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Sustainability - Diversify Sources of Income

Sustainability

Strategy 2: Diversify Sources of Income

 

The second key strategy to ensure sustainability is to diversify sources of income for the organization.

 

First of all, this requires a thorough knowledge of organizational needs. After the vision, mission and goals of the organization have been defined, the next important task is strategic planning to define how to achieve the goals. In the end, a long-range financial plan (projected for three to five years) must be constructed [See Preparing a Long-Term Financial Plan in the Finance and Accounting module.]

 

That plan may clearly identify the expenses of the operation. What about the income to cover those expenses? It is important to avoid dependence on sources of income that may not be reliable for the future. Diversifying the sources of income should be a serious focus. Possible sources of funds for nonprofits include:

Contributions from groups or individuals Grants from government, businesses, foundations or other charities Income generated from for-profit activities that further the purposes of the organization (see the IRS rules about this) Creating a joint venture with a for-profit company (as permitted under IRS Ruling 2004-51) that furthers the organization’s purposes [Dillon, 2005}

Each of these potential sources of income requires specific fundraising and management strategies.  

Ideally, the organization builds itself into a vital community resource with multiple sources of funding to minimize reliance on any one source that is subject to sudden change. Dramatic changes in the economy may prove disruptive to the organization in several ways. According to the Center on Philanthropy at Indiana University, periods of economic recession have a significant impact on giving.

Giving USA Foundation's Spotlight newsletter for Fall 2008 analyzed trends over the last 40 years. It shows that giving fell, adjusted for inflation, an average of 1 percent in recession years. In years with 8 months or more of recession, giving declined at an average rate of 2.7 percent per year (adjusted for inflation).

Most households continue to give during times of financial insecurity, although some give less compared to periods of economic prosperity and some donors become non-donors, especially those earning less than $50,000 per year. [IUPUI, 2008]

People Want to Feel Good about the Organization

People want to be associated with successful ventures. An organization that is constantly begging for assistance will not be perceived as successful.

The Board and management should foster partnerships with local companies, businesses, charities and service organizations. [See Building Partnerships in this module.]

 

REFERENCES

The Center on Philanthropy at Indiana University (2008, November). The Economy and Charitable Giving: Special Briefing, November 2008. Retrieved December 25, 2008, from http://www.philanthropy.iupui.edu/Research/EconomyBriefing.aspx

Dillon, George T., & Wilkins, Matthew M. (2005, May). True Sustainability: A New Model to Aid Nonprofits in Developing Self-Sustaining Revenue Streams. Retrieved December 22, 2008, from http://www.guidestar.org/news/features/sustainability.jsp

RESOURCES: GRANT SEEKING

Foundation Center Marketplace. Offers publications, workshops and online training courses in grantseeking. http://foundationcenter.org/marketplace/

RESOURCES: USING THE INTERNET IN FUNDRAISING

Fritz, Joanne. Online Fundraising: A Startup Guide. About.com, Nonfprofit Charitable Orgs. http://nonfproit.about.com/od/onlinefundaising/tp/onlinefundraisinghub.htm?p=1

Gilbert, Michael C. Frictionless Fundraising. Nonprofit News Online. http://news.gilbert.org/AboutFreeWhitePapers

Network for Good. One example of an online service that processes credit card donations for nonprofits. http://www.groundspring.org/service/donatenow.cfm

Techsoup.org. Using the Internet. A variety of articles on using the Internet in nonprofit organizations. http://www.techsoup.org/learningcenter/internet/

            Allen, Nick. Using Email for Fundraising

            Stanionis, Madeline. Book Excerpt: Raising Thousands of Dollars with Email

  INTERNET LINK WARNING

Please note that by selecting an Internet link you will be directed to an external site, and the Pass It on Center does not control the content of the site.

 

DISCLAIMER

This work is supported under a five-year cooperative agreement # H235V060016 awarded by the U.S. Department of Education, Office of Special Education and Rehabilitative Services, and is administered by the Pass It On Center of the Georgia Department of Labor – Tools for Life.  However, the contents of this publication do not necessarily represent the policy or opinions of the Department of Education, or the Georgia Department of Labor, and you should not assume endorsements of this document by the Federal government or the Georgia Department of Labor.

 

 

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Title: Sustainability - Diversify Sources of Income
Module: Sustainability
Author: Trish Redmon
Audience: Administrator
Sub Title: Strategy 2
Procedure:
Organization Source: Pass It on Center
Last Reviewed: 01-25-2009 1:34 PM