The old saying, “don’t put all your eggs in one basket” is especially true of nonprofits and how they generate revenue in order to continuing operating. COVID-19 has underscored the need for a strong internal structure and foundation and has made many nonprofits stop and reconsider how the organization is utilizing it’s resources to either sustain or rebuild a solid infrastructure. A disruptive force like the pandemic also showed nonprofits their own vulnerabilities for those who rely on contributions of just a few major grants or donors– in the wake of a crisis, a precarious position indeed.
When economic and political climate change affects the availability of funding, spreading out risk over multiple sources in a manageable portfolio is critical. Makes sense and sounds easy. Why, then, is it such a tricky balancing act for so many nonprofits? One reason could be that it can be difficult to resist making grants the primary revenue stream. If the money is there, it can be a challenge to stick to the recommended 20% max grant-based funding. Another major reason is that it just is not as simple as it may sound. Diversifying revenue sources really is, well, complicated and not so easily achieved. In fact, finding way to diversify revenue is often not a one-size-fits-all and spreading out funding sources can be just as unique as the nonprofit itself.
In fact, According to Nonprofit Quarterly, “Each revenue type (and source) comes with its own levels of reliability, constraints, and costs, and all may not align appropriately with the organization or its stakeholders or other revenue sources. Many types of revenue streams may need a runway where they may cost more than they bring in for a period of time. Some need a different kind of organizational capacity than what exists. Some may draw you off course or create reputational issues. Some revenue streams might soften with the economy, while others do not.”
Some Ways to Diversify and Intensify the Revenue
Many nonprofits look to local funding within their respective communities; a natural and necessary inclination that also helps build credibility and a base of supporters dedicated to the nonprofit’s success. It’s a winning way to go to build local relationships first that could help pave the way for regional and national funding support later.
Implement giving levels. As social beings, we take cues from others… so when suggesting giving levels, it translates to the donor the “appropriate ” amount to give. How much a person donates can be influenced by seeing how much others give.
Revisit your case for support. A compelling narrative will help you prove that your nonprofit’s mission is worthy of your supporters’ dedication. Be sure to illustrate the impact that donors can make (and have already made) with concrete examples. Nonprofits need to develop the ability to know whether they’re making a difference and to know how to invest wisely so that they can do better over time.
Another large consideration is social impact. What is your ‘why’ and what social impact has your nonprofit had historically and how has that changed? You may need to revisit your vision and tweak your game plan within a different context and adapted to changed needs. For example, many organizations are shifting the way they deliver programs and services, are forging new partnerships to extend their reach and impact, an using this time to advocate for systemic change.
Other ways to diversify revenue sources:
- Conduct prospect research and use tools to find potential new major donors
- Analyzed wealth screening data that provides intelligence as to who can give, how much they can give, and to whom they’ve supported before
- Donor-advised funds (DAF)
- Explore corporate giving opportunities
- Multichannel Fundraising
Using the latest technology to create donor prospects and conduct wealth screenings as a wonderful tool. Leading software platforms like Donor Search can be cost prohibitive for many smaller to mid-size nonprofits and often a way around this is to align with a licensed third party. The data a typical search yields includes real estate ownership, stock holdings, business affiliations and past records of political contributions. The philanthropic indicators go deeper and clarifies a donor’s hobbies and interests, past donations in general– whether it is to your organization or others.
A qualified nonprofit professional can analyze both the wealth and philanthropic indicators, sift through the massive amounts of data and create markers that clarify a donor’s capacity to give.
A sponsoring organization holds charitable assets for future contributions and acts as a savings account. As the account grows over time, the donor can decide when and where to direct the gift. There are three main categories of DAF sponsors:
- Affinity group sponsors or single issue sponsors: allows you to direct the funds to a specific cause
- Commercial sponsors are usually large financial institutions. The most common and the most flexible of all the organization sponsors with lower contribution requirements such as the single issue sponsors, and are accessible to a wider range of donors.
- Community foundation sponsors- the first to sponsor DAFs since the 1930s and are usually community or faith-based foundations. Excellent option for donors who wish to stay local or regional.
Benefits of DAFs… allows for immediate tax deductions and can accept non-cash assets. Other great reasons to include DAFs: it is becoming more commonplace for wealthy individuals and families to set aside philanthrophic dollars. Also, since DAF sponsors manage stables of accounts, relationship-building and exposure to other sponsoring organizations can potentially provide connections to multiple donors. In short, DAFs should be a part of every fundraising strategy.
While scaled back during COVID times, many businesses are still donating significant contributions. It goes without saying that sensitivity to certain industries impacted by COVID are strictly off-limits. There are plenty of industries and options to explore even during uncertain economic times:
- Matching gift opportunities. Many businesses will match charitable contributions from eligible employees. Consider creating a campaign to promote awareness about matching-gift programs. Utilize the research tools (as mentioned above) to determine specific donor eligibility
- Solicit directly the old school way…. especially helpful during the quiet phase of a capital campaign. Always enlist the help of a capital campaign expert to make the most of corporate donations.
Integrating multiple online and offline channels for fundraising is not as easy as it may sound and timing is everything. You can make your donation appeals whenever you wish but reaching the right audience at the right time can make or break your efforts. Timing makes all the difference between still having your hand out giving, but not receiving what you need in order to keep going.
Digital fundraising should form the foundation of any fundraising strategy and offline fundraising channels can reach donors and raise funds on a range of traditional, although now modified ways.
- Branding – keeping branding consistent creates a solid giving experience for donors
- Website – establish online donation platform on the website so that sending links to the donation page and including the link in posts will drive donors
- Social Media – timing… know the peak days and hours for each platform
- Email marketing – targeted and personalized. Don’t just send appeals for money, also send updates, volunteer opportunities and invitations to “events”
- Crowdfunding – many useful platforms
- Cash collections – read, Salvation Army in front of a store (but now with a mask on)Advertising – can be targeted with verifiable results
- Direct mail – old school but works with the older demographics.
Diversification with several sources of revenue builds reliable cash flow streams from one to another so that in the event that one source dries up, the rest are there to support the organization until the source is replaced. Then, as an organization becomes more efficient and adept at handling their revenue, they can look at seeking out additional funding, thus helping them sustain and grow.
Contact Sanmita for a complimentary wealth screening, donor prospects samples, or consultation here.
Next up– You are invited!
Attend our LIVE webinar entitled, “How to Refresh Your Case Statement in the Post Pandemic Era” and meet nonprofit specialist Robert Hinnen, who brings over 20 years of executive level experience and has raised in excess of $100 million dollars for nonprofits.
Date/Time: Aug 11, 2021 2:00pm EST
We hope to see you there!
Sanmita is an agency that specializes in strategic planning, marketing, development, and fundraising for nonprofits and associations nationally. They help build powerful stories, effective programs and advancement campaigns. Their work is based on the development of a solid and practical strategic plan, which is the foundation for all branding communications and fundraising initiatives. Sanmita helps nonprofit leaders discover and tell their most powerful stories to achieve real, measurable results.