This article was inspired by a conversation with a CEO of a government funded nonprofit. He explained that his nonprofit’s basic services were going out to bid. Instead of just nonprofit competitors, now Wal-Mart and liquor stores can compete for his traditional funding sources.

A government agency is giving a nonprofit a beating in the ring. “Do this and we will give you the funds you need to operate.” The nonprofit wobbles, complies, and returns to the ring. “Okay. Now that you absorbed a 10 percent cut, here is a new set of requirements.” The nonprofit falls, picks itself up, complies, and waits for the next blow. “They are due next week.”

At times, I feel like an umpire watching a fight shouting over the cheers and jeers. “Have you had enough?” I yell. “Are you ready to try a new approach?”  Freeing yourself from the excessive demands of government income is one of the most challenging shifts nonprofits make. It’s a shift towards health and sustainability. It is a shift toward true partnership with a larger community who supports your valuable work.

While challenging, the shift is possible. Gulf Coast Legal Services is in the midst of making the shift by creating a cultural of philanthropy. In six months, after a modest consulting intervention, it has had the best individual fundraising year ever, seen a shift in staff interactions with potential donors, and reduced the drama it previously experienced working with a major funder. Another client is exploring a combination of income sources to fund its work involving corporate sponsorship, grants, individual fundraising, and earned revenue. Hope Family Services is in the midst of a multi-year effort to strengthen their individual donor’s support. While individual fundraising is one vehicle to use in the shift toward greater freedom, it is not the only effective option. Five years ago, Meals on Wheels PLUS was more than 50 percent government funded. Today, only 24 percent of their income comes from government money. The majority of its income is donated by individuals, foundations, businesses, and earned from customers.

Develop a future-funding plan that gives you a fair fight in whatever ring you enter. If any source is particularly irksome, plan a way to jettison it. At the same time, recognize that any funding stream that helped you in the past, including government funding, might be important in your future. Government funding, despite current tends, remains an important nonprofit income source. It’s the third largest source of income for nonprofits. If your nonprofit is in a constant and unreasonable state of bedlam because of government demands (or the demands of any funding stream) take the reins. You have options. (See this article for an overview of the seven sources.)

Have you had enough? Besides the feeling in your gut, here are four signs that indicate the need to reduce your dependency on government funding:

  • Your nonprofit swings from crisis to crisis responding to demands.
  • You have less and less money for the same work.
  • You develop a super new program only to close it when funding stops
  • New requirements cost money and fail to provide better results.

If you see these signs at your organization, what is the solution? Develop, commit to, and consistently pursue diverse strategies to create abundant income. Simple words. Challenging process. Finding good strategies requires thinking and analysis. Many groups immediately conclude that individual fundraising is the solution. To this I respond: “Maybe. Maybe not.” Avoid jumping to immediate solutions. Study your options. Develop unique strategies to fit your gifts and build on your strengths.

Once useful strategies are developed, commit to follow them. Besides your personal commitment, seek commitment from your board, staff, volunteers, and other members of your community. Commitment requires more than a stamp of approval. Commitment involves a decision that is a precursor to action. “I commit therefore I will do …”

In making this shift, anticipate a challenging process, but not one that requires neuro-engineering skills. Instead, you need to make disciplined efforts to define and complete key tasks that create results. Although progress will be seen much sooner, transitions from government dependence to community partnership take several years. En route you will learn to be even more patient and persistent and change your culture to one that insists on partnership. Along the way, you will create amazing results in income and organizational development.

En route expect to step into scary places and to encounter failure and rejection. It won’t be anything that you can’t face. If unanticipated, however, these can discourage everyone.  More challenging is the fact that in response to these and similar challenges your mind will generate reasons to quit. These fears dress themselves in arguments that appear logical on the surface. “No one ever funds us.” “I think the government rules are getting easier.” Fear, disguised as logical reasons, can be difficult to recognize. Subsequently, many nonprofit leave the port seeking more control in their funding to free them from tyranny only to get waylaid by things like doubts, obstacles, and often the apparent “reform” or “recovery” of an existing funding source.

Have you had enough? Deciding to take control of your nonprofit income streams is a leadership decision. To gain control, commit to change, find a strategy that fits you, enhance your culture, learn new skills and stand firm in uncertainty. Those who succeed aren’t just lucky. They determine strategies and tactics and use them with consistent discipline. The first step is the most important. Decide you have had enough. Decide to do something about it.  As an expert who has seen success and failures with these efforts, I recommend you hire counsel to shorten the journey, shore you up, and obtain needed expertise.

For more answers, check out this Nonprofit  CEO Library.

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