The Power of Diversified Funding

It's important for nonprofit organizations to rely on multiple sources of funding. In a nutshell this is the idea of diversified funding, and it helps nonprofits to remain sustainable and to keep doing good work. As we often mention, the National Center on Charitable Statistics reveals that approximately 30% of nonprofits fail 10 years in. Against these outcomes, diversified funding is not just a strategy; it’s a lifeline that can enhance an organization’s resilience and long-term success.

Why Funding Diversification Matters

Diversified funding involves securing financial support from multiple sources rather than depending on one primary donor, government grant, or foundation. This approach reduces the risks associated with funding uncertainty and can protect organizations from financial instability. For instance, if a major donor decides to withdraw their support, or if a government grant is reduced or eliminated, a nonprofit may struggle to meet its financial obligations. This can lead to disruptions in services, staff layoffs, and even organizational closure. A study from the National Center for Charitable Statistics (NCCS) shows that nonprofits with a diverse revenue portfolio have lower income volatility, demonstrating the value of a well-rounded funding strategy.

Altogether, with multiple streams of income, nonprofits can adapt more easily to changing circumstances and unexpected expenses. Having different funding sources means that you can handle surprise costs or shifts in the economy without having to cut back on programs or services. It gives you the flexibility to stay steady and to keep helping your communities no matter what comes your way.

Enhanced Credibility

When a nonprofit shows it can successfully gather support from various places, it also signals to others that they’re trustworthy and capable. A broad base of supporters demonstrates a nonprofit’s ability to attract and manage diverse sources of funding, which can enhance its credibility to additional potential funders and partners. It’s like having a good reputation that spreads; more people and organizations will be interested in getting involved because they see the nonprofit as reliable and well-managed. This credibility boost can open doors, making it easier to grow and achieve your mission.

Strategies for Diversifying Funding

Grants and Foundations: Go after a mix of grants from different foundations and government programs. This way, you’re not putting all your eggs in one basket and can handle changes more easily.

Individual Donors: Build strong relationships with individual donors through fun campaigns, events, and personalized messages. Keeping them engaged and feeling appreciated can go a long way. Further, creating opportunities where you can create relationships with multiple people at once gives you the opportunity to meet more people and potentially have more lifelong donors.

Corporate Sponsorships: Team up with businesses for sponsorships and cause-related marketing. It’s a win-win: they get positive exposure, and you get the funds and support you need.

Earned Income: Look into ways to generate income through services or products that align with your mission. This could be anything from selling merchandise to offering workshops. Everyone loves a comfy sweatshirt, right?

Crowdfunding: Use online crowdfunding platforms to get the community involved and raise funds. It’s a great way to gather small amounts from many people, which can add up quickly. Plus, it’s a fun way to spread the word about your cause!

Usorum: We create incremental fundraising for nonprofits through digital forums and brainstorms, events where your nonprofit engages directly with the community to gain their perspective surrounding strategies, projects, and policies. It works, and it helps engagement too.

Case Study: Project ECHO

Here's an example of how diversified funding was used in the real world. Although the approach to funding is slightly different (funding expertise rather than money), the same concepts apply.  

Project ECHO (Extension for Community Healthcare Outcomes) was an innovative model of healthcare founded by Dr. Sanjeev Arora at the University of New Mexico Health Sciences Center in 2003 in order to bridge the gap between specialists and primary care providers using video-conferencing technology. More specifically, it aimed to break down the geographical barriers that limited thousands of New Mexicans from accessing treatment for Hepatitis C. What truly allowed Project ECHO to succeed? Diversified funding.  Project ECHO leveraged diversified funding sources to create a network of expertise. Foundations, private donors, and government grants all played a role. “Armed with the data, the project was able to better tailor its messaging and recruit additional university medical centers, local physicians, and funders. Between 2011 and 2014, Project ECHO exploded in size, adding partners such as the GE Foundation, Helmsley Charitable Trust, the US Department of Veterans Affairs, and the US Department of Defense to expand to new geographies and new areas of health.” By connecting specialists with local providers through virtual clinics, Project ECHO democratized knowledge. Funding wasn’t solely dependent on one major donor; it flowed from multiple streams, ensuring stability. The impact was profound. Project ECHO’s resilience lay not only in its mission but also in its financial adaptability. It was by weaving together various threads of support, that they were able to adapt to changing circumstances and ultimately fulfill their mission. 

Conclusion

All in all, diversified funding is more than just a financial strategy; it’s a fundamental component of a nonprofit’s resilience and growth. By spreading funding sources, nonprofits can better manage financial risks, adapt to changes, boost credibility, and continue to pursue their mission effectively. Investing in a diversified funding strategy is a proactive step to securing the future of your organization and maximizing its impact.

As always, thank you for your part in saving the world,

Usorum

We’re Usorum. We create peer-to-peer and bottom-up conversations for nonprofit communities. We do this by hosting 'brainstorms' for nonprofit organizations, where they can ask their community to digitally engage around a common topic. For those nonprofits who want to, the brainstorm can also serve as a fundraising and a volunteer recruitment tool. Our second offer is an ongoing digital forum for the communities serviced across nonprofits, with a culture of people directly supporting each other and providing their techniques on adversity into a shared lived experience library. If you believe in community engagement, check us out at Usorum.com