How to Build a Diverse Funding Strategy for Nonprofits
- Nonprofit Learning Lab
- May 5
- 4 min read
This is a guest blog.
A stable funding strategy is the backbone of any successful nonprofit. Relying on a single source of income can leave organizations vulnerable to sudden changes, making it crucial to build a diverse funding portfolio. By securing revenue from multiple channels, nonprofits can weather uncertainty and ensure their missions thrive.
From exploring new revenue streams to balancing tried-and-true methods, you’ll find actionable insights to fuel your organization’s growth in this guide. Let’s explore how to create a diverse funding strategy designed to strengthen your nonprofit’s financial foundation.
Step 1: Establish Your Nonprofit’s Current State
The first step in building a diverse funding strategy is to evaluate where your nonprofit stands today. Start by conducting a self-audit of your current funding sources. Review your organization’s financial audits to analyze how much revenue each stream brings in compared to how much it costs to maintain. This will give you a clear picture of which funding sources are most sustainable and which may be draining resources.
Next, identify how reliant your nonprofit is on specific funding sources. For instance, if a significant portion of your income stems from a single grant or event, you’re likely over-reliant on that revenue stream. Pinpointing these vulnerabilities now will make it easier to address them as you move forward.
Think of this step as similar to evaluating program success within your organization. Just as you assess program outcomes to gauge their success and alignment with your organization’s mission, it’s equally important to regularly evaluate your funding streams.
By taking stock of your current financial landscape, you'll be better prepared to fill gaps and diversify your funding sources strategically.
Step 2: Research Other Funding Opportunities
Expanding your nonprofit’s funding streams means exploring a variety of opportunities beyond what you’re currently using. A few key sources to consider include:
Matching Gifts: These programs allow employers to match their employees’ charitable contributions, doubling the impact.
Grants: Grants can provide significant funding, but identifying the right opportunities takes effort. Thompson Grants suggests using a tool like an online grant database to streamline your search and help find suitable options.
Volunteer Grants: Companies may donate funds based on the hours their employees spend volunteering for nonprofits.
Corporate Sponsorships: Partnering with businesses can result in financial support and increased visibility.
Peer-to-Peer Fundraising: Engaging supporters to fundraise on your behalf is an effective way to amplify your outreach.
Planned Giving: Encouraging donors to include your nonprofit in their wills or estates is a long-term strategy to secure future funding.
In-Kind Donations: Receiving goods or services instead of money can reduce operational costs.
Crowdfunding: Platforms like GoFundMe enable nonprofits to connect with a broad audience for specific campaigns.
Researching these opportunities and integrating them into your overall strategy can drastically strengthen your financial stability.
Step 3: Get Approval from Leadership
After identifying potential funding sources, the next critical step is gaining approval from your nonprofit’s leadership team. Follow these steps to present a well-prepared case, ensuring your strategy is more likely to be embraced and supported:
Start by creating revenue forecasts for each funding channel. These projections help leadership understand the potential financial impact of each source. For example, illustrate how a matching gift program could generate consistent contributions or how crowdfunding can quickly build momentum for specific campaigns.
Next, outline the resources required to pursue each opportunity. This could include staff time, marketing efforts, fundraising tools, or financial investment. Providing a clear estimate of what’s needed shows that the strategy is realistic and well-calculated.
Finally, present a weighted, diversified funding strategy. Break down each funding source by its percentage of the overall revenue plan. For instance, explain that individual gifts might account for 30% of revenue, while corporate sponsorships might cover 25%. Justify these allocations based on market research, past trends, and the sustainability of each stream.
By delivering your findings in a structured, data-driven way, you’ll create a compelling argument for leadership to approve and fully support your funding strategy.
Step 4: Create a Detailed Strategic Plan
After earning leadership buy-in, the next step is to create a clear and actionable strategic plan for diversifying your nonprofit’s funding sources. Your plan should include these essential elements:
Funding Source Prioritization: Identify and rank funding streams based on potential impact and resource requirements. Focus where it counts most.
Timeline and Milestones: Set deadlines and key markers for each initiative to track progress and sustain momentum.
Key Performance Indicators (KPIs): Define measurable goals, such as funds raised or donor retention rates, to evaluate success.
Roles and Responsibilities: Assign clear tasks to team members to foster accountability and streamline execution.
Risk Management and Contingency Plans: Anticipate challenges and prepare plans to address setbacks efficiently.
Strategies for Engaging Donors: Enhance donor connections through campaigns, personalized outreach, or recurring gift programs.
Marketing Plan: Design strategies to communicate initiatives and broaden your reach effectively.
Training and Capacity Building: Equip your team with the tools and skills needed to implement the strategy.
This plan ensures a structured path toward financial diversification and long-term sustainability.
Step 5: Expand Resources and Capacity
Pursuing new revenue sources often demands significant changes to your nonprofit’s daily operations. Successfully diversifying funding requires both preparation and commitment.
Train Team Members: Equip your staff with the skills needed to manage new funding streams, from grant writing to donor relationship building.
Obtain New Software/Tools: Invest in systems that streamline donor management, track compliance for different funding sources, and optimize fundraising efforts.
Increase Staff or Hire Specialists: Expanding capacity may mean hiring grant writers, marketing experts, or development professionals who specialize in securing specific funding sources.
Build a Strong Volunteer Network: Recruit skilled volunteers, including those offering pro-bono legal, financial, or creative services, to support your fundraising goals.
Strengthen Board Engagement: Engage your board in finding new connections, providing oversight, and advocating for resources.
This process requires ongoing refinement. Keep track of industry trends, adapt your approach, and invest in continuous improvement to sustain long-term growth and boost funding outcomes.
When building a diverse funding strategy, don’t try to tackle everything at once. Prioritize, take small, achievable steps, and build momentum as you go. A well-balanced funding base isn’t created overnight, but with persistence and a proactive approach, your nonprofit will be better equipped to fulfill its mission while staying financially resilient.
Your next steps today could shape a brighter future for your organization. Start mapping out your strategy now, and take your first step toward creating a sustainable funding plan for years to come.
