Diversify Your Funding Sources

Cash revenue streams for nonprofit organizations include, among others:

  • Individuals (this represents 75% of charitable giving in the U.S.)
  • Foundation and corporate grants
  • Government grants (federal, state, and local)
  • Community/civic groups
  • Churches
  • United Way
  • Fundraising events
  • Fees for service (from clients)
  • Government contracts
  • Insurance reimbursement (for healthcare services)
  • Membership fees

Just because your organization has gotten by for many years with limited revenue streams, or even a limited number of donors, does not mean it will continue forever.

Consider the example of “Happy Days Center for the Disabled,” a fictitious nonprofit organization similar to countless real nonprofit organizations.  Happy Days has been in business for 30 years and has received most of its support from a state grant.  Unfortunately, the state cut its budget in half last year, and now Happy Days must also cut its budget in half since it has no other source of revenue or fundraising.  Had the organization had the foresight to do fundraising many years ago while times were better, there might be funding from any number of possible sources, and cutting programs might not be an issue right now.

We received a phone call awhile back from an organization in Dallas with a $9 million annual budget, and $8 million of the budget had been provided annually from one very generous donor for many years.  And that donor had just given the organization one year’s notice that they were completely stopping their funding.  Not long ago there was a local newspaper story about a small nonprofit organization in Dallas that had been totally funded by one donor for several years, and that donor had just pulled their funding without advance notice.

You have to constantly be seeking new revenue streams in case other types of funding dry up.  You can’t just rest on your laurels.

An important source of potential new revenues for many organizations is the people you serve – your clients.  For a long time many nonprofit organizations proudly proclaimed that their services were provided free of charge to everyone who qualified to receive services.  But the world has changed and other revenue streams have been reduced, and everyone receiving services should pay what they can possibly afford – even as little as $1 per service if that’s all they can pay, as is done at one local nonprofit organization.  If your organization charges a fee, it should be less than a for-profit business would charge for the same or a similar service.

Rather than charge a fee, some nonprofits have “voluntary” donations, meaning you suggest that a client can help you provide services by giving a donation.  One way to do this is to post a fee schedule that provides information such as how much your service actually costs to provide, and inviting users to donate an amount of their choosing.  There is some evidence that people, even when financially challenged, like to donate something rather than just receive a “handout.”  Whether you invite donations from clients will depend greatly on the nature of your organization and the service you provide.  A soup kitchen that provides food to the homeless is not a very appropriate place to ask for donations.

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Recent grants received by our clients include:

$40,000 for an agency that meets the critical needs of homeless children across North Texas – for products for homeless children

$40,000 for an agency that provides a food pantry for low-income and homeless persons – for general operating expenses

$38,500 for an organization that provides needy families with children in the last stages of terminal cancer assistance in creating “Everlasting Memories” – for gifts and last wishes for terminally ill children

$33,500 for a faith-based school – for a program for children with dyslexia

$24,500 for a domestic violence agency – $12,500 for their emergency safe shelter, and $12,000 for services to children

$20,000 for an organization with a mission to prevent homelessness and to stabilize those at risk in decent, affordable, and permanent housing – for services to children

$18,500 for an agency that has programs for abused and neglected children – $13,500 for general operating expenses and $5,000 for critically needed items for abused children who have just been removed from their homes

$15,000 for an agency that improve case outcomes for abused and neglected children by enhancing the quality of legal services they receive – $15,000 for their online center operations in Tarrant County

$15,000 for a school for severely developmentally disabled children – $10,000 for therapy, and $5,000 for scholarships

$15,000 for an organization that provides therapeutic recreational programs for physically disabled persons – for programs for children

$10,000 for an organization that cares for seniors – for their program for seniors with financial needs

$10,000 for a clinic for low-income families – for general operating expenses

$10,000 for an agency that provides residential recovery services to women battling substance addiction – for general operating expenses

$10,000 for an organization that provides mental health services to veterans and first responders – for general operating expenses

Murray Covensmurraycovens@northtexasnonprofitresources.org

North Texas Nonprofit Resources

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