If we’ve learned anything from the past three years, it’s that nothing is rock-solid (except dogs, who are always there for us and make every day better, period). In an instant, the best-laid plans of mice and nonprofits can be undone, whether it’s your board president moving to Fiji or a global pandemic. The best way to insulate yourself from all that external volatility and uncertainty? Diversifying your revenue streams so that no one source of funding is the end all and be all.
Why should nonprofits diversify their revenue streams?
To be sure, revenue diversification requires a lot of planning and a lot of work. So, why should you put in the effort? Being reliant on a single revenue stream is akin to putting all your eggs in one basket. If the basket breaks, you’re eating Special K for the next week, and no one wants that when they could be having Ina Garten’s slow-scrambled eggs. By mixing up your revenue streams, you know that you always have other options. Then, when a big grant doesn’t come through or a major donor says ciao, you can avoid a panic attack, knowing that they’re not the only fish in the sea. Huh, we’re really breaking out the adages and idioms today, aren’t we?
Benefits of diversifying your revenue
In addition to protecting your nonprofit from the ups, downs, and uncertainties of our rapidly changing world, diversifying your fundraising has many benefits for your organization.
- Reduce financial risks. First and foremost, relying on any one source of revenue represents a major financial risk. You never want to rely 100% on any one anything—that’s why our hobbies include collecting rare stamps AND crocheting miniature animals. By mixing it up, you ensure there’s always something else to fill the void.
- Grow your network. Having multiple revenue streams is like networking for your finances. Branching out is a great way to meet new people and drive visibility for your organization. And when you meet people and make connections, you keep finding new opportunities to grow.
- Build long-term resilience. Diversified funding sources protect your organization from outside shockwaves. For nonprofits relying on in-person events for most of their revenue, COVID was a disaster. For those with other revenue streams, it was still a disaster—but a more manageable one.
- Increase your earning potential. This isn’t a sure-fire thing, but it’s a definite possibility. With more fundraising prospects, you open your organization up to increased growth. If you accept stock gifts, maybe the market will go up; if you sell e-merch, maybe your branded tank tops will go viral. You never know!
- Impress external funders. During that seemingly interminable waiting period when grant providers are evaluating your application, they’re also considering your long-term organizational health. After all, they don’t want to give the big bucks to a nonprofit that’s in danger of shuttering any day. One way they confirm your stability is by checking your funding streams to ensure you’re not overly reliant on any one source of revenue. So, make ‘em proud!
- Built-in predictability and stability. Like the resilience and risk-reduction bullet points above, this speaks to your nonprofit’s future plans by building a solid core today. When you have strong, proven, diverse funding streams, your Big Ideas can focus on the difference you’re making, not how best to compete for a new audience.
- Answer to yourself. If you get a lot of money from restricted funds or specific grants, the people giving that money have a big say in your spending. The less reliant you are on a single source of revenue, the more you can spend your funds as you see fit while furthering your mission.
9 ways to diversify your revenue streams
At this point, you’re just like, “I get it, I get it, now what are my options?” We’re so glad you asked, because there’s truly something to suit every palate.
1. Lean into stocks
In an increasingly cash-free society, nonprofits only accepting cash or credit donations are severely limiting their revenue. If you’re looking for a good place to start, lean into stocks. A 2016 study found that nonprofits receiving only cash gifts grew an average of 11% over a five-year period while those receiving non-cash gifts in the form of securities grew 66% (Professor Russel James III). That’s quite a difference!
2. Do prospect research.
The wealth gap is, unfortunately, widening, making those major donors even more important than before. If you have just a few folks in your leadership circle, you’ll want to expand, but finding new donors requires some online sleuthing. Your development team will want to look into wealth and philanthropic indicators to find folks who have a bit more to give.
3. Go global.
Many of us receive fundraising letters from the same 20 charities every single month. And that makes sense because it can feel like there are only so many interested donors, and if not them, then who? If you feel like your prospective donor pool has dried up, try expanding your outreach to other states and even other countries. To get you started, we’ve put together this handy guide to building a global donor network.
4. Think peer-to-peer.
One of the best ways to diversify is to embrace lots of smaller donations rather than being overly reliant on a dozen major gifts. You cultivate community with your dedicated supporters while growing your network to include everyone they know. Then, with thousands of donors, you won’t break a sweat if a few stop giving.
5. Plug into corporate giving.
Nowadays, corporations are being called on to do more than create value for shareholders, and that’s good news for nonprofits. You can capitalize on recent corporate responsibility trends by including matching-gift opportunities on your donation form and ensuring everyone is aware of the opportunity. Furthermore, reach out to businesses about various sponsorship opportunities.
6. Make some passive income.
Amazon Smile is gone, and whether you loved it or secretly hated it (it was kind of a pain for a lot of folks, TBH), it was a nice way to make a little extra each month without a ton of effort. But now, you can sit down and strategically implement some new passive income revenue plans that are sure to be way better. We’ll get you started with some ideas for how to rake in that passive income.
7. Apply to grants.
Yes, they’re a lot of work, but if you’ve done some groundwork, you can streamline the process, and it’ll really pay off. To up your odds of grant award success, consider hiring a full-time grant writer. They’re magic!
8. Try a subscription model.
Recurring giving through monthly subscriptions gives you a steadier source of revenue than annual gifts. Lean into your recurring giving options by highlighting them across social media and including recurring upgrade features on your donation forms.
9. Mix up your events.
We assume you’re already doing some form of fundraising events. Maybe you do a gala every December, or maybe you’re all in on webinars. Whatever you’re doing, mix it up. If you’re all online, try in person. If you’re doing dinners, try a brunch. The broader your net, the more butterflies you’ll catch! (And then release, very gently, and also donate to a Monarch conservation program.)
10. Let your donors into the inner circle.
It’s a pretty common strategy these days: donors cover the fees. Turn your donation form into an opportunity for donors to spring for a little extra so that your transaction and processing fees are covered.
Tips to earn more money with diversified revenue streams
Now that you have a plethora of varied funding ideas at your disposal, you can wrangle your team members and get diversifying. And if you’re still feeling a bit stymied, we have a few tricks to get you on your way.
- Visualize your revenue streams. Wondering whether you even need to diversify your funding in the first place? Try visualizing it. Collect all your data in Excel, calculate what percentage of your total funding each stream makes up, and then make a pie chart. If you only have one or two slices, or any one slice is more than a quarter of your total revenue, you’ll want to take a step back and reevaluate.
- Really do some planning. Overall, pursuing additional revenue streams is good for your org’s long-term sustainability and revenue. But it takes money, and it’s complex, and it can even lead to mission drift. So, work it into your budget, make sure you have the time and personnel, and make a plan to stay laser-focused on your mission.
- Think across demographics. If you’re overly focused on Boomer donations, you’re not alone. But they’re getting older, so diversifying your donor demographics now is another way to weather trying times. If you’re already cultivating relationships with supporters of all ages, you’ll never have to scramble to create a groovy TikTok account with zero knowledge of TikTok. (We’re pretty sure “groovy” is making a comeback.)
- Get creative. We keep talking about “diversifying revenue streams” but put another way, we’re just saying to get creative with your fundraising. Try that new idea. Host that out-there event. Put on a disguise and rub elbows with the .01% at a password-protected black-tie gala, then convince everyone there to give away half their wealth. You can do it!
- Partner with other organizations. You can partner with local businesses and fellow nonprofits to offer complementary services and reach a broader audience. You can also share each other’s posts on social media, give a shout-out in your newsletter, or host a joint event. It’s the perfect way to build community and a safety net.
It’s a wild world out there, but that doesn’t mean you can’t plan for it. By diversifying your revenue streams, you’ll be prepared for what lies ahead, be it zombie apocalypse or robot takeover. Now go forth and diversify!
Diversifying revenue streams: Key takeaways
- If your nonprofit is dependent on just one or two revenue streams, you’re setting yourself up for financial risk in an uncertain environment.
- By diversifying your revenue streams, you can increase your organization’s long-term sustainability, grow your network, and impress external stakeholders.
- Be proactive and make diversified funding a part of your organization’s strategy, allotting resources and personnel to make it a reality and then monitoring the outcomes carefully.