November 9, 2015

How to Avoid the Revenue Diversification Boomerang Effect

When it comes to income, greater diversity rules. Leaders who decide to become more diverse take action. But when the going gets bumpy, some return to their traditional income streams. This is the boomerang effect in action. Leaders who get caught up in the boomerang effect loose momentum. Some abandon their income diversity quest.

Why do we return to existing income streams-let’s call them “used cash machines”- when our strategy calls for greater diversity? Our brains create strong links to rewards. Money, of course, is a reward. Our minds literally encourage us to repeat what worked.

So as you build new revenue steams, anticipate the boomerang effect. Half of dealing with it is recognizing what’s happening and why. To avoid its other detrimental effects, circumvent them. Here’s what I recommend:

1. Recommit.

See temptations whether by your, your staff or board, as progress. Your mental doodling about applying for a huge grant or calling a disgruntled donor means something. When you move toward old income streams (even though you intended to go to a new one) recognize that you’re probably stuck or tired. If you weren’t making progress toward more diverse income, you wouldn’t experience this confusion.

View boomerangs, that is, returns to old strategy, as decision points. Does the more diverse income strategy still makes sense? Why did you commit to it?
If it weren’t for this temptation, would you abandon your new strategy? Turn back to the strategy-the one you made before you got bumped. As you pivot, ask yourself what you see from this viewpoint that you missed before.

2. Celebrate Wins.

Explore your progress. What have you learned? What has changed? Ask others to help you identify wins. Help your brain decipher what works.

My clients find it helpful to remember that when their groups first began to earn its current income, they encountered hardship, small returns, and setbacks. But, everyone was so desperate-they didn’t count the cost. Re-adopt this mindset. Consistent new income arrives late in the process. Until then, celebrate wins that indicate progress, such as the new donors.

3. Create Accountability.

Find someone you trust to remind you that your current sources of income won’t provide the revenue you seek and deserve-no matter the boomerang’s strength. You decided to diversify for solid reasons. Your goals are valid. Enlist someone to inspire you when you get discouraged or stuck.

When it comes to earning new income, expect your brain’s to guide you to return to the tried-and-true. Expect the boomerang effect. Name it. Circumvent it. Your diversity goals are worth it. It’s your way forward. Create new brain patterns to find new successes.

Karen Eber Davis

Karen Eber Davis provides customized advising and coaching around nonprofit strategy and board development. People leaders hire her to bring clarity to sticky situations, break through barriers that seem insurmountable, and align people for better futures. She is the author of 7 Nonprofit Income Streams and Let's Raise Nonprofit Millions Together.


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