In February, I talked about the importance of prioritizing diversified funding. After Amazon announced its Amazon Smiles program would be closing, several of my clients and colleagues discussed what this change would mean for their respective organizations and the impact of limited revenue streams on nonprofits. These conversations brought the topic of diversified funding to the forefront for me.

But, if your organization has been financially secure the last few years because of a generous donor, an endowment, a multi-year grant, or corporate sponsorship, you might still question the importance of diversifying your funding.

I want to take this opportunity to address some of those questions. Let’s go!

1.“A corporation has agreed to support our programs for several years. Why should we be worried about funding?”

Long-term giving is essential to sustaining nonprofits, and cultivating those relationships requires a significant amount of work with an impactful reward at the end. Simultaneously, there are always potential threats and external factors that can disrupt corporate funding.

As I mentioned in my previous blog, one reason diversified funding is important is because of improved risk management. When an organization has multiple funding sources, they are better able to mitigate risks. The corporation supporting your work could close its door due to an economic downturn, reallocate its revenue due to a decrease in product demand, or choose to support another issue area, leaving you with a notable gap in your annual revenue.

2. “Our annual gala generates the majority of our funding each year, and it’s been a success for the last ten! What do we have to be concerned about?”

Events are a great way to raise money for your mission while educating the community about your work and impact. Many organizations have annual fundraisers they depend on to generate a substantial portion of that year’s revenue. This is why during the pandemic when these events had to be canceled or moved online, nonprofits with fewer funding sources and, by extension, less flexibility felt the loss the most.

If an organization has several streams of income, they have more room to explore opportunities and adapt more easily to unexpected circumstances such as a pandemic, government shutdown, or natural emergency. A consecutive annual event that funds your mission is something to applaud while recognizing that financial success is not guaranteed each time. This uncertainty is why flexibility is critical to nonprofits.

3. “Everyone on our grants team is great at what they do. They always come through for us in a pinch.”

Grants play a crucial role in the finances of many organizations and can supplement your organization’s revenue. One reason nonprofits invest so much time into grant applications is that there are a variety of grants available, including those from the government (federal, local, and state), public charities, community foundations, family foundations, and private foundations. Considering the number of applications and deadlines grants staff have to manage, their work should be acknowledged.

However, grant applications take a large amount of time, are often restricted, and are not processed immediately, meaning the funds may be unavailable for months. Additionally, relying heavily on grants forces the staff to develop programs that match a grant instead of finding grants that match your current programs. Working this way decreases efficiency and muddles your organization’s mission.

If you’re interested in learning more about fundraising and diversifying your funds, schedule a free thirty-minute consultation with me to determine how I can help you achieve your financial goals.

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