Fundraising Week 2012: Diversify Your Fundraising Portfolio

It's Fundraising Week here at NCFY! We're re-posting some of our favorite articles from the Right on the Money series, which focuses on how youth-serving organizations can sustain their programs financially. In this article first published in April 2009, we talked to fundraising consultant Ann McCaw about the importance of "diversifying" your funding sources.

When youth-serving organizations rely on just one source of funding, they can find themselves at risk during tough economic times. "An organization must diversify its funding streams in order to survive and thrive," says Ann McCaw, principal consultant at One Bright Bird Consulting, which advises nonprofit organizations on fund raising. "No donor will be around forever."

In addition, McCaw says, donors, whether foundation, government or individual, often put restrictions on how an organization spends its money.  "The more different kinds of donors you have, the more flexibility you have in how you spend those precious dollars," she says. "If one donor won't support advocacy or infrastructure, another kind of donor will."

Seeking multiple sources of funding is a long-term strategy—not a quick fix in a difficult economy. "Relationships take time to build and tremendous energy to sustain," McCaw says. "By carefully thinking through the most fruitful kinds of relationships for the organization as a whole, you will be growing the organization—maybe not in six months, but definitely over a year or two years or three."

To get our readers started on the road to diversification, NCFY has put together a few tips:

• Government funding is a start—not an end—to meeting your program's needs. Triangulate funding from federal, state and local sources to stave off the effects of budget cuts. Most state budgets set aside funding specifically for programs serving youth outside of school including mentoring programs and those for runaway and homeless youth. Numerous cities, towns and counties do the same. 
• Private funding includes donations from individuals and grants from foundations and corporations. Building strong long-term relationships is key to raising money from private sources. In addition, when thinking of how donors can help you, don't think merely of their pocket books, McCaw says. Consider, as well, the ways they might help you build your programs and your fund-raising strategy. "If you're providing job training skills to at-risk youth, is there a kind of business where you would like to place them?" she says. "Then work with those businesses on building program and on fundraising activities." Some foundations offer technical assistance and training to their grantees; individual donors can be powerful spokespeople and volunteers for an organization.

What you can do:

• Determine your current funding mix from all sources. 
• Consider the restrictions placed on each stream of funding.
• Consider how long each funding stream might last. 
• Forecast where a gap might exist in the future. 
• Create a strategic plan that joins your programmatic priorities and your fund-raising needs.