As we continue our discussion of strategic fund development by exploring possible sources of sustainable funds we want to remind you of this critical fundamental premise – MONEY FOLLOWS MISSION. We would never encourage any organization to compromise their mission in the pursuit of money, yet this is a nagging temptation for many leaders – especially in lean economic times such as these. As we explore various options, remember these are options and its up to your leadership (board and staff) to explore the possibilities and determine the best blend of revenue streams that support and extend your mission. Avoid any opportunity that might thwart or hijack your mission, it’s not worth the cost [See article on Mission Drift].
Let’s look at three broad categories of potential funding sources. Within each of these categories are myriads of opportunities and approaches that we will discuss in upcoming articles, but for now let’s keep it simple and look at: Individuals, Institutions and Innovative Enterprise.
Individuals comprise the single largest category of philanthropic funding in America. According to the Giving USA 2007 Report (www.givingusa.org), individual donors gave over $229 Billion to charities in 2006. That accounts for over 75% of all charitable giving in the United States. Accessing individual donors is relatively easy and is primarily based on relationships. You may not have access to Warren Buffett or Bill Gates (few people do), but there are dozens, hundreds or even thousands of people you could approach and potentially engage as supporters for your organization. However, it takes a great deal of time, infrastructure and energy to develop and maintain a robust donor development program. (Next month we begin exploring donor development).
Access – you must find ways to access prospective donors. The primary reason private donors give money is someone asks for their support. The probability of giving increases when the person making “the ask” is a trusted friend or colleague. This is a great opportunity for board members, staff and key volunteers to get involved on behalf of the organization.
Infrastructure – there are basic elements that must be in place to launch donor campaigns. This is made easier by the use of donor software packages, but it is not necessary to purchase expensive software to get started – however it is important to record vital information so you can track and nurture donors. Other elements necessary for sustainable individual funding include:
- 501c3 status - is necessary for donors’ gifts to be tax deductible. If an organization does not have a 501c3, they can still receive funding. However, they must find an organization with a 501c3 to serve as their fiscal agent.
- Donor database -- some type of database is necessary to keep manage donor information.
- Gift receipting process – to acknowledge gifts and provide receipts to donors.
- Donor communications - a plan and a process for ongoing communication with donors to nurture and grow the relationship.
Results – private donors vary in the level of results reporting they expect. Traditionally many donors are satisfied simply by client testimonials. They are motivated to give because they support your mission and your good work as evidenced by the changed lives of past and present participants.
In the US there are over 72,000 grantmaking foundations that, according to the Foundation Growth and Giving Estimates published by the Foundation Center (www.foundationcenter.org), invested $42.9 Billion dollars in 2007. Included in this study are corporate foundations, community foundations, independent and family foundations.
In addition to grant making foundations, there are other sources of institutional funding including corporations (local companies or local branches or offices), religious organizations and local, state and federal government agencies.
Access – most grants are accessed by some type of formal application process. The process varies among foundations but commonly involves a formal application or request for proposal (RFP) process. Other foundations may use some type of pre-proposal, introductory process like a letter of inquiry or a concept paper. As with individuals, relationships go a long ways with institutions. The ideal situation is for an institutional funder to request a proposal from your organization because of their familiarity with the organization’s leaders or its work.
Infrastructure – obviously there are more requirements for organizations to successfully apply for and receive institutional funds. The organization must:
- Deliver successful programs or develop creative solutions that meet documented needs
- Research and identify grant opportunities
- Develop competitive proposals and professional correspondence
- Document program results to produce required reports
- Maintain robust financial accounting system to track restricted funds
Results – increasingly institutional donors, especially foundations and government are demanding more sophisticated results reporting. Many want to ensure they funds are making a significant difference in those served and are requiring organizations document their outcomes (results) in addition to their outputs (activities). [Click here to learn more about outcomes].
Perhaps you remember the old commercials in which the stately gentleman intoned, “Here at Smith Barney we make our money the old fashioned way, we earn it”. Many nonprofits have launched a variety of social enterprises to earn part of their revenues. Whatever its label -- social enterprise, social entrepreneurship, social ventures, nonprofit business development – the concept is the same. Nonprofit organizations seek to use existing skills and resources (facilities, reputation, expertise, or services) to generate capital through some type of business enterprise and broaden their funding base, reduce their dependence on grants and increase their access to unrestricted funds. Perhaps the best-known example of innovative enterprise used by thousands of nonprofits is the thrift store. Many nonprofits also utilize entrepreneurial endeavors to create job opportunities for their clients.
There are inherent risks associated with launching innovative enterprises. As with any new business venture there are start-up costs that must be underwritten and profitability is not guaranteed. These ventures should be thoroughly researched and accompanied by the development of a business plan to increase your chances at success and profitability. One great online resource for leaders interested in learning more is the Social Enterprise Alliance (www.se-alliance.org). Another great resource, Venture Forth!, is a book that guides nonprofits through the process.
Years ago William Jennings Bryan provided some advice that is very applicable to nonprofit leaders today. He wrote, “Destiny is no matter of chance. It is a matter of choice. It is not a thing to be waited for, it is a thing to be achieved.” We can say the same thing about sustainability. Sustainability doesn’t just happen! It is the result of much planning and hard work. We know many of our readers have developed creative approaches to accessing funds from individuals, institutions and innovation.