This is the second post in a two-post series from Hayden Dansky @hdansky. Dansky shares their experience as the Executive Director of Boulder Food Rescue and took the organization from an underfunded grassroots effort to a sustainably funded nonprofit. This post explores revenue sources typically available to nonprofits. The first post in this series specifically explores philanthropy as a funding source.
Ready to start fundraising but have no idea where to begin? Let’s examine some ways nonprofits are doing this and the pros and cons of opportunities.
Grants (Foundation and Government)
Many people think this is the primary revenue source for nonprofits. But it’s not always the biggest line item, nor should it be. First of all, if you’re getting started, it’s tough to secure grants. But once you do, they can be pretty sweet to sustain your operation. They take some time to write and become realistic to get, but it’s worth the payout usually. Well, it’s definitely worth considering if it’s worth the payout. Foundation funding can be significant, especially if you share goals and long-term vision. Where this gets tricky is everything listed in the previous post's Challenges in Philanthropy section.
| Pros                                                            | Cons |
|---|---|
| Usually, more significant amounts of money | Usually cannot qualify for the first few years of nonprofit’s existence |
| Clear deliverables, timelines | Depending on the grant, could be a decent amount of work |
| Can build relationships with funders with similar goals | Often 1 year of funding |
| Could have multi-year funding | Sometimes program-specific |
| Could also be a pro --> | Foundation could change their priorities, which usually happens after more extensive strategy sessions |
| If you know one funder, you know one funder |
More context on that last con. There’s no one-size-fits-all for grant writing and relationship building in this space. Each funder has different goals and wants to see different things in a proposal. You should really work directly with the funder to understand this, which is both a pro and a con in that it may take more time.
Individual Donors
This is my favorite way to fundraise! It could be because it’s the easiest and costs the least in time and money, but I think it’s also because I like getting to know people. Individual donations are often the backbone of nonprofit fundraising strategies. People give because of one or all of these reasons (hopefully all):
(a) Ask: You ask! Turns out, this is really important for getting people to give. It can be scary, but usually, people want to help. And if they cannot, they will express that. And if they get annoyed, hopefully, they will share that too!
(b) Belief in the mission: They care about your cause, don’t have time to work on it themselves, and they want to see you make it happen. It’s also a huge ego boost - it turns out you have some dope ideas that other people want to see in the world. So all you have to do is keep being awesome. Oh, and build relationships… see (c).
(c) Connection to you: They know you, the asker, and care about you. It’s not great to develop your organization only based on the people most deeply involved because if they leave, that could be really unsustainable, but it’s a great way to get started. Over time as you build out your presence in the community, this will change. You will get to know other donors, build relationships, and eventually have a solid donor base. A large number of small gifts can keep an organization alive.
| Pros | Cons |
|---|---|
| Built-in relationships | People’s incomes change, priorities change |
| People want to give out of the sweetness of their hearts and belief in your mission. If they give, they believe in you and your cause already. | Often 1 donation, doesn’t ensure ongoing funding - you have to do the work to ask again |
| A lot of people giving a little adds up | |
| Goes to general operating | |
| You can start asking for money right away | |
| Not a lot of work for the payout |
Events
Everyone loves a good gala, right?! Okay, maybe not all of us. There are certainly benefits to throwing an event, but ironically, they aren’t necessarily fundraising. Honestly, the biggest payout is throwing donors a really good time and sharing more about your organization so that you can ask them for money later. A line item in your revenue budget is a bonus.
| Pros | Cons |
|---|---|
| General operating | They are SO MUCH WORK for not that much money |
| You give people a good time on top of raising funds | They also cost a lot of money to put on |
| Opportunity to cultivate relationships with donors | It takes a long time to build a high-profile event |
| Opportunity to reach new donors, volunteers, or other stakeholders in the community | Competing with other nonprofits doing events around the same time |
| You can throw an event whenever |
More context for that last pro, if you’re just getting started, it’s actually really great to throw an event because you are also trying to build awareness of what you are doing, but you may not have big donors right away.
Business
Businesses like to give to nonprofits too! They do this in several ways. Some businesses give out of the sweet kindness of their hearts (and probably a pretty sweet tax write-off). Other companies give because, well, it promotes them. This is called “cause-marketing” and is trendy. It goes along with the rise of neoliberalism and the growing love for concepts like consumer-driven change models (i.e., shop with your values in mind). This isn’t necessarily bad, supporting black-owned and POC-owned (and insert under-represented identity) businesses, small businesses, and local businesses. This is great! The businesses donate to nonprofits and then tell their customers how awesome they are because they give back to the community. Many of these businesses are actually awesome. It becomes problematic when used as a form of marketing and a way to diverge attention away from and cover up problematic business practices. My favorite example of this is Walmart, which loves to give money to Feeding America. Feeding America is the national network of food banks, working to “solve” hunger (working to distribute food to people, which doesn’t actually solve the root causes of hunger). Simultaneously, Walmart pays their employees minimum wage and even signs them up for food stamps upon employment. They put their brand on food bank trucks and tell customers they care about solving hunger, without taking action within their own system. Raising their employees' wages and benefits would significantly impact hunger.
| Pros | Cons |
|---|---|
| Can be more significant amounts for not that much work | Potential values misalignment |
| Matching employee donations make individual contributions go twice as far | Often businesses are looking to get some marketing strategy out of it (unless you don’t care) |
| Can help with getting your brand out to the larger community of potential individual donors | Harder to develop a relationship because it is more transactional |
| Ex. Round up campaigns at cash registers | Could be harder to challenge problematic business practices if a nonprofit becomes reliant on their money |
| Sometimes it’s more work for you. |
More context on that last con, businesses may say, “we will donate a percentage of our funds, and you should market this event also.” Or worse: “We will donate a percentage of our funds coming in from only your people.” This means the only money you make relies on your extra work, and it’s usually a lot of work to market an event that you weren’t planning on having in the first place.
Earned-Income Models
Trendy new-ish ideas in the nonprofit space. Suppose a nonprofit is already offering a service to its community. Are there ways to sell that service (or another service in line with their mission) to make an income to support their charitable programming? For example, a nonprofit may have a for-profit business side or sell their products to some people to sustain a free program for other people.
| Pros | Cons |
|---|---|
| Sell services you are already doing | Need for a business model and mindset that many nonprofit leaders (like myself) lack! |
| People buy a product instead of a “value,” which tends to be more popular under capitalism | Can be a lot of upfront work, with payout coming later. Finding the time can be challenging for a lot of nonprofits that are already overworked. |
| More reliable income once the program is established and proven to be effective |
Web Monetization could fit in with earned-income models and individual donors.
Top comments (4)
@cjdawson @brandon_mhzcurationist this post may interest you
Thanks for sharing!
We have a #nonprofit tag. Can you start using that on your posts? @ayeshaware is also going to go to old posts and start tagging them. This is an emerging area in the WM/GftW community. What would help you better connect with other projects?
Thank you, Chris! We'll start using this tag! This platform has been really great thus far. @cjdawson - do you have any thoughts on this?