it out later."

So What Can We Actually Do?

If you're reading this and feeling called out—good. I've been on both sides of this. I've built aspirational budgets. I've pushed teams too hard. I've learned these lessons the painful way. Here's what I wish someone had told me earlier:

Budget from Actual, Not Aspiration

Start with what you actually raised this year. Not what you hoped to raise. Not what you "should" have raised. What actually came in the door.

Then be honest about trends. If individual giving has declined 10% annually for three years, don't budget it flat. Budget the decline and have a real plan to reverse it. If that foundation grant is ending and you haven't heard about renewal, don't include it in revenue.

This is zero-based budgeting at its core: every dollar has to be justified, not assumed. It feels restrictive at first, but it's actually liberating. You're finally working with reality instead of fantasy.

Really Think About Deficit Budgets

I'm not saying deficit budgets are never appropriate. Sometimes you're in a genuine bridge year—you're between grants, you're making a strategic investment in development capacity, you know exactly where the money will come from next year.

But if you're budgeting a deficit because "we'll figure it out" or "development will close the gap somehow," stop. That's not strategic—that's magical thinking.

Ask yourself:

• If we don't raise that projected revenue, what gets cut?

• Can we afford to deplete reserves? How long will it take to rebuild them?

• Are we being honest with staff about job security, or setting them up for mid-year layoffs?

• Is this deficit serving the mission, or just letting us avoid hard conversations about sustainability?

Prioritize Reserves and Investments

This might be the most controversial suggestion: sometimes we need to slow programmatic growth or delay hiring to build financial stability.

I know how that sounds. "You want us to serve fewer people so we can save money?" But here's the thing—if we expand programs without the financial foundation to sustain them, we're not serving those people long-term anyway. We're just setting them up for disruption when the money runs out.

Building reserves isn't selfish or conservative—it's responsible. Three to six months of operating expenses in the bank means when 2025 happens, you can absorb the shock instead of cutting staff and programs. It means you can take strategic risks because you have a cushion. It means you can actually plan beyond the current fiscal year.

The same goes for investing in infrastructure—technology, systems, staff development, fundraising capacity. These aren't "overhead" to minimize. They're investments in sustainability that pay dividends for years.

The Uncomfortable Decisions Nobody Wants to Make

Here's where it gets really hard. Sometimes budgeting realistically means making decisions that feel like moving backward:

Pausing growth. Telling funders and stakeholders "we're not expanding this year—we're strengthening what we have." This feels vulnerable. It feels like admitting failure. But it's actually strategic restraint, which is a different thing entirely.

Sunsetting programs. If something isn't sustainable without constant scrambling, maybe it shouldn't exist in its current form. I've watched organizations keep programs on life support for years out of guilt, burning resources that could strengthen their core work. Ending something with dignity and intentionality is sometimes the most mission-aligned choice.

Using contractors instead of FTEs. A lean staff supplemented by skilled contractors can be more sustainable than hiring full-time employees you can't afford long-term. Yes, there are trade-offs. But those trade-offs might be better than hiring someone, building their life around your organization, then laying them off when money gets tight.

These decisions are painful. They require us to have hard conversations with boards, funders, and communities. But they're often better than the alternative: promising things we can't deliver and burning out everyone in the process.

The Liberation in Limits

I started this piece with a budget meeting that ended badly. Let me tell you about one that ended differently.

A few months ago, I was working with an organization going through their annual budgeting. The executive director came in with projections showing 15% growth. But as we walked through the numbers, she got quieter and quieter.

Finally, she said, "I don't think we can do this. I think we need to budget flat."

The room tensed. But then she continued: "If we budget growth, we're going to push our development director to burnout. We're going to make promises to the board we can't keep. We're going to spend the year stressed and reactive. What if instead, we budget what we know we can raise, strengthen our infrastructure, build reserves, and see what's actually possible?"

The board pushed back. Of course they did. But she held firm. "I'd rather under-promise and over-deliver than the reverse. And I'd rather keep our team intact than achieve growth that costs us our people."

They approved the flat budget. You know what happened that year? They exceeded it by 12% because the development director wasn't burned out and could actually do her job. Because the team wasn't in constant crisis mode. Because they could take advantage of unexpected opportunities instead of just trying to survive.

That's what budgeting from reality can look like. Not limitation—liberation.

The Revolution We Actually Need

This is Part Two of challenging how we think about resources in the nonprofit sector. Part One was about shifting from scarcity mindset to frugal leadership. This is about the practical application: budgeting like we actually believe in sustainability over growth.

It requires us to opt out of capitalism's definition of success. To say that being small and mighty is better than being big and broken. To acknowledge that the relentless pressure to grow is making our sector weaker, not stronger.

It requires uncomfortable conversations with boards who've been taught that growth equals success. With funders who want to invest in "scaling impact." With communities who deserve to know we're not overpromising what we can deliver.

But here's what I believe: the nonprofits that will still be here in ten years, doing deep and transformative work, are the ones making these choices now. The ones budgeting from reality. The ones prioritizing sustainability over expansion. The ones retaining their talented teams by setting reasonable goals.

The ones who understand that sometimes the most revolutionary thing you can do is simply survive—with your mission, your values, and your people intact.

That budget meeting I opened with? The development director left three months later. The organization had to cut two of those three new positions mid-year. They depleted their reserves entirely and spent two years rebuilding.

It didn't have to go that way.

And for your organization, it doesn't have to go that way either.

We can choose differently. We can budget differently. We can lead differently.

We just have to be willing to say that growth for growth's sake is not the goal. Sustainability is. Impact is. Taking care of our people is.

And maybe, just maybe, that's what nonprofit success has always supposed to look like.