Funding: How do you build a financially sustainable organization that has an impact?
There are two key elements that are essential to creating a sustainable organization – money and people.
All too often we see situations where a group of people start an organization with the best of intentions, but then the energy fades as time goes on – because they can’t afford to pay people and everyone is working as a volunteer. Money is essential in creating an organization that not only survives, but thrives. It’s nearly impossible to grow an organization’s influence without paid staff – competitively paid staff.
Volunteers can be great, but they often lack the time required to run an organization. By being able to pay staff, you will be able to build a core team with time and focus.
So, let’s talk about the money component.
Funding can come from a variety of sources; private donors, corporate sponsors, grants, and/or a recurring revenue stream from a product or service that you sell. The trick is to create a balanced revenue stream across those four sources, or at least as many of the four sources as possible. The ideal is that each revenue stream is in the 20%-30% range with no single revenue stream making up more than 50% of your income.
In your pursuit of private donors you will have different strategies and approaches for those donors that have the potential of large donations from those that are smaller donors. And, you will absolutely want both types. You will find that it may be hard to get large donors initially, but once you do, you will find that you get more money for your time with the large donors. Be sure to prioritize large donor cultivation first in your private donor activities. It will take more time to secure a large donation, but the amount of money that you get for your time will be significantly higher.
Unfortunately, it’s hard to capture the attention of the large donors unless you have good traction and good success stories to share. So, how do you find, reach, and engage large donors?
Some organizations hold a gala, a fundraising gala.
After talking to numerous nonprofits about their fundraising strategies, especially those that do hold galas, it’s uncommon to hear a nonprofit brag about their gala. Nine out of 10 times the gala is considered to be an obligatory event that really does not produce a lot of net new income, and certainly does not produce new money. In other words, the money that is donated at the gala is money that the nonprofit would have gotten anyway and the donors are just using the gala as a public announcement of their donation. Galas are expensive and at the end of the day, they are just not worth it.
A better, more pragmatic approach is to cultivate a list. Ask your board members to create a list of people in the community that they know or suspect could be significant donors. Be sure to capture any known contact information – phone, email, physical address.
Upon creating this list, work with your board members individually to prioritize the people that you pursue (with the board member) first. And, different board members will have different levels of comfort when it comes to fundraising. Some board members are comfortable with asking for money and other board members are only comfortable with making an introduction – introducing the Executive Director to the potential donor.
In meeting with potential donors, be sure to have a clear “Case for Support”. At a minimum, a Case for Support will include the Challenge (or Need) in your geographic region, your organization’s Aspiration, your Unique Ability to address that Challenge, and a clear explanation of what their money would fund.
Don’t get discouraged if their initial donation is not a 6 figure donation. Often, large donors like to start with a smaller donation initially and then increase their donation over the course of a few years based on the organization’s impact. It’s critical that the organization maintain a steady relationship with all major current and potential donors.
In summary, private donors are a valuable pursuit to make the most of your fundraising time. Donors with the potential to give large sums can be contacted in a variety of ways, but the method that I’ve found to be most useful is through networking through community and board members. As with most networking, maintaining relationships with current and potential private donors is important as it spreads the word of your organization’s actions and successes, and keeps the door open for future donations.
Grants come in all shapes and sizes. Grants can come from private institutions, family foundations, corporations, or government bodies. Grants can range from $1,000 to $1M+.
Grants are essential to creating a sustainable organization but they also require a fair amount of due diligence, organization, and solid writing skills. Grant management and grant writing will take a fair amount of time and it’s best to find someone that can focus their job on this effort.
Start by creating a Grant Calendar. This will be a list of potential grants along with their due dates, grant size, focus areas, and a historical view into who they typically give to. Although it’s tempting to apply to every grant that comes across your desk, you will soon find that you will want to hone your skills to focus on the grants where you have the greatest chance of success.
Where possible, try to build a relationship with the Grantor (the person that coordinates the selection and distribution processes) prior to submitting a grant application. Your chances of success will be exponentially higher in cases where you have an existing relationship.
Look for grants that have missions aligned with your own. The closer the alignment, the better your chances will be.
From there it’s a matter of selecting the grants that you want to pursue over the course of the year and creating a clear, concise grant proposal that shows the impact that their money would fund.
Keep in mind that most grants are restricted. This means that the grant money needs to be used for a specific project or program. In most grants, you can build in a 10-20% overhead that can be used to fund the general operation of the organization, but most of the money will go towards the specific project/program.
Some corporations or businesses have a formal grant program and others have the ability to sponsor local organizations. And, their ‘donation’ can be in the form of money or in-kind product/service. Both are important.
So, what is an example of an in-kind donation?
Your nonprofit is a business and your business has all kinds of needs. From rental space to legal services to construction needs to food at events, etc. If you can get some of these needs donated from businesses, that is extremely valuable and should not be underestimated.
For cash donations, you’ll want to create a sponsorship package that identifies multiple levels of giving and shows what the business will get in return for each donation level.
Show them how you can help them. Show them how you can help them with their own energy efficiency. Show them how they can save money. Show them how you can help them get more customers and how you can help them get more visibility within the community.
Typically, the business will get varying levels of visibility (website, social, at events, on t-shirts, etc.) but you might also be able to provide your services. For example, a sustainability oriented organization is routinely educating residents on various sustainability topics – maybe through a workshop or webinar format. Maybe offer an on-site workshop for the business employees for a certain donation level. Maybe you offer a sustainability assessment for the business itself.
If you provide value to the business, you will stand out above most other sponsorship requests that they get.
In summary, grants or corporate sponsorships are other revenue streams that are more heavily focused on particular projects taken on by your organization. Despite the restrictions, corporate sponsorships have the potential to offset your baseline costs in significant ways through in-kind or non-cash donations.
Recurring revenue streams are the toughest revenue stream for a grassroots, climate action organization. But if you can find a product or service that aligns with your mission, that you can sell for a small profit, that is a great revenue stream to pursue and possibly grow.
There are many other things that go into building a sustainable organization beyond money, but money allows you to do a lot of things. Things like making sure that you’ve got a supportive board, making sure that you’ve got well compensated staff, and making sure that you are managing your volunteers appropriately and effectively.
If you start by building diversified, well balanced revenue streams, you’ll be able to focus more of your attention on running the organization and achieving your mission.