Amazon’s announcement last month that it would be ending its Amazon Smile program brought the topic of diversified funding to the forefront for me. I have had several clients and nonprofit colleagues bring it up recently in conversation. So, let’s talk about it!
The abrupt change from Amazon came as a stark reminder that a funder can shift priorities at any time. A sudden change in funding is nerve-wracking and can induce panic, especially for small but mighty nonprofits that may rely heavily on a few funders for the majority of their revenue.
Why is diversified funding important?
- Risk Management; There are many external factors, including the economy, political shifts, and natural disasters, that can impact your organization. Having diversified funding sources allows you to better prepare for these uncontrollable circumstances and more effectively mitigate the long-term risk for your organization.
- Increase efficiency; Finding the right funding sources that align with your organization’s values and long-term goals is important. Taking time to research, plan, and explore your funding strategy BEFORE diving in, allows you to operate more efficiently in the long run.
- Flexibility; Diversified funding can give you the flexibility to explore new opportunities and adapt more quickly when faced with unexpected changes.
When I am working with clients, I always share the reminder that there is no one size fits all diversified funding strategy and it’s important for organizations to stay true to their mission rather than start chasing new funding sources for the mere sake of attaining a more diversified revenue stream. That being said, in general, an effective funding strategy includes a variety of revenue sources such as events, individual donors, corporate sponsors, and grants.
Steps you can take today to diversify your funding
- Assess your current funding sources. I am always surprised when I talk with EDs or Development staff who aren’t sure of how their funding breaks down. Get familiar with funding and identify your balance between funding sources. Ideally, no one funding source should be more than 25-30% of your revenue.
- Start. There can be an intimidation factor when exploring the possibility of applying for your first grant, trying to secure your first major gift, or expanding your individual donor base. It is easy to get stuck in a perpetual state of planning and preparation. However, I encourage you to take one step today toward achieving your goal.
- Utilize the resources you have available right now. Examine what you are doing well and what opportunities you have for growth within your existing areas of expertise. If you are successful at securing grant support, can you diversify your funding further under that umbrella by pursuing new opportunities and relationships? Look at your current donor base. Have you heard of the 80/20 rule that says roughly 80% of your major gift fundraising comes from 20% of your donors? Who can you connect with to strengthen their commitment and engagement with your mission?
- Set aside time each week to focus on this work. Like all fundraising efforts, this work takes time and requires dedication to make it happen. Resist the urge to put it off and stay focused on the task at hand. I promise the time investment will pay off in the long run!
- Connect the dots between your funding strategy and strategic plan. Address your funding strategy and goals for diversification in your strategic plan to ensure it remains a priority. Have both short and long-term goals to measure success and seek help from your board and other team members to achieve these goals.
Tackling diversified funding can feel overwhelming, but once you get started, you quickly recognize that small steps make a difference. If you have questions about this topic or want to talk more, let’s chat. I am here to help!