“This is so good. Once we start it, we’ll find a way to fund it,” the nonprofit organization leader announced with conviction. Around the conference table, many in the group murmured in agreement.
If you have been around nonprofit organizations very long, you will recognize this conclusion as a case of risky thinking and unfounded optimism. Far too many nonprofit organizations conclude that the money will follow when a program is worthwhile. After making this false step, they add services that they cannot sustain because the nonprofit never finds funding.
What to do instead? Before you start a new effort, create a sustainable income plan. To help you get started, consider the following fourteen funding approaches:
1. Ask individuals served to pay an equal portion of the total cost of the service. Examples include neighborhood associations, clubs, and worship centers.
2. Request that the individual served pays for part of the service cost. This payment can range from a token fee (i.e., a dollar) to 99 percent of the true cost of the activity.
3. Offer a variety of fee structures. Some individuals pay the full amount; others pay less than the actual cost. Examples include the use of discounts and sliding scale fees.
4. Ask for donations. Suggest the full price of the service. For those who cannot pay now, ask for a future donation to “pay it forward.”
5. Ask served individuals to pay more than their fair share of the full cost of the services. Examples include tickets for special events and requests to sponsor others to attend events.
6. Seek fee for service grants from the government, foundations, corporations, and federated funds.
7. Seek full or partial scholarships funding from the above sources to sponsor individuals.
8. Seek donations for operating support, i.e., administration and capacity building.
9. Develop quid pro quid and semi-quid pro quid arrangements-donations that entitle the donor to receive marketing, goodwill, or premiums such as banners at events, listing in programs, and gifts with memberships.
10. Seek bequests from individuals.
11. Develop services that do not involve your mission but still provide you funding, i.e., hall rental and receipts from consignment shops, refreshment stands, bake sales, and raffles.
12. Earned income from endowments.
13. Use funding above expenses from other activities or interest earned from such income.
14. Combine four or more of these sources.
The best underpinning for any nonprofit program, based on both experience and research, is the final source-number 14. Friend, Dr. Terrie Temkin, a nonprofit organizational governance specialist, suggests: “An organization that counts on getting 25 percent or more of its income from any one source is crossing into a danger zone.” Apply the 25 percent rule to the program level as much as possible. Although this will be challenging for your nonprofit organization, it will help you keep individual nonprofit programs out of the danger zone.
By looking at your funding options, combining the approaches listed above, and determining what will work for your program, you can form a sustainable funding plan. Identifying your approach is only the first step in developing a funding plan. Selecting an approach will help you to design a funding pie chart with a lot of slices. Such funding pie charts help nonprofit leaders to state, with confidence, “This is so good that we must take whatever steps are necessary to create an intentional income plan to fund it.”
To learn the seven sources of nonprofit income, click here.
For more answers, check out this Nonprofit CEO Library.
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