Diversifying Your Funding Sources

The challenge of funding community and voluntary organisations in the long term is to diversify or die. This article discusses the argument for having diverse funding sources.

Diversify or die

Diversify or die, may seem a stark message, but it is meant to sound alarm bells for organisations that depend on funding from a very limited number of sources and especially to those whose money predominantly comes from the grant-making sector. There is no doubt that mergers and other forms of joint-working will have some role to play in the future sustainability of the community and voluntary sector but the most fundamental challenge I believe on this issue is the need for more investment on the income side of the not-for-profit business.

It is a generalisation but in my view an accurate one, that for many community organisations the main source of funding they receive is from one main grant funder - probably from government or the European Union. As funding from these and other sources diminishes we will have to be pro-active fundraisers rather than reactive grant seekers.

A Business Minded Approach

To sustain in the long-term community and voluntary organisations must take a business-minded approach to income generation. They must increase their ability to secure funds, particularly from unrestricted sources, and protect themselves from changes in the funding environment. This will require investment in their fundraising capacity both in terms of staff/volunteer development and fundraising resources.

Strategize for Success

To fundraise for the future organisations must integrate their fundraising efforts with their strategic planning processes. Too many organisations develop strategic plans and yet have no strategy for financing them. These organisations will always struggle with their fundraising on an annual, monthly or even weekly basis.

To sustain in the long-term community and voluntary organisations must take a business-minded approach to income generation.

The pressures of other work can cause us to limit our fundraising only to where they can get the next grant. The majority of organisations that will survive and prosper will be those who get their money from a variety of sources; from individual donors, from fundraising events and activities, from trading as well as from grant-making organisations. The problem of depending upon a narrow income stream, perhaps even being wholly dependent on one or two funders, means organisations live and die at the behest of the funder's whim.

It must be understood that the vast majority of grants will always be for one-off projects, for time-limited work and not for core costs. The effort spent in packaging core work as projects to get the grant would be better served working for unrestricted sources of income. Trying constantly to get grant funders to finance core work will ultimately fail. Even the full cost recovery model while it makes it easier to explain total project costs does not add a single penny to the overall pot. Full cost recovery means fewer applicants can be funded if the total cost is applied for - so the solution has to lie elsewhere.

Bear in mind that the majority of independent trusts want to do new things all the time and that criteria for funding can change with political direction and so is not a long-term solution. Funding from Government is likely to start moving to a model of competitive tendering and there is therefore likely to be less grants for core work - while the reservoir of European Union funding is running dry. These are just some reasons why grants should only ever be a part of the funding mix - not the only ingredient.

In looking to solve the funding crisis, some newly established social economy projects are springing up, often on the back of grants pump-priming initiatives. However, these organisations tend to still compete for grant support to survive. As businesses they are not financial viable, at least not yet, and for some they will never be profitable enough to sustain - without the handout. Remember that all community and voluntary organisations are social enterprises and when using this ‘lens’ to view the sector, there is little difference between the residents association and the community café or recycling community business. All organisations in the community and voluntary sector should seek to raise a proportion of funds from charging for services - not just those with the ‘community business’ strap line.

Competing with and Learning From the Private Sector

If the social economy business is set up primarily as a fundraising tool, then it needs to be a hard-nosed, watch-the-bottom-line business in order to compete with the private sector. If a business also offers a social outcome it needs to be fully costed, marketed and sold with a healthy mark-up and still be able to compete. It may be an obvious statement but the overarching purpose of social economy projects as a fundraising technique must be that it raises funds. Better to have a profit-driven business that can devote its energies into making money for the charity. If the social purpose takes over it can easily become a collection bucket with holes and is no longer a method of earning income.

Community and voluntary sector organisations need to learn from private businesses to really exploit their income generation potential. It does not mean abandoning our social purposes - its means using our social purpose as part of the ‘sales' pitch where appropriate and of appeal to the buying public. The aim of income generation in a charity should be to maximise income to sustain and grow the business - in this field - a voluntary and community organisation. You may need to spend money to make money - or at least be realistic with what you already spend.

There is a myth around that many community organisations don't spend anything on fundraising. But consider an organisation where the director spends one day a week on average completing funding applications and accounting for grants. That organisation will spend one fifth of their Director' salary on fundraising - and they may not be any good at it. That money might be better used as a budget to organise fundraising events, set up a donor database or heaven forbid - employ a fundraiser. Discussions need to start happening across the sector and within organisations about how co-financing a fundraiser for several organisations could work where there isn’t capacity for each organisation to employ their own.

Many argue that they could not get individual members of the public to support their work with donations. There is no doubt some causes seem to be a harder ‘sell' than others. Fundraising for community development, for example, is different from fundraising for cancer. But who has more of an interest in community development than those people who live in the area, or grew up in the area or care about people in that area?

Appeal to Your Market

It is also argued that people cannot afford to give your organisation money because you serve a very poor area. Again, do these people have no money to spend? How then can the local shop, café, pub, supermarket, bookmakers and other businesses survive if people don't have money to spend? The fact is they survive because they appeal to a specific market. Community and voluntary organisations need to do the same. Community and voluntary organisation must ask themselves how they can get local people to ‘buy' their services. They must keep contact with the people they help, so they can be asked to return help in the future.

Organisations must begin to ‘do the ask' for money in both new and traditional ways - the collection tin alongside eBay for charity, the charity shop alongside the virtual gift. Legacies, standing orders and appeals for donations must be part of the fundraising efforts for local organisations. Too many community organisations make no effort to let the general public know they are charitable and that they can receive individual donations. How many community centres have appeals for funding displayed in their lobby? How many organisations build relationships with the relatively wealthy in their communities to one day make an appeal for a €1000, €100,000 or €1million donation to their cause? How many use friends and family to make contact with potential major donors.

Organisations must develop their own fundraising events and activities throughout the year, every year without fail and build them into an annual programme with targets throughout the year. There is enormous range of options from the traditional coffee mornings, cake sales and sponsored walks to the innovative, creative and wacky as-yet unthought-of fundraising events. Simply organise a flag day, a bag pack, place collection boxes in shops and funding for some of your core costs will come rolling in.

The argument is always made that events are very hard work. Well yes, they often are. Just do them anyway. Involve volunteers - better still, set them up as a volunteer team and let them plan, organise fundraising activities and recruit other supporters. What you do and how you should do it will vary from organisation but some good advice is to have a good sized fundraising event each quarterly, one of which will be your high profile annual fundraiser. There is much more you could do with thousands of different fundraising events.

A further argument not to fundraise other than by applying for a grant is that there is not enough money to go around all the charities fundraising in this way. Does this stop the large charities from using diverse methods of fundraising? If a small independent grocery shop is competing with Tesco then it has to offer something that is unique, local and personal to attract a viable share of a limited market. Local organisations that appeal for donations need to make a targeted pitch to potential donors bearing in mind the competition from large Ireland-wide charities and other local interests. Those who make the effort will reap the rewards. Those who don't will lose out. You may also grow the ‘market' simply by asking for donations - many people will not give to charity simply because they are not asked. If you ask there is a good chance they will give.

Investment in fundraising needs to be made at a skills and resources level to make diversification of fundraising work. Staff and volunteers will need training in various fundraising methods and techniques. Budgets will need to be found to buy collection boxes, run events, set up systems. Again, some will ask, can we not get a grant for this?