Building Resilient Funding Models: Essential Tips for Nonprofit Finance Professionals
Finance plays a crucial role in building a sustainable and scalable funding strategy. By actively bringing together different departments and leading discussions around revenue diversification, you can set measurable goals, evaluate the ROI of each funding source, and make informed decisions about where to invest time and resources.
Finance professionals can provide key insights into risk analysis, financial forecasting, and performance measurement, ensuring each new revenue stream supports your long-term sustainability and growth.
Because if your organization is relying on a limited number of revenue streams, it can lead to financial instability, especially when many external factors are out of your control. If a major donor decides to pull back or a grant isn’t renewed, it could jeopardize your programs. Without multiple ways to bring in revenue, your organization is at risk of sudden funding cuts, which will disrupt operations and pull focus away from your mission at best and put a complete halt to programming and payroll at worst.
The most successful organizations are effectively scaling both their income and their impact by thinking like a business and creating scalable revenue streams, with less reliance on traditional sources.
In this post, you’ll learn why diversifying your funding matters and get tips and ideas for starting the conversation with your counterparts in development.
Why Funding Diversity Matters (and What Finance Can Do to Support It)
Before diving into specific ideas, let’s talk about why having diverse funding is so critical. When your organization expands your revenue sources, you:
Build resilience
A broader funding base means your organization is less likely to face a financial crisis if one revenue stream dips. Your team becomes more agile, and easily able to pivot and double down on another area when one falters.
The finance team can track the performance of each stream to help identify which ones are the most resilient.
Unlock growth opportunities
Having a more diverse and flexible revenue portfolio may enable your organization to grow faster or find funding opportunities for previously underfunded work.
Finance teams can help analyze which revenue sources offer the highest ROI and where to direct further investment.
Ensure long-term sustainability
When your organization only has a couple revenue streams, growth potential is limited. But several options will help build a longer-term, more sustainable strategy.
Finance professionals can create models to forecast future revenue, allowing you to anticipate growth potential across various streams.
The good news? Diversifying funding doesn’t have to be a massive overhaul. It’s about having good data, getting creative, starting small, testing options, and scaling what works—while keeping finance front and center.
5 Out-of-the-Box Ideas to Diversify and Scale Your Funding
To get started, here are five ideas that can broaden your organization’s funding base and boost its sustainability:
1. Earned Income
You don’t have to be a for-profit business to generate revenue through earned income. Nonprofits, healthcare organizations, and schools can create programs, services, or products that align with their mission while also generating funds. For example, a school could sell their exclusive curriculum to other schools.
How to Start: Think about your intellectual property, or the skills or services your team excels at that could be marketable. Not only does this create a new revenue stream, but it also adds a layer of financial independence to your organization and has the potential to scale by selling one to many.
How to Measure: Track revenue generated, expenses incurred, and profit margins for each earned income initiative. Set performance benchmarks (e.g., cost per unit or attendee) and use financial data to assess scalability.
2. Corporate Sponsorships and Partnerships
Companies often look for ways to engage with the community and enhance their brand reputation, making corporate sponsorships a win-win for both parties. A youth nonprofit could partner with a local tech company to fund a coding camp, while giving the company visibility in marketing materials and on social media, for example. Or an airline could donate frequent flier miles to cover an organization’s travel expenses.
How to Start: Create a compelling sponsorship package that outlines clear benefits for potential partners. This could include event sponsorship, volunteer opportunities for employees, or matching gift campaigns.
How to Measure: Use metrics like sponsorship revenue growth, cost of acquisition, and renewal rates to evaluate which partnerships are delivering the best financial returns.
3. Membership or Subscription Programs
A membership program offers exclusive benefits to supporters in exchange for monthly or annual dues. This model isn’t just for gyms or museums—it can work for advocacy groups, community organizations, and more. For example, an environmental nonprofit could offer members access to exclusive webinars or behind-the-scenes updates on conservation efforts.
How to Start: Create a tiered membership program with different levels of access or perks. For example, members might receive a quarterly impact report, special event invites, or exclusive content.
How to Measure: Track metrics like monthly recurring revenue (MRR), member retention rates, and customer lifetime value to reveal the effectiveness of different membership levels and pricing strategies.
4. Crowdfunding or Peer-to-Peer Fundraising Campaigns with a Twist
These are more than just another appeal—they can be exciting, creative events that quickly expand and engage a brand new donor base for exponential reach. Host a “24-Hour Giving Blitz,” for example, where each donation unlocks a surprise or milestone.
How to Start: Create a time-limited campaign with a unique theme, challenge, or match goal. Tell a compelling story that pulls at the heartstrings.
How to Measure: Evaluate cost per dollar raised, donor acquisition costs, and conversion rates. Finance should monitor how campaigns impact overall revenue growth and donor retention over time.
5. Asset Utilization
If your organization owns real estate or other valuable assets like vehicles, consider leveraging them to generate revenue. For example, a community center could rent out its event space for corporate meetings, while a nonprofit with a kitchen could offer cooking classes.
How to Start: Assess your assets—do you have an unused meeting space, a kitchen, or even outdoor space that could be rented out?
How to Measure: Calculate return on assets (ROA) to determine the efficiency of asset utilization. Analyze revenue against any associated costs (e.g., maintenance, insurance) to ensure profitability.
How to Build a Funding Diversification Plan
Ready to start diversifying? Here’s a quick guide to building your funding diversification plan:
- Assess current funding sources: Review your existing funding streams to understand where your revenue comes from and identify gaps or over-reliance on a single area.
- Set specific diversification goals: Establish measurable revenue goals for each new funding stream, driven by finance to ensure realistic targets.
- Create an action plan: Choose one area to explore, set up financial metrics, and implement the plan. Regularly review performance with fundraising to identify successes, challenges, and opportunities for scaling.
Driving the Diversification Conversation
Diversifying and scaling your funding streams doesn’t have to be daunting. It’s a strategic journey where finance plays a pivotal role, by ensuring that each new revenue stream is not only implemented effectively but also measured, analyzed, and optimized for maximum impact. Finance can develop a clear financial roadmap that identifies the most promising opportunities, assesses risk, and tracks performance.
Ultimately, diversification isn’t just about increasing revenue; it’s about building a resilient and financially sustainable organization positioned for growth and long-term success. When finance drives the diversification conversation, your organization is better equipped to thrive, fulfill its mission, and expand its impact.
To learn more about assessing program performance, optimizing resources, and expanding funding sources to scale your organization’s impact, join us for the webinar Growing Smarter: Strategies for Scaling and Sustaining Long-term Success at Your Organization.
