5 Major Reasons You Need to Diversify Your Nonprofit Revenue Streams

Diversifying your fundraising portfolio with multiple nonprofit revenue streams is crucial to your organization’s sustainability. Just like a financial advisor wouldn’t recommend investing your life savings into one volatile stock, your nonprofit shouldn’t solely depend on a single revenue stream to keep it afloat. A diversified fundraising portfolio gives your organization peace of mind in knowing that you’re prepared for the things you can’t control, and that you’ll be able to bounce back when the next crisis hits.

The COVID-19 pandemic opened our eyes to the unfortunate reality that there will be times of uncertainty that we can’t plan for, but taking the precautionary steps to protect your nonprofit with the appropriate fundraising diversification strategies can mitigate your risk of loss in the future. To better understand how the 2020 health crisis altered giving trends and behaviors, check out Why America Gives 2020.

If your nonprofit hasn’t already committed to diversifying its revenue streams, consider bringing this list to your board or fellow team members to explain its key role in sustaining your organization’s impact.

1. Mitigate Risk

You can’t eliminate risk, but you can mitigate it by being prepared. Diversifying your streams of revenue could save your nonprofit from completely losing its footing amid an economic downturn, health crisis, or shift in political policy.

The first step to mitigating risk is analyzing your current revenue streams and determining what percentage of the pie you want to allocate to each source. A few sources all nonprofits should have, regardless of organizational size, include the following:

• A peer-to-peer fundraising platform
• Recurring giving
• Fundraising events (which include a virtual component)

Once you pinpoint all of your current nonprofit revenue streams, calculate each source as a percentage of the total to identify any potential trouble spots. Is there a particular source that carries a large majority of the weight? If so, brainstorm ways to redistribute that load or consider adding another source to supplement your fundraising efforts. That way you’re able to protect your income flow now and into the future.

2. Improve Your Nonprofit’s Adaptability

Waiting until the ball drops isn’t the best time to devise a back-up plan. When the COVID-19 pandemic forced our world to shelter in place, seemingly reliable revenue streams took a hit as people’s job stability and regular income were impacted. Organizations that weren’t already fundraising online had to make the switch as in-person events were no longer available.

Organizations with diverse revenue streams in place, such as a recurring giving program, were able to quickly adapt to this loss, leaving them with greater bandwidth to assess the current needs of their community and provide solutions in real-time. Virtual fundraising events, recurring giving, and peer-to-peer fundraising campaigns created ways for nonprofits to stay virtually connected with their audiences and advance their missions, despite economic hardship and quarantine restrictions.

Even when in-person gatherings return, these three online fundraising types should remain a permanent part of your annual strategy. Digital campaigns can be built, tweaked, and updated with the touch of a button, allowing your nonprofit the opportunity to quickly launch new initiatives and adjust them as needed.

Before you launch your next crowdfunding, peer-to-peer, or event fundraising campaign, download these checklists to ensure you’ve covered all of your bases and set them up for conversion.

3. Save Time and Resources

Not all sources of funds will align with your organization and its stakeholders, so it’s important to consider the pros and cons of each revenue stream. Doing the work upfront to identify the right opportunities for your nonprofit will help you reap the benefits down the road when you’re not floundering to figure it out when crisis hits.

Depending on the size, needs, and current bandwidth of your nonprofit, the costs-versus-benefits of each source will vary. For example, applying for certain grants may cost your organization more money in the long run once you compensate your team members that are working on the lengthy application process. In addition, many organizations invest in a grant writing training program for these team members to increase the chances of getting their proposal approved. These expenses could potentially outweigh the benefits of the grant, depending on its offerings.

Regardless of the revenue stream you’re establishing, start with smaller goals and then gradually increase your benchmarks. For example, your long-term objective to double the revenue of your recurring giving program can start with a promotional crowdfunding campaign to capture recurring gifts. Kick off the campaign with a few conservative goals in terms of donor acquisition or number of recurring gifts, then refine your efforts and do more targeted pushes as it evolves.

4. Boost Visibility

A nonprofit can’t sustain its mission without visibility. Diversifying your fundraising streams can open the door to building connections with local businesses, government agencies, and the general public. The more visible you are, the more hands you can get involved in your efforts.

Consider experimenting with different types of campaigns, such as crowdfunding and recurring giving, to ensure you’re appealing to all audiences and how they prefer to take action on your organization’s behalf. Each campaign type is designed for a specific call to action, so experiment with each to see which ones are best received.

Here are a few more best practices to think about:

• Include a virtual component in all fundraising campaigns to reach a wider audience
• Extend your campaign dates to provide more time for donors to contribute
• Offer multiple giving options (credit card, ACH, Apple Pay/Google Pay) on your donation page to improve the donor experience
• Attend nonprofit conferences to grow your network

5. Increase Autonomy

By balancing a handful of revenue streams, you’re protecting your organization from depending too heavily on a single source, like a grant committee or governing board, that may require you to shift your operations in order to meet eligibility requirements.

For example, most grant applications specify particular “areas of influence” that your organization must qualify for in order to be eligible. To accept this grant opportunity, you may be required to alter the direction of your organization’s work to meet the requirements. Depending too heavily on this grant would leave your organization in a vulnerable place, feeling like altering your mission is the only option. Rather than confronting this problem in the future, be proactive in seeking out grants that directly and specifically relate to your work, but also balance out the weight of that grant with other unrelated sources in case it falls through.

It may be tempting to stick with what you know and rely on the revenue sources you’ve already established, but diversifying your fundraising portfolio provides a cushion between your nonprofit and the things you can’t control. By adding supplemental revenue streams, your nonprofit can boost its visibility and protect its ability to operate freely. Diversification allows for your team to keep moving forward despite any unforeseen circumstances, ultimately giving your nonprofit the ability to serve your world when crisis hits.