So Where Are You?
You know your programmatic goals and the population you serve. You have spent countless hours, dollars, and manpower determining how to identify your beneficiaries and improve your services to them. But that is only half of your job. Nonprofits must have as much clarity about how you will fund your mission. You must cultivate a distinct set of funders through building and scaling sustainable financial support. Identifying and developing a funding model is as important as the services you provide, for without the funding there will be no services.
Kim, Perreault and Foster share four guidelines to help nonprofits identify and develop their funding model in the Fall 2011 Stanford Social Innovation Review:
- Get a sense of where you are
- Take inspiration from your peers
- Weigh revenue potential against associated costs
- Pave the road
To move forward you must know where you have been. Your organization must take a look at the relative strengths and weaknesses of your funding plan. Focus your research on funding sources, funder motivation, and fundraising capabilities.
Funding sources can grow into the lore of your organization and may not actually be accurate. One education nonprofit had arranged site tours of its diagnostic learning clinics for years under the assumption that these visits produced great funding returns. In fact, they planned to open more clinics to encourage more visits, and spent great time and manpower on arranging these tours. However, an analysis of funds as a result of these visits was shockingly low. The group halted new clinic openings and limited tours while refocusing on fund development efforts in other areas.
Analyze historic data instead of relying on what you think works. Go back five years and look at such questions as “What renewable funding sources are likely to continue for the next three to five years, and what percentage of costs do they cover?” “How many funders make up our core renewable funding sources?”
Ideally your organization has more than 3 or more consistent funders so that you may sustain the loss of one. You are in a relatively strong position if no more than 30% of your funds are restricted to non-core activities. Remember, no funding means no services – spend time and energy on developing your funding model and you will increase your sustainability. In our next blog we will look at how to take inspiration from your peers as part of identifying and developing your funding model.