Despite not turning a profit, nonprofits still need revenue to maintain their operations and achieve their mission statements. Unfortunately, low-funding periods can leave your nonprofit with limited resources, even if your operations stay the same. While you should seek out various funding opportunities, grants for nonprofits can provide crucial support to keep your organization running.
Planning ahead, prioritizing your funds, and diversifying the types of grants you apply for can boost your revenue stream and prepare your nonprofit for whatever the future holds.
Planning Ahead: Building Financial Resilience
Financial resilience is about maintaining your nonprofit’s services and mission, even amid financial setbacks and other complex challenges. Diversifying your sources of funding helps you take advantage of all available opportunities and limits your reliance on a single revenue stream.
Planning ahead is the best way to boost your odds when applying for grant programs. It gives you more time to research programs, complete grant applications, and align your projects around each program’s criteria.
Why Every Nonprofit Needs a Reserve Fund
Nonprofit operating reserves give your organization a “cushion” during low-funding periods or other financial hardships. Also called cash reserves and “rainy-day funds,” these reserves act similarly to a personal savings account and help you stretch out your revenue for long-term usage. Crucially, they do this without turning your nonprofit into a for-profit organization.
The goal is to continuously add to your reserve fund, and when your revenue supersedes your spending, such as after holding a successful fundraising event or receiving a sizable grant. You can then use the surplus to fill in gaps in your funding throughout the rest of the year, which may be essential if your nonprofit doesn’t generate consistent revenue.
Beyond economic downturns, operating reserves can also reduce the need for your organization to take out loans or lines of credit, which can save your nonprofit time and money over the long term. Furthermore, many grant programs and donors will consider the state of your reserve fund before supporting your nonprofit to ensure their money is going to a sustainable organization.
How to Start Building Reserves With Limited Resources
As mentioned, the easiest way to add to your reserve fund is after you receive a surplus of revenue, but what if this day never comes? Your nonprofit must establish a feasible financial policy that covers all of your current operations and spending needs while continuously adding to your reserve.
To begin this process, consider your current operating expenses and estimate how much money you would need to cover those costs for at least three months — this is the minimum your organization should have in its reserves. Once you’ve established your target, begin budgeting the best way to allocate your funds. In some cases, this could require you to cut back on your operational costs to put that money toward your reserve and lower your target.
In addition to your budgeting strategy, you should also write a financial policy for your reserves. This will set fixed expectations for when to use the funds and how much revenue should be added each month.
Exploring Alternative Fundraising Options
Diversifying your sources of funding boosts your sustainability by giving your organization multiple legs to stand on. Seek out all potential funding opportunities, including local donations, sponsorships, and partnerships.
Before starting the application process, consider expanding the types of grants you apply for, including:
- Government grants: Local, state, and federal grants are awarded by various government agencies and support multiple types of causes, including educational and environmental initiatives.
- Foundation grants: These grants are offered by other nonprofits or charities with similar goals. For example, the National Association of Social Workers (NASW) provides funding for social work students and initiatives.
- Corporate grants: These philanthropic grants let companies and for-profit organizations support nonprofits in their area, typically with a community focus.
- Specialized grants: These grants are less generic than others and are usually written for specific organizations or projects. Various organizations and agencies may provide specialized grants, depending on your project’s unique needs.
Leveraging Individual Giving and Monthly Donor Programs
Individual donors offer key economic opportunities for community-centered nonprofits, such as social work organizations. While one-time gifts are always helpful, the best types of donations are recurring. Set up a monthly donor program for your nonprofit organization and consider launching fundraising campaigns to raise awareness.
Consider differentiating your donor campaigns between small and philanthropic donations. While most of your donations will likely fall under $10,000, philanthropic gifts from major donors can significantly expand your operations, especially if they’re recurring.
Partnering With Local Businesses or Community Groups
Partnering with other organizations, such as sponsors, community groups, or other nonprofits, expands the resources and potential funding at your disposal. For example, partners may provide essential equipment, extra hands, and professional expertise to decrease your operational costs and make your project more achievable.
Organizations you’ve partnered with may also offer foundation, corporate, or specialized grants to support your operations, especially if you’re targeting a community-centered cause. Establishing long-term relationships with other organizations in your community can boost trust and dollar amounts when it’s time to discuss funding.
Applying for Capacity-Building or Emergency Grants
Capacity-building grants help nonprofits boost their sustainability and capabilities. Rather than targeting specific projects or initiatives, they support your organization as a whole for seamless operations and long-term growth. These types of grants can also expand your organization’s services, such as by helping you afford additional employees or a move to a new location.
You should also be aware of potential emergency grants that can benefit your organization — or at least the foundations and government agencies that offer them near you. These types of grants provide essential support during times of hardship, such as after a natural disaster or during an economic downturn.
Strategic Prioritization During Low-Funding Periods
Low-funding periods may leave your nonprofit with limited revenue, which can make it challenging to continue your operations and maintain your service quality. Investments, endowment funds, and reserve funds give your nonprofit alternative sources to pull from, reducing the need to slash your budget in other areas. A comprehensive sustainability plan can help your organization stand out when applying for government grants for nonprofits.
Your low-funding strategy should also include a plan for what to prioritize if your funds are lower than anticipated. Engaging your staff, board members, and stakeholders in the process can boost your trust and morale and help you make an informed decision.
Distinguishing Mission-Critical Programs From Nice-to-Haves
If your organization genuinely doesn’t have enough revenue or savings to maintain its operations, what will you cut first, and what do you consider essential to your nonprofit? Identifying your mission-critical programs and your nonessential operations can help you appropriately allocate your funds without losing sight of your mission statement.
Investing in Efficiency: Spending Smart to Save Later
Cross-training and professional development can boost your team’s flexibility, productivity, and capabilities with limited long-term costs. This can help your organization endure low-funding periods and stand out when applying for nonprofit grant programs. Additionally, investing in employees’ career development can boost your retention and job satisfaction, limiting your turnover-related costs down the road.
Consider various types of skills and capabilities when investing in training programs. Hard skills, such as knowing how to use a specific piece of equipment or software, may be key for essential roles or new procedures. On the other hand, soft skills are universally compatible throughout the job. For example, time management training can optimize employees’ time on the clock, while leadership training can help you learn how to keep your nonprofit’s teams engaged.
When It’s Worth Investing in New Technology or Systems
Investing in modern solutions, such as case management software for nonprofits, expands your capabilities and reduces your long-term costs, depending on what you choose. The best systems will simplify and optimize your operations, such as by letting case managers access important information and update their care plans from their phones. You can also use nonprofit software to create a grant proposal, considering all of the vital information without overlooking any application requirements.
Various software options offer minimal upfront and long-term costs, making them easy to implement for long-term savings. Capacity-building grants and other grants for nonprofits can further reduce your costs for seamless integration.
Staying Mission-Aligned in Every Financial Decision
Navigating financial strain should never come at the cost of your organization’s core purpose. Whether you’re experiencing a low-funding period or applying for federal grants for nonprofits, make sure every decision you make supports your mission statement and organizational goals. This means your funds should primarily support mission-critical programs, and you should avoid grant criteria or corporations that are unrelated to your mission. For example, if your nonprofit focuses on mental health, a grant for physical health initiatives may distract you from your primary goals.
Moving Forward With Confidence and Clarity
Low-funding periods are a standard part of many nonprofits’ annual revenue cycles. So it’s time to stop treating them as setbacks and start embracing them as opportunities to rethink, refine, and reinforce your nonprofit’s sustainability.
Applying for grants for nonprofits, prioritizing mission-critical programs, and expanding your funding opportunities will help your organization stay proactive, focused, and mission-driven. Learn more about how different grants support various organizations and how to get grants for nonprofits according to key nonprofit case studies.
