Now is the time to diversify your income streams

There has been a lot of uncertainty in the nonprofit funding space and some organizations may be worried that their primary source of income is going away. That’s why it is so important to make sure you aren’t putting all of your fundraising eggs in one basket. We have all seen the pie chart for giving that shows the largest piece of the giving pie comes from individuals. If we know that, why do so many nonprofits rely on government/foundation grant funding or one big event each year? It may seem easier to focus on what’s working for you, but your organization is severely limiting your philanthropic earning potential. 

What’s the problem?

Before diving into diversification strategies, it's important to acknowledge the backbone of nonprofit funding: 

• Individual donations remain a crucial funding source, but the landscape has evolved significantly. Today's donors expect greater transparency, impact measurement and engagement opportunities. They are also more likely to give through digital platforms and participate in peer-to-peer fundraising campaigns.
• Foundation grants continue to play a vital role, though competition has intensified. Successful organizations are those that align their programs with funders' strategic priorities while maintaining their core mission integrity.
• Government funding, while substantial, often comes with complex reporting requirements and can be subject to political shifts. Organizations need to carefully weigh the benefits against administrative costs.

Over-reliance on one funding area can lead to many issues – especially when that funding source changes their model. A broad funding base gives your organization the ability to focus on other areas when one revenue source dips. You are able to reduce financial risks and build long-term resilience. 

What’s the best balance?

I can’t answer that question for your organization but I can give you the breakdown of giving based on source and provide a few other revenue sources that you might not be looking at yet. 

• 67% from individuals
• 19% from foundations
• 8% by bequest
• 7% by corporations

*Giving USA 2024  

You’ll notice this doesn’t include any type of government grants or funding since Giving USA only tracks philanthropic giving. But I want you to take a look at your income statement and see how closely aligned your giving numbers are to these. 

How do you fix it?

There are a few different ways to start diversifying your income streams.

Earned income

Is there a way for your organization to create a revenue source? Creating earned income will not only help your bottom line, but can also make your operating budget a little more attractive to funders, since you aren’t relying solely on philanthropic support. This might take a lot of brainstorming and a pretty large shift in the mindset of your organization, but it can make a big impact on your financials. 

You might be able to charge for your services on a sliding scale, begin billing insurance for a portion of reimbursement or use your building/warehouse for storage for other organizations. You can also create a mission-aligned business venture that can generate unrestricted income while advancing your cause. For example, a job training nonprofit might open a café that employs program participants or an environmental organization could launch a consulting service for sustainable business practices.

Lean into stock giving

More and more donors are looking to gift stock rather than cash for a variety of reasons, but a lot – and I mean a lot – of organizations aren’t set up for this very simple process. Talk to your accounting team and get this set up as soon as possible. Add it to your site, donation envelopes and appeals as an option and educate your donors on why they should consider giving stock rather than a cash gift. Donors may not know about the tax advantages or think it’s a complicated process and it isn’t! The best part? You get the same amount as a cash gift, but don’t have to pay credit card or processing fees!

Plug into corporate giving

Nowadays, corporations are being called on to do more than create value for shareholders, and that’s good news for nonprofits. You can capitalize on recent corporate responsibility trends by including matching-gift opportunities on your donation form and ensuring everyone is aware of the opportunity. Take advantage of this opportunity and reach out to businesses about various corporate sponsorship opportunities.

Mix up your events (or don’t do them at all)

Have you ever considered the time, effort and resources it takes to put on your annual events? Maybe you’ve thought about skipping them, changing it or moving to every other year but are too worried about the possible income loss. It’s a lot easier to rinse, wash and repeat an event, but I’m here to tell you to take a risk and change it up! We are living in a very busy world. Most people don’t own fancy gowns and tuxedos any more or want to take their precious Saturday night for a chicken dinner and silent auction. By taking an event off your fundraising staff’s plate, you open up hours of worktime that can be spent stewarding donors, sending additional information about the impact their donation made and deepening connections with those who support you. 

How do you make the change?

Obviously, this is going to depend on a lot of different factors, like what’s your largest revenue stream now, do you have any other revenue or are you starting from scratch? 

Successful diversification requires a systematic and planned approach:

Start small and scale

Begin with pilot projects to test new revenue streams before making significant investments. This allows for learning and adjustment with minimal risk.

Build internal capacity

Ensure your team has the skills and resources needed to manage new revenue streams. This might require training, hiring or strategic partnerships.

Maintain mission alignment

Every new revenue stream should advance your mission, either directly or by providing unrestricted funding for core programs.

Monitor and adjust

Implement systems to track the performance of different revenue streams and their impact on your organization's overall financial health.

Be careful not to spread your resources too thin in the name of diversification. Focus on a few promising opportunities rather than pursuing every potential revenue stream. Continue strong relationships with current funders, you don’t want to lose what you have, just add to it! And as always, keep your organization’s values and mission at the front of what you do. You don’t ever want to compromise your integrity to chase funding.  

Income diversification is no longer optional for nonprofits seeking long-term sustainability. Success requires careful planning and ongoing adaptation to changing circumstances. Organizations that thoughtfully and methodically develop multiple revenue streams while staying true to their mission will be best positioned to create lasting social impact. The key is to approach diversification as a journey rather than a destination. Start with your organization's strengths, learn from others' experiences and be prepared to adapt as you discover what works best for you.

Remember that diversification isn't just about financial security, it's also about creating a more robust and effective organization better equipped to serve its mission. 

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