The Net Grant tool has been gaining traction in the non-profit community. It’s meant to show the real value of a grant award after you apply for and manage the grant. Blogger Dahna Goldstein recently walked her readers through the grant value calculation.

What follows is an example of how the Net Grant tool can be adapted and applied. In a nutshell, that R100 000 grant you apply for won’t necessarily add R100 000 to your organisation’s bottom line. Here’s why.

How can you calculate your organisation’s true cost of applying for and managing a grant? The net value grant calculation will help determine a grant’s net monetary value, and thus help you make a more informed choice when setting your funding priorities.

It’s a simple concept on the face of it:

Grant Amount – Total Grant Cost = Net Grant

Keep in mind that the total grant cost is not the cost to actually run the program you’re trying to get funded. Rather, it’s the cost to find, apply for, get, report on, and otherwise manage the grant.

Briefly, that means:

Hours Spent Researching Opportunity

+ Hours Spent Writing Letter of Intent (if applicable)

+ Hours Spent Writing Application + Hours Spent Communicating with Funder

+ Travel cost to meet with Funder (if applicable)

+ Hours Spent on Any Other Miscellaneous Grant-Related Activities

+ The Hourly Salary of the Person Managing/Administering Grant =  Grant cost

The individual components may vary depending on your organisation or the particular grant you’re pursuing. Every organisation is different; so your calculations will take into account your organisation’s own particular assets, infrastructure and personnel.  There could be multiple parties involved in securing the grant, making these calculations all the more complicated.

But just to keep our example simple, let’s say that that particular grant will require the following staff resources to apply for and administer.

Research and find opportunity 10 hours
Writing LOI 10 hours
Writing proposal 20 hours
Communicating with funder 10 hours
Other miscellaneous time spent 10 hours
Salary of the person managing/ administering the grant 20 hours
Total number of hours spent

Hourly rate: R200ph and Travel costs: R4000

80 hours
##### R20 000

Remember, this is not the cost of running the program this R100 000 will fund. The grant cost is only what it takes to apply for and manage the grant. Still, it seems a simple calculation, right?

Grant Amount – Total Grant Cost = Net Grant*

Or,

R100 000 – R20 000 = R80 000.

Not bad. Surely we can cut a few corners and run the project on R80 000?

But wait.

Just because you applied for R100 000 doesn’t mean the funder will give you that much. Do some research. Look into the funder’s past award history and try and get a sense of how much they award and for what, then be realistic. For the sake of argument, let’s say an expected award of R70 000 is more reasonable.

So, we use

Expected Grant Amount – Total Grant Cost = Net Grant

Or,

R70 000 – R20 000 = R50 000

A net grant value of R50 000 was maybe not what you were hoping for; still, one could make do…

But wait, there’s more.

Have you considered the PROBABILITY of getting the grant?  Even in the best of economic times your chances are probability going to be less than 100%. Much less, actually. Again for the sake of argument, let’s assume your chances of getting the grant are about 50/50.

So, the expected amount of the grant is actually: R70 000 x 0.5 = R35 000

Using that value,

Expected Grant Amount – Total Grant Cost = Net Grant

then becomes:

R35 000 – R20 000 = R 15 000

Will that R15 000 be enough for your organisation to run that R100 000 project you envisioned?

On the surface of it, it may seem an overly pessimistic and somewhat arbitrary calculation. Yet, we all are aware that on some level at least, merely seeking funding represents a tangible drain on organisational resources. Obviously we are not going to get every grant we apply for. So, we like to have three or four pans in the funding fire to make sure we’re covered, but does your organisation account for this use of its assets?

The Net Grant calculation is meant as a tool to help your organisation set informed and realistic priorities. Your own calculations will likely be far more complicated than our modest hypothetical example. Conversely, not all of these considerations may apply to your work, or maybe you just feel that such cold, “bottom line thinking” is simply not appropriate for the non-profit sector. (Never mind the growing body of literature suggesting that not non-profits need to act more like businesses to stay sustainable… that’s a topic for another day.)

Quibbles over accounting procedures aside, the Net Grant tool is powerful a way of illustrating that:

•  Not all grants are worth applying for. Ultimately a too-small grant award may even negatively impact your organisation’s finances.
•  Where possible such costs as writing reports to funders, grant administration, or travelling to meet with funders should be accounted for in the grant proposal itself. If not, these costs must be placed on the other side of the ledger as part of the Total Grant Cost.
•  However one does the math, it is essential to understand that even the grants we don’t get will have an impact an organisation’s bottom line.