Nonprofits Need to Diversify Income

Fear is a powerful emotion. It’s a biochemical response to danger, real or perceived. Fear of failure is the driving force behind many decisions or lack of decisions.

What does fear have to do with fundraising? Everything. I know that fundraising can be scary. Fear is that “deer in the headlights” look I get when I ask board members about their fundraising experiences. Many do not understand that fundraising is part of board service. They cannot imagine asking their friends, colleagues or family to support a nonprofit organization. They see fundraising as the staff’s responsibility, not theirs.

While many understand the transactional nature of special events or the generosity of family or corporate foundations, they don’t fully grasp the power of the individual donor. According to reports from Giving USA, over 80% of all charitable giving in the U.S. comes from individual donors and through their bequests. By comparison, corporate giving is only five percent.

Much like having a diverse portfolio for your retirement, you need to also have that diversity within your donor base. During COVID-19 we are witnessing the struggle of nonprofits that have relied primarily on events or heavy on a few, select grant funders.

As fundraisers, leaders of nonprofit organizations, and even experienced volunteers, it is our responsibility to educate our board members on the importance of diverse funding sources. Like your investment portfolio, you should make sure to diversify one’s holdings and your fundraising revenues.

For example, a sustainable diverse funding strategy could include a combination of contributed and earned income:

Contributed:

• Individuals, including bequests

• Grants from foundations, United Way, or governments

• Events

Earned:

• Fees for service

• Membership dues

• Government contracts

• Insurance reimbursement (for healthcare services)

Your development plan should outline the expected sources of your revenue, as well as the percentage you expect to receive from each source. For example:

• 60% Individuals

• 20% Foundations

• 15% Special Events

• 5% Corporations

How does this compare to your actual revenue streams? If you are too dependent in one area, this comparison will help you work toward adjusting that imbalance. Setting goals and having a plan can help you create a diverse, balanced portfolio of contributions.

Cheers,

Michelle Crim, CFRE

Dynamic Development Strategies can help. We offer coaching and fundraising services for our nonprofit clients. We specialize in startup and smaller nonprofits because we understand your challenges. Please contact us for more information.

https://www.dynamicdevelopmentstrategies.com/