Thursday, October 1, 2015

Where's the (Nonprofit) Money?

Statistics about nonprofit income abound - and often seem confusing and contradictory. Consider these from the National Center for Charitable Statistics:
  • Charitable contributions: 72% come from individuals, 15% from foundations, 7% from bequests
  • Nonprofit revenue: 21% from contributions and grants (only 4% of this from foundations); 72% from program service revenue (including government fees and contracts); 7% from dues, rentals, and special events.
So what's the message here? The largest source of charitable contributions is individual giving. The largest source of revenue is program service fees. Foundation funding is at the bottom of the barrel, along with special events.

But you should also know that none these bare figures take into account expenses, staff and volunteer time required, or value added. Nor do they take into account differences between small and big nonprofits, program service sectors, organizational cultures, or the communities being served.

There is in fact no one right model for a nonprofit fundraising program. Instead, consider these four guidelines to use as you shape a strategy for your unique organization:
  • Diversify your income. Aim for a health mix of grant income, individual contributed income, and earned income. Avoid becoming totally dependent on one source of funding, both overall and within each category. If the loss of one significant major donor, one government contract, or one big foundation grant would cause a financial crisis you've got a major problem.
  • Assess your return on investment. Look at how much actual time and resources go into raising dollars. Is that grant really worth the staff time spent in reporting and administration? Does that special event actually make a profit? Are you wasting time asking for donations from rich folks with no connection to your cause?
  • Be realistic. It's always best to assume a one-year foundation grant is just that, and not an ongoing commitment. And never apply for funding for a project that doesn't fit your mission or organizational scale just because the money is tempting. Use grant funding to kick-start important new projects or substantially strengthen ongoing programs, with the knowledge you're going to have to raise more money to keep them going.
  • Seek sustainable, unrestricted funding wherever possible. One of the key values of individual gifts is that most of them are unrestricted and can be used for those basic operating expenses that make your programs possible. And once donors make a contribution - as long as you continue to do good work - a majority will continue to make annual gifts. Having an option for monthly donations is another great way to build a source of ongoing unrestricted cash flow.
And always remember that the basis for successful fundraising and strong nonprofit organizations centers on building relationships over time with people - community leaders, foundation staff, key government representatives, clients, volunteers, and donors.