In the current economic climate, many nonprofits are facing a dilemma: increasing demand for their services at a time when financial support for growth is scarce. For those groups that decide to expand to meet the greater need, careful financial planning is essential.

But since normal expenses often increase faster than revenue during times of growth, charities must also have a plan for plugging the budget gaps and a good sense of how long it will take the revenue and expenses to balance out again.

One organization that decided to undertake growth is Legal Outreach, a New York City nonprofit that works to prepare students for college.

NFF worked with Legal Outreach to project its direct and indirect costs over several years, and Legal Outreach estimated how much of the growth it could cover each year through a combination of fundraising and drawing down its reserves.

Once the…

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