Reliance on a single source of funding can be a dangerous position for nonprofits. It jeopardizes the health of the organization when grant funding gets cut, individual gifts are scaled back, or campaigns fail to hit goal.
As the economy continues to soften, and we enter the final months of the presidential campaign, organizations across the nation are feeling the pinch.
Nonprofits with diversified funding sources might move through the softening economy breathing a little easier than most. The good news is those not in that category can still explore new avenues to help diversify their "funding portfolios."
However, don't let your panic -- or someone else's -- control how to begin to expand your funding. Diversification is simple in theory, and very well intentioned, but can falter in execution or unrealistic expectations. Beware of these nine myths of fundraising diversification:
Myth #1: "Let's make this a part of Sally's (or Joe's) job."
All development professionals understand raising money is a full-time job. It takes a focused effort, and can be time-consuming, especially if the organization has never had a development department. And for nonprofits that have relied on government funds or a single source of income, building awareness and engaging in marketing activities is an essential part of the equation. Fundraising is all about relationships, and having dedicated staff helps demonstrate a commitment for long-term stability.
Myth #2: "The board will (or can) do it."
People are asked to serve on your board for many reasons: to fulfill a grant requirement, or because they have influence with a constituency integral to your program or services. But unless the board members were asked to join specifically to help fundraise, there's a good chance that relying on them to help you diversify your funding will result in little forward progress.
It's important to understand your current board's strengths and weaknesses. Set up easy wins for board members who might be reluctant to ask for money, and look to build your board with fundraising, marketing, or sales expertise. Along with governance, ensuring the long-term financial health of the organization is one of the most critical roles of a board member.
Myth #3: "People already know who we are."
You know what your organization does and why it is so great, but don't assume that others fully understand your importance to the community. You could have a well-run program, but limited awareness that your organization runs it. Or conversely, you might be well-known in the community for one thing, such as Goodwill's retail stores, but folks don't understand the mission behind the public face.
Don't let public perception go unchecked or unguided. Paint your picture and tell your story. Education is a key component in a diversification strategy.
Myth #4: "ABC Charity raises tons of money with a special event, so..."
Special events have many purposes, including raising awareness, cultivating donors, and introducing potential donors to the organization. They are also a lot of work and can be expensive. Before you embark on the special event bandwagon, do your homework.
Decide what you want to accomplish by having the event; who is going to help; how it's aligned to your mission, vision, and goals; and whether the event can be sustained and modified year after year.
Myth #5: "Let's crank out a couple of private grants and be done with it."
If only this statement was true. Grant writing can be a long, tedious, and sometimes discouraging process. Grants are just like every other form of fundraising -- it's all about the relationships you can create with the foundation or family.
Remember, foundations are comprised of people. It takes time to educate, inspire, and show that your organization is posed to support their foundation's goals for grant award recipients. What's more, foundations want to see your future plans for funding, a strong mix of funding sources, and the impact your programs are having on the community. Grants are an essential part of diversification, but they're a process rather than a quick win.
Myth #6: "The Smiths are wealthy and give to other organizations. They should be willing give to us."
There are two major mistakes with this philosophy. The first mistake is the underlying assumption that your organization is a fit. The second mistake is the word "should."
Major donors give for a variety of reasons, the least of which is because they "have to." They give because they have a relationship with someone affiliated with the organization or their lives have been touched by the cause supported by the organization. Major donors look at their contributions as investments, so they want assurance that your organization will produce a larger impact with their gifts. Major gift cultivation takes time, patience, and a willingness to forgo short-term urgency for long-term stability.
Myth #7: "123 Company is a natural fit. They will support us."
Philanthropy is a part of many companies' cultures. However, keep in mind that if the corporation has a formal program, it might require that its employees volunteer, sit on the board, or direct the giving. What's more, if the industry of that particular business is in a down-economy, charitable giving dollars might not be as readily available.
Regardless, the word of caution on this myth is that the businesses which seem like natural fits for your organization could in fact be the hardest ones from which to obtain support. Don't fall into the trap of assumption, but instead, work to establish the relationship. Once you break the barrier, ensure that you engage the business in all possible ways, such that yours becomes their favorite charity.
Myth #8: "A direct mail or e-mail campaign will secure individual donations quickly."
Direct response campaigns are both an art and a science. Just sending something out to see what sticks is not a good use of your time, money, or your donor's attention. Direct response vehicles, such as direct mail and email campaigns, are strategic donor acquisition tools that must target the right constituency, with the right messages, at the right times. While you may be able to get away with emergency appeals a few times, they are most successful in combination with other efforts.
Myth #9: "Putting a donation link on our Web site will make the cash flow."
If we build it, they will come. Won't they? Unfortunately, they probably won't come. Like all avenues to raise money, a Web site is not successful in a vacuum. Your Web site is a marketing tool that, if used correctly, can help capture new donors. In today's competitive fundraising landscape, it's critical that you use the Internet in your fundraising mix, as well as have a secure way for donors to contribute online.
Diversification takes time, good planning, cultivation, and patience. It's a long-term strategy, not a quick fix in difficult times. But the investment today will keep your organization strong in the future.