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Income Diversity for Nonprofits: Let’s Reduce Dependence on Government Grants

Moving from government funding to income diversity for nonprofits is momentous. It might be easier to hike the Pacific Crest or Appalachian Trail. While most primarily government-funded nonprofits hope to make the journey, few anticipate or know how to minimize the hurdles they’ll face. Few know how to prepare for the journey. This article will help your nonprofit gear up for this difficult but definitely doable adventure.

Why Pursue Income Diversity in Nonprofit Funding Sources?

Government funds are shrinking. Even if this turns out not to be true for your organization, you will want fewer spending restrictions. You need funds for innovation. You seek to serve people who need your services without restrictions determined from afar. You might crave more community engagement, so that when you face major cuts, your local friends rally round you so you and your work survives. Or, quite simply, you want more revenue.

What Makes the Journey Challenging?

What makes the move from government funding to diversity so challenging? Successful government funding helps you to excel at working well with government personnel. It teaches political sensitivity and flexibility with changing electoral needs. You master precise guidelines, such as sign page four in blue ink. Expertise in government funding teaches this process to gain income:

  • Identify opportunities.
  • Complete paperwork.
  • Submit.
  • Wait on the outcome.
  • Do the program.
  • Repeat.

While valuable, these skills differ substantially from those required to generate the six other income streams.

7 Nonprofit Income Streams, by Karen Eber Davis

7 Nonprofit Income Streams: Open the Floodgates to Sustainability! by Karen Eber Davis.

In my book published by CharityChannel Press, 7 Nonprofit Income Streams: Open the Floodgates to Sustainability!, I help you to decide which stream or streams you need to maximize your income. Income diversity will require you to reorient your efforts. To be diverse, you create relationships that inspire donors and loyal customers. To gain these customers and donors, discover why they bring you money. You know what they hope to achieve, and you ensure that they achieve those aspirations.

Besides reorientating your focus and gaining skills, the journey to diversity challenges an organization because it brings unpredictable returns. You’ll experience more trial and error. A potential donor decides, after all, to give money to a sister nonprofit or spend it on a family reunion cruise.

Success will look different—at least, at first. Motivating one hundred new donors to donate $20 is a high-five accomplishment worthy of a celebration. Yet the resulting $2,000 income stream is paltry compared to most government awards. Part of your reorientation includes shifting from considering the value of the money to the value of the new donors over years, and repeating the process that inspired the new donations.

Despite these and other challenges, most primarily government-funded nonprofits seek, and often need, greater income diversity. It’s the way to achieve greater stability, sustainability, and self-determination.

Your Packing List for the Journey to Income Diversity

If you’re determined to make this quest, what should you pack? Start with these mindsets:

Mindsets: More Than Good Intentions

Like good hiking boots, these mindsets protect you from snakes you may encounter in the territory you cross.

Appreciate the Feat

Ingenious nonprofits anticipate a long-term process. They anticipate realistic success. For most, it’s reasonable to grow nongovernment income by 10 percent over three to five years. The time and the results depend on where you start. If you’ve dabbled successfully in income diversity for years, this will be too modest a goal. If you’ve done nothing, set your goals even lower, such as earning 1 percent over eighteen months. In any case, gird yourself for a journey. Expect effort.

Grow. Have Faith

The skills that got you here—you guessed it—won’t get you there. Growth requires new skills plus commitment to the process. Roland Emerton, Development Director at Bradenton Kiwanis Foundation , and a decade-long fundraiser, recently reminded me of what I’ve dubbed the “Input here. Surprise! Output there,” concept. Translated: You work toward gaining a specific number of donors or customers, inviting them to come in your front door. Surprise! A different set arrives at the back door. Why is this important? You seek income. As you work, you must believe that the results will come from your effort but at an unknown point . Imagine how different waiting feels when working with donors or customers from waiting for the preestablished deadline about your government proposal.

Resist Temptations

Sometime during your journey—maybe more than once—you’ll encounter a humongous, glorious government opportunity. It will provide you with amazing revenue. Whether you pursue it or not, resist the temptation to quit your income diversity work. At some point, that new government stream will be exhausted. You’ll face the diversity challenge again. Starting from a full stop is harder. Avoid hiking the first day of a long hike twice or more.

Practical Items

Along with mindsets, what else do ingenious nonprofits pack? These practical items:

Money

You must invest money. Invest to gain new skills. Invest to support new relationships. You might need new personnel. You certainly need learning tools. Invest to keep your supporters and workers’ spirits high. Invest in help when you’re stuck. Finding this money might be one of your first challenges. Ingenious nonprofits find sources. Here are a few ideas to start your thinking: grants from community foundations, board members, and supporters who “get it.”

Time

Despite the sector’s income challenges, time is scarcer. You need time today. You need time tomorrow—every day, from here on out. You must invest time when you don’t feel like it, when you don’t know what to do, and even time when other priorities scream for attention. In my workshops I deal with this time shortage. I challenge participants to not check social media once per day. Instead I challenge them to commit to investing the time (every day) to diversify income. You control at least some of your time. You can find it.

Map-making Tools

Compared to your new streams, government funding offers a much clearer roadmap. For the other streams, the roadmaps are much sketchier. So you have to fill in the blanks and details. To do so, map out which income streams to pursue. That’s like your destination city. Map out a strategy to obtain those streams, like selecting the interstates you’ll take. Plan how and when you make the trip, such as starting next Monday, we’ll drive from Miami to New York on I-95. Use your map-making tools to break your magnificent quest into today’s next steps. Make your map based on your strengths and what you learn and experience. Your map shows you where to go and what to do. Your map allows you to track progress.

Pacific Crest, Appalachian Trail, and Income Diversity

You start moving from government funding to diverse income in dim light, sensing the trees and the moss underfoot. You feel unsteady. Over time, the mindsets and practical items you bring with you help you to move through the forest to diverse income. You can do it. En route your organization will change. Your life will be enriched. When you get to diversity, you will be glad you made the trip. Nonprofits and through-hikers never regret the trek or the results. Commit to the journey. Begin by reading 7 Nonprofit Income Streams: Open the Floodgates to Sustainability!

Karen Eber Davis, MBA

About the Contributor: Karen Eber Davis, MBA

Karen Eber Davis is a leading authority on income growth strategies for nonprofits. She helps leaders generate the ideas, resources, and money they need to fulfill their goals and create extraordinary impact.

For over twenty years, Karen has advised nonprofit organizations such as The Salvation Army, Habitat for Humanity, The American Red Cross, Ringling College of Art and Design, Meals on Wheels PLUS, and many others.Karen is

7 Nonprofit Income Streams, by Karen Eber DavisKaren is author of the popular 7 Nonprofit Income Streams: Open the Floodgates to Sustainability! (CharityChannel Press, 2014) and is a contributing author to YOU and Your Nonprofit Board: Advice and Practical Tips from the Field’s Top Practitioners, Researchers, and Provocateurs (CharityChannel Press, 2013). She has published over two hundred articles in a variety of publications, including Advancing Philanthropy, CharityChannel Press, Nonprofit World, and The Nonprofit Times. Her monthly newsletter, Added Value, and column, “The Ingenious Nonprofit,” inspire leaders to find ways to realize more funding and more supporters to accomplish their mission.

Karen graduated magna cum laude from the University of Connecticut and earned her MBA in finance from the University of South Florida.

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