What is Your Funding Model?
We’ve discussed having a vision for your organization, your leadership planning, and communicating your mission. But many nonprofits still struggle with how to secure funding. The Stanford Social Innovation Review has looked at “How Nonprofits Get Really Big,” based on the 144 nonprofits that had reached $50 million in annual revenue. Bridgespan Group’s research found that they defied conventional wisdom by finding large single source donors instead of diversifying their revenue sources.
In the 2009 issue Kim, Perreault, & Foster looked at “Ten Nonprofit Funding Models,” for large nonprofits and defined the strategic growth models. Since these two studies, many nonprofit leaders have wondered how to identify and develop the right funding model for their organization.
In the Fall 2011 issue of Stanford Social Innovation Review, Kim, Perreault, & Foster share four guidelines to determine the best funding model for your purposes. To begin, one must know when to begin. Funding model development requires considerable time and investment – if you are in financial distress or your leadership isn’t willing to invest staff and systems to this effort, you are not ready.
Size matters as well. A funding model is most helpful for nonprofits that generate at least $3 million in annual revenues. Smaller organizations can get by with idiosyncratic fundraising methods so there is not an urgent need to over-strategize. However; there are some advantages such as finding those natural matches, clarifying who the main decision makers are, and the appeal of investing in your organization for your current donors. These are all helpful pieces information that will prepare you to develop your funding model.
Finally, your organization must have very clear programmatic goals to achieve since different objectives require different funding models. For instance, do you want rapid growth, or to expand your financial resources without increasing in size?
These are some of the goals to consider as we look at developing your funding model in this new blog series.