Relying on a single donor or revenue stream is rarely a stable business model, especially for nonprofits trying to create impacts in their communities. Diversifying funding for nonprofits helps organizations maintain financial stability and branch out far beyond their existing network. Many nonprofits use a combination of income streams, including government grants, corporate partnerships, and individual donations, to achieve this long-term sustainability.
Discover how nonprofits can effectively diversify their revenue streams.
Why Diversifying Funding Matters for Nonprofits
Nonprofits with various sources of funding achieve better long-term financial security and avoid financial volatility. Rather than “putting all of your eggs in one basket,” diversifying funding gives your organization multiple sources to rely on. This reduces the impact of losing individual donors or revenue streams, as you’ll still have various other funding sources to maintain operations.
Diversifying funding sources for nonprofits also expands your network and organizational reach. Your nonprofit can more easily connect with other local organizations and donors, and you may obtain more connections organically through word of mouth.
7 Strategies to Diversify Your Nonprofit’s Funding
Expand your financial resources beyond your current funding sources with these nonprofit fundraising ideas.
1. Build a Strong Grants Program
Grants provide crucial funding for nonprofits without the expectation of repayment or a direct return on investment (ROI). The best nonprofit grants come from various sources, including:
- State governments
- County, city, township, and special district governments
- Public housing authorities
- Educational institutions
- Various for-profit and nonprofit organizations
Most government grants are written for specific purposes, such as supporting green energy, accessibility, or small businesses. This means your nonprofit or the project you’re trying to fund must meet and follow specific criteria to be eligible for benefits.
Establishing a comprehensive grants program gives your nonprofit a fixed system to follow for successful grant writing. Your grant management team will not only apply for the grants they find but also oversee the implementation of funds and ensure your organization follows a grant’s requirements. This level of management helps your nonprofit avoid losing funding, being audited, or receiving fines.
2. Expand Individual Giving Initiatives
Individual donors play a significant role in diversifying funding for nonprofits, especially when this money comes from so many different sources. In fact, individual donations are the most dominant funding source for many nonprofits, particularly for organizations that directly impact local communities.
Individual donations generally fall into two categories:
- Philanthropy: Philanthropic donations typically exceed $10,000 and provide stable funding for many large nonprofits. These are often one-time gifts or recurring donations from major donors.
- Small giving: These donations comprise anything under $10,000 and are crucial for small, community-centered organizations. While they don’t have the same impact as philanthropic donations, frequent donations from large communities still offer stable funding, even if some individual donors drop out later.
Hone in on your individual giving initiatives to expand your nonprofit funding and maximize the resources in your own community. Comprehensive initiatives typically combine multiple types of funding strategies, including monthly donor programs, seasonal fundraising events, and large gift campaigns for major donors.
3. Develop Corporate and Community Partnerships
Partnering with other organizations and communities increases your funding opportunities and other resources, depending on the type of partnership. On a financial level, companies may offer sponsorships, grants, or recurring donations that benefit your operations. For example, you may find multiple local businesses willing to sponsor a community event, especially if they’re able to market their brand.
Corporate and community partnerships may also provide key resources that indirectly support your budget or otherwise help your nonprofit, including:
- Goods and equipment: Partners and corporate sponsors often can provide essential products for your nonprofit, such as office items, industry-relevant equipment, or food at events. Additionally, communities may be willing to pool resources for specific causes, such as food drives or responses to natural disasters, making costly initiatives significantly more affordable.
- Professional expertise: Partnering with local organizations and businesses lets you achieve feats you may not have been able to on your own, especially if a business is willing to donate its services or offer your organization a lower price. For instance, partnering with a marketing team can help you spread the word about your important initiatives, while partnering with a related nonprofit can potentially double both of your impacts.
- Volunteering: Community members may be willing to volunteer their time to your nonprofit, especially if the work is for a good cause or is otherwise worth their time. For example, nonprofit zoos often attract volunteers by offering unique animal experiences and promoting their contributions to animal conservation. Partners, sponsors, and educational institutions may even encourage employees and students to help your nonprofit for volunteer hours.
4. Offer Fee-for-Service or Social Enterprise Models
In standard business, fee-for-service (FFS) models set fixed costs for services, regardless of outcomes. Meanwhile, social enterprise models focus more on economic, social, and environmental impacts than on your financial bottom line. Both business models help nonprofits achieve funding and advance their missions in different ways.
FFS models can establish dependable nonprofit revenue streams, especially if you provide services to clients or other organizations. For example, animal shelters often charge adoption fees for rescue animals, nonprofit schools charge students tuition, and nonprofit therapists typically charge per session, like most other therapists.
Social enterprise models act very similarly to FFS for nonprofits, and you can likely use both in your operations. In the social enterprise approach, you apply tactical corporate business strategies to your nonprofit’s socioeconomic missions. The goal is to balance your community impacts with your nonprofit’s finances, ensuring they don’t supplant one another. By doing so, you can maintain stable nonprofit revenue streams without losing sight of your mission statement.
5. Launch Membership or Subscription Programs
Subscription and membership programs are some of the best FFS models for consistent nonprofit revenue. These programs charge members and subscribers regular flat fees for access to goods and services based on what your particular nonprofit offers. For example, nonprofits may provide networking opportunities, specific products, educational resources, early entry, or business support to subscribers and members.
Similar to unused gym memberships, members’ and subscribers’ regular payments aren’t impacted if they don’t use your services during that time frame unless they directly cancel. In fact, many nonprofits treat their membership and subscription programs as regular donation programs with “perks,” giving individual donors attractive incentives to get involved.
6. Invest in Peer-to-Peer and Online Fundraising
Social media can be a powerful tool for your nonprofit that helps you find potential donors far beyond your local community. Online fundraising platforms, such as GoFundMe, Classy, or your own website, give people easy ways to complete donation forms and support your cause, even if they just learned about your organization.
Peer-to-peer campaigns further boost your online fundraising by encouraging donors and stakeholders to spread the word about your nonprofit. Rather than sharing your GoFundMe link around, peer-to-peer approaches ask individuals to create their own fundraising campaigns for your cause while sharing why it’s important to them. For example, Facebook and other social media platforms let users create birthday fundraisers for nonprofits with monthly payouts for your organization.
7. Explore Planned Giving and Endowment Funds
Planned giving, endowment funds, and other sources can further diversify funding for nonprofits long-term. Planned giving donations, also known as deferred or legacy gifts, are usually granted after a donor has passed according to their will or their estate.
Your nonprofit may also benefit from endowment funds, which are long-term investments that can establish an ongoing source of revenue. The best time to consider establishing an endowment is after receiving a sudden increase in donations that your current operations don’t immediately account for, such as after the holidays. You can invest those funds for long-term growth rather than letting them sit and depreciate.
Connecting Funding Diversity to Long-Term Impact
Diversifying funding sources for nonprofits can support long-term planning, operations, and other essential aspects of your organization. This is especially crucial when preparing for potential economic downturns, as you may lose corporate sponsors, partners, or individual donors along the way. A diverse and ever-growing funding base ensures you can still maintain operations and your mission statement if you lose any donors.
Diverse funding can also support your organization’s data tracking. Manage and track all donations and revenue streams over time to identify your nonprofit’s most significant funding sources. Look at your nonprofit’s top types of funding, whether that’s government grants or individual donations, and consider how you could expand these revenue streams further. Then compare your financial data with your measurable community outcomes to gauge your biggest impacts and see how you can potentially expand operations.
Build a Resilient Future Through Smarter Funding
Evaluate your current revenue streams and funding sources to identify your most significant areas for growth. For instance, if you have minimal income from individual donations, you may either need to try new strategies to reach donors or focus on your other funding sources.
The best solutions vary by organization. Start experimenting with new, sustainable funding models to begin diversifying funding for nonprofits and see what works best for your organization and community.
