Nonprofits Need to Diversify Revenue

Many small business owners understand the importance of having different revenue streams, but often nonprofit organizations underestimate how having multiple ways of making and earning money can influence the overall health of the organization or agency. Whether heavily reliant on individual donations, grants or fees for service, nonprofits need to look at a collection of different ways of making and raising money.

It is easy for a nonprofit organization to become predominantly reliant on one income source. A really fantastic grant writer, for example, may bring in some large grants that make the organization feel financially solvent. In fact, grants can be an unreliable way to sustain and organization since the money is for a short-lived or specific program and project. Eventually, the organization will need to figure out how to sustain and pay for the project after the grant money goes away.

For the overall health of even a small nonprofit organization, consider diversifying revenue to include corporate funding and money from businesses, individual contributions, grants and other large project and program funding, AND a way of earning money for products or services provided. By designing an income budget that includes getting money from various revenue streams, the organization will be less likely to take a hard hit if one of those revenue sources dries up. It also helps in terms of prioritizing and deciding where to put the organization's efforts and resources. For example, if a great deal of effort and work goes into a fundraising event that only brings in $5,000, that can be evaluated based on whether or not the money can be raised easier and with less effort in another way.

A sound fundraising and revenue plan for a nonprofit organization or agency must include a plan to raise income from a variety of sources'"this way the organization has options and a better chance at security.