Overhead Isn’t the Enemy, Starving Your Nonprofit Is

For as long as anyone can remember, nonprofits have been judged by one number: the overhead ratio.

Donors, funders, and even some board members proudly point to how little their organization spends on “administration.” The message is clear, the less you spend on overhead, the better you are doing.

But here’s the reality: that thinking is not only wrong, it’s harmful.
The obsession with low overhead doesn’t make a nonprofit efficient, it makes it fragile.

“Overhead” refers to the costs that do not directly go to programs:

• Administrative salaries
• Fundraising expenses
• Rent, insurance, and utilities
• Technology and software
• Staff training and professional development

In other words, the things that actually make it possible to run the programs.

Yet these are the very expenses that get labeled “waste” or “bloat.” Donors want to see 90% of every dollar “go to the cause,” and nonprofits bend over backwards to make that happen, even if it means cutting corners.

When nonprofits starve their infrastructure, it shows, not always immediately, but inevitably.

Burned-out staff.
When there’s no budget for fair pay, benefits, or professional growth, turnover skyrockets. And turnover is far more expensive than investing in people from the start.

Outdated technology.
Nonprofits that avoid spending on proper accounting systems, CRMs, or cybersecurity end up wasting time and risking errors. “Doing more with less” can easily turn into “doing less with more stress.”

Weak fundraising capacity.
Cutting the fundraising budget might look good this year, but it limits growth for the next five. It’s like refusing to plant seeds because you don’t want to spend money on soil.

Missed compliance and oversight.
Underfunded finance or HR functions lead to missed filings, audit issues, and grant compliance headaches, all of which can jeopardize funding.

Let’s be honest, no one judges for-profit businesses this way.

When a company invests in HR systems, marketing, or leadership training, investors call it “strategic.”
When a nonprofit does the same thing, donors call it “overhead.”

So why do we hold nonprofits to a completely different, and unrealistic, standard?

When organizations are rewarded for starving themselves, they stop innovating. They avoid risks. They don’t build reserves. They don’t grow their people.

Eventually, they burn out.

And the community loses not because the mission failed, but because the organization wasn’t allowed to operate like the serious, complex entity it actually is.

The best-run nonprofits know that overhead is not the enemy. It’s the foundation. They:

• Educate donors and boards. They tell the story of why investment in staff and systems directly supports impact.
• Budget honestly. No more pretending that everything is “program” just to look good on paper.
• Track outcomes, not ratios. They measure real results – lives changed, communities strengthened, systems improved.
• Build reserves. They treat sustainability as part of their mission, not an afterthought.

Low overhead doesn’t make a nonprofit efficient, it makes it vulnerable.
If an organization can’t afford qualified staff, up-to-date systems, or strategic growth, it’s only a matter of time before cracks start to show.

The nonprofits that last are the ones that invest in themselves.
Because the truth is simple: you can’t pour from an empty cup, not even for a good cause.