Thursday, October 07, 2004

Bring In Donations From Many Different Kinds of Sources

What does your personal stockbroker (or maybe partner, instead) tell you about your personal investments?

They tell you to "Diversify!"

Why? Now, this isn't a blog on investments, and I don't claim to be anything near a financial counselor of any kind, but, to make my point: if you have a stock portfolio that is only invested in grapefruit juice sales and grapefruit futures - you are broke after Hurricanes Ivan and Jean wipe out the entire crop and a good portion of the industry. Had you had some money in grapefruit investments but the rest broken into investments in Coke A Lola, Radio Shook Corporation, and Why Won't It Do What I Want Computers, Inc. - the exposure to risk that your total investment portfolio had would have been much lower.

Same thing with searching for income for a non profit. More to the point, if your agency has income coming only from individual donations, or only from grants; your organization's finances are vulnerable. Why? If that grant donor (or donors) doesn't give your organization the grants it's been giving you for the past four years, or if your donors are hit hard by a sour economy (it happened in 2000 when the economy changed) you could have a severe drop in your agencies only revenue.

Having revenue come into your organization from several types of funding sources is not just safer - it leads to relationships with donors of all kinds, it opens the door to a variety of financial opportunities, and it's balanced so that if some of your revenue stream is slowed by something - your entire revenue sources will not be.

For example:

Let's say that you and I work for Barbecue for the Barbecueless non profit agency. Our mission is to provide barbecue food, implements, information, and assistance to anyone who does not have access to barbecue in Arlen, Texas. Our clients are mostly the homeless. Our donor constituency is made up mostly of men (70%) who barbecue constantly and as a hobby, or corporations that make barbecue equipment, cookbooks, and sauces, etc.

Here's one possible diversified revenue scenario:

Our revenue has come mostly from individual donors and some from corporations during the past five years, since Barbecue for the Barbecueless was started. We're expanding - the need for excellent barbecue is before us.

If we add a grant seeking program to the revenue stream (after we're sure we can afford to add a grant writer to the staff) we must make sure that we balance the amount of income we're working to get from all three sources. Grants are not a 'magic cure all' for fundraising woes. Grants are safest thought of as a one time donation with no guarantee of another donation from the donor. In other words, if you hire a staff member and have a grant to pay for that staff member for one year - where is the next year's pay for that staff member going to come from? Don't EXPECT it to come from that grant source. Be sure that you can increase your individual and corporate donation amounts to be able to cover that payroll - AND attempt to get another grant to cover the employee's pay. It's safest, fiscally.

So, here's what you and I decide is a good safe set of revenue sources for the five year old agency:

Cash Donations (Individuals and Corporations)
Services for Fees
Fundraising Events
Educational Programs for Fees
Major Donor Solicitation (soliciting large donations from donors who give larger amounts)
Endowment Interest (having an endowment in savings and using the interest from it as income)
Selling donated barbecue supplies, (or whatever) etc. for profit in a retail store or online
Becoming a United Way agency
Require Annual Minimum Board Member Donations
Working with another organization on a specific program/project and sharing the costs
Gather Sponsors
Raise In Kind donations

Which revenue source works for your agency and how much to expect from each revenue source must be determined based on resources available and time allowed for success. The options are out there. Diversify.