Creating the Right
Funding Mix for
Long-Term Sustainability

Not long ago, I was speaking to the staff of a well-established non-profit organization that was facing a dilemma. For the past several years, they were fortunate enough not to have to worry about raising funds. Most of their contributions came from a handful of donors who provided the necessary operating support.

But then one of their major donors had a falling out with a board member and stopped giving. Another donor died unexpectedly. Suddenly, this financially stable organization became extremely unstable. The organization was forced to eliminate several programs, and the executive director wondered what could have been done to avoid this situation.

One solution may have been to develop more diverse sources of support so the organization would not be unduly reliant on a handful of donors. There are good reasons for doing this:

• Non-profit organizations must pass the public support test, which stipulates that at least one third of their total revenue must come from “public sources.” A rather complicated formula is used to calculate this, but it is easy to recognize the need to diversify if you currently rely on only a few major donors.
• A diverse funding portfolio helps organizations weather economic downturns. It stands to reason that you will have more chance to recoup from a loss if you are able to turn to a large number of donors to make up the difference.
• A broad base of support ensures that no one donor, or small group of donors, controls the mission or programs of your organization. It is certainly a good feeling to know you can walk away from a gift if it will not advance your vision. By contrast, if you have only a handful of donors, you may not feel like you have that luxury.

To determine the right funding mix for your organization at this time, you may want to take the following steps:

Create a strategic plan

Review the history of your organization’s fundraising programs and list the contributions you have received historically and from what source – individuals, corporations, foundations, and sales. By comparing the trends over time, you may find that certain areas offer more potential.

Also, take into account your organization’s specific situation. Consider your current programs, audiences, funding needs, marketing plans as well as your resources, including personnel and fundraising. For instance, if you decide to embark on a direct mail campaign, you should be ready to make a significant investment in terms of money and staff time.

Determine where new opportunities exist

You may want to evaluate your “competition” or other organizations similar to yours to ascertain how they are funded. This may provide you with some insights into untapped markets such as national or state-based private foundations, local corporations, or individual donors.

Secure board support

Before embarking on a new fundraising program, be sure to inform and engage your board of directors. You will be grateful to have their support, especially when new initiatives take time to show a return on investment.