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A practical playbook to fund true costs, win flexible support, and grow impact
For nonprofit leaders grappling with the starvation cycle, there are several actionable strategies to help escape the death spiral and build a more resilient organization.
Start with honest budgeting and transparency. Nonprofits must fully account for what it really takes to deliver their programs successfully – including rent, utilities, IT, salaries for administrative staff, insurance, etc. Do not hide or arbitrarily chop these necessary expenses. Instead, educate your funders and board about why investing in capacity yields better outcomes. Share data (for example, studies show organizations that invest in infrastructure are more likely to succeed). Explain that a dollar spent on training or cybersecurity or fundraising software is not wasted overhead – it’s what allows the mission to run. When funders understand the connection between healthy overhead and program impact, you can begin to reset their expectations. This may involve tough conversations to dispel the overhead myth, but it’s part of your role to articulate the business case for robust operations.
If a grant offer comes with a very low indirect cost cap (say 5% or 10%), push back politely. Provide a breakdown showing that accepting such terms would starve critical functions and ultimately hurt program delivery and the beneficiaries of the services. Often, funders simply follow old habits and may be open to dialogue. Propose compromises, like phasing in additional overhead coverage or identifying specific capacity-building line items they could fund (e.g., “In addition to program funds, we request a grant to upgrade our case management database, which will improve service tracking”).
When possible, favor funders who offer general operating support or realistic indirect rates, and diversify your funding to reduce over-reliance on any single penny-pinching donor. In the long run, chasing dollars that don’t cover their share of costs will put you in a deeper hole. By advocating for what you need – and demonstrating your stewardship by tying expenses to results – you can find more partners who invest in your overall strength instead of just projects.
It may feel counterintuitive if you’re strapped for cash, but strategic investments in capacity are precisely how to improve your financial health over time. Prioritize a few key infrastructure improvements or staff additions that will boost your efficiency or fundraising.
For instance, upgrading a faulty IT system might save staff hours (and stress), or hiring a development director might increase revenue next year. Treat these as critical investments in your mission, not optional luxuries.
Start small if needed. For instance, allocate a percentage of every unrestricted dollar to a “capacity fund” or use unexpected surplus for infrastructure. Additionally, work on building an operating reserve (even a month or two of expenses saved) to give yourself breathing room. Organizations with reserves had a lifeline during crises, whereas those without had to cut to the bone.
One way to convince stakeholders to support overhead is to frame it as risk management. Chronic underinvestment is a huge threat – it increases the likelihood of mission failure, financial crises, and stakeholder distrust when something inevitably breaks. Adopting a lean risk management approach can help map these risks and address them proactively. For example, as part of our Foundations for Growth program, we coach organizations to create an “early warning system” for potential threats and opportunities, embedding resilience into daily operations. This means systematically identifying where under-resourcing (outdated software, lack of succession plan, etc.) could hurt you, then taking steps to mitigate those risks.
Likewise, implement Lean Strategic Planning to align your mission goals with the capacity needed to achieve them. Traditional strategic plans often sit on a shelf; a lean plan is dynamic and risk-aware, integrating regular reviews so you can adapt and invest where it counts. By using frameworks like LSP, you ensure that infrastructure and staffing needs are not afterthoughts but central to your strategy.
These tools not only improve internal decision-making but also signal to funders that you are serious about sustainability. Sharing that your nonprofit has a risk management plan and engages in lean strategic planning can increase funder confidence to provide flexible support.
Finally, reframe the narrative when talking to stakeholders: overhead is mission work. The accounting categories might separate “program” and “admin,” but in practice they are deeply intertwined. A well-supported staff delivers better programs. A modern data system tracks outcomes more effectively. A solid finance office ensures donations are used wisely. Make this link explicit in your reports and stories. Show that past capacity investments led to positive results (e.g., “after upgrading our outreach software, we increased services to 30% more people”). When donors see a clear line from a dollar spent on overhead to greater impact, the stigma begins to fade.
Internally, build a culture that values learning, development, and long-term thinking. Reward managers for improving processes, not just cutting costs. By focusing on impact and improvement, you can shift conversations away from arbitrary expense ratios and toward what truly matters – how well the organization is fulfilling its mission. Lead that conversation.
The nonprofit starvation cycle remains a critical challenge in 2025, but it is one we can solve through collective effort and principled leadership. The continuing relevance of this issue – Challenge #3 in our resilience roadmap – cannot be overstated: without breaking the cycle of underinvestment, nonprofits will struggle to survive, let alone innovate and grow.
As you tackle this challenge, focus on empowerment over fear. Rather than accepting starvation as the price of doing good, champion a narrative of strength, transparency, and partnership. Yes, it takes courage to budget for that new hire or to tell a donor “no” to a restrictive grant – but such courage is exactly what builds a resilient, high-impact nonprofit.
This post is part of an ongoing series revisiting the 50 challenges from Managing Your Nonprofit for Resilience. Stay tuned for the next installment, and remember: investing in your nonprofit’s capacity is investing in its ability to make a difference.