This is the fourth post (of a series of six) on our six month evaluation
This report outlines our key financial metrics.
80,000 Hours is seeking to raise £360,000 over the next year to cover operating expenses for July 2013 June 2015. This would cover all of 80,000 Hours’ expenses for this year and give 80,000 Hours 12 months of cash reserves, which would be very valuable for improved organizational planning and stability. Raising £245,000 by June 2014 would give us 6 months of cash reserves.
This will enable us to carry out our plans to develop and promote our content about which careers make the most difference, as outlined in our team plan.
80,000 Hours’ current financial situation: As of 20 August 2013, 80,000 Hours has about £30,000 of cash on hand, which is about 2 months of reserves. 80,000 Hours’ estimated budget for July 2013 June 2014 is £160,000. 80,000 Hours’ estimated budget for July 2014 – June 2015 is £230,000. In the last year, 80,000 Hours raised £100,000, so we would like funds raised this year to increase by £260,000.
Over our previous budgeting period (July 2012 – June 2013) we spent £79,000. Overall, we spent slightly more than the £73,000 originally budgeted for. We went under budget in most areas, but spent significantly more on intern expenses than projected because we identified several very high quality interns.
Spending was dominated by employees and intern expenses:
- Of our total budget, about 45% was spent on employee pay
40% was spent on intern living and housing expenses
Of the remainder, the largest expense was the office at 8% of the total.
Over the six month review period we spent £46,000. this was 2.6 times the previous six month period. the increase was due to:
- hiring a second staff member
hiring two extra interns
making upfront payments and paying deposits for housing
In total, we averaged 2.7 full-time staff and 4.7 full-time interns over the period. We believe this represents exceptional value given the quality of our staff. The total cost per full-time team member has been less than £11,000 per year including the office and all expenses.
- In the last year, 80,000 Hours has raised £100,000 in funds.
Since founding, 80,000 Hours has raised £110,000 in funds.
About 60% of funds were restricted to 80,000 Hours. The other 40% were donated to CEA as unrestricted funds, and 80,000 Hours has received just over 50% of CEA’s unrestricted funds to date.
During the next budgeting period (July 2013 – June 2014)
Our central case budget involves spending about £160,000.
Note that we plan to review this budget (i) in one month when we see the results of our recent hiring round (ii) at our next six month review.
This represents roughly a doubling of the budget compared to the previous period. The main changes are to:
- Bring the average number of full-time staff up from 2.7 to 6.6. The increase comes from (i) hiring 50% of an ED of CEA (ii) hiring 50% of an additional full-time finance officer and director of fundraising to central CEA (iii) hiring an additional full-time member of the 80,000 Hours careers team
Increase the average number of interns from 4.7 to 6.7. This is from hiring an extra two interns to central CEA and an extra intern to work on communications at 80,000 Hours.
Increase office expenses by about £8,000 per year to cover our new Oxford university office space.
If we covered this budget, we don’t think it would exhaust our room for funding. If given more funding, it is likely we could hire staff earlier and usefully increase the number of interns by 1.5, to reach a total budget of around £185,000.
The minimum we could comfortably spend is around £120,000. This would involve not hiring additional staff and letting the number of interns reduce to about 5 (from 6.5 currently).
During the following budgeting period (July 2014 – June 2015)
Our central case budget involves spending £230,000, although note this is highly likely to be reviewed.
If we didn’t take on further staff after June 2014, we would spend about £210,000. It is also likely we could spend significantly more than the central case.
Beyond July 2015
We’re highly uncertain about what level of budget will be effective, but we certainly have the potential to massively scale up our model.
We strongly prioritise having at least 6 months of cash reserves, and aim to have at least 12 months. We regard 3 months as probably not providing enough margin for error, and will curtail expansion while reserves are below 3 months.
We chose this level because:
- It takes us between 3-12 months to fundraise, and it is difficult to reduce expenses significantly within a year. Historically, we’ve found that fundraising from individuals takes around 3 months from when we contact them to when we receive the income. At the margin, many of our fundraising opportunities involve grants, which take 6-12 months to receive. On the expenses side, it is difficult to reduce our number of staff in less than 6 months. Overall, 6 months of reserves gives us a reasonable margin for error if a round of fundraising goes worse than expected.
6 months of reserves (or ideally higher) makes it easier to plan the next financial year. In practice, we need to commit to hiring people for at least a year, as well as make long-term commitments to other expenses like our office. A year of reserves would make us better able to confidently accept these future expenses.
It is conventional in the charity sector to have 3-12 months of cash reserves, and seems to be regarded as good practice to have 6-18. For instance, GiveWell prefers charities to have at least 6 months of reserves (though regards more than 24 months as worrying or unnecessary). Charity Navigator gives higher scores to charities who have at least 6 months of reserves, with the highest scores going to charities that have at least 12 months of reserves.
Room for more funding July 2013 – June 2014
We currently have about £30,000 of cash on hand, which is about 2 months reserves.
Our central case budget for July 2013 – June 2014 is £160,000.
Our central case budget for July 2014 – June 2015 is £230,000.
Thus, to reach 6 months of reserves by the end of June 2014, we need revenue of £245,000 this year.
To reach 12 months of reserves, we need additional revenue of £360,000.
We believe we have capacity to spend up to £180,000 from July 2013 to June 2014, so to reach our maximum rate of expansion and raise 12 months of reserves, our room for more funding before June 2014 is £380,000.
Historical budget for the review period
‘Central case’ budget July 2013 – June 2015