Why is it important to diversify fundraising?

How do you define the right mix for your organization?

If there’s one thing the economic downturn has taught us – as individuals or as nonprofit organizations – it’s that diversification is key. Philanthropic and corporate funding sway alongside the economy. In a booming economy, they have more money to give (and in the case of foundations, they have more money that they have to give).

There’s no simple formula that will apply to all nonprofit organizations. For example, an organization that provides job training to low-income people and is customized to meet the needs of specific large employers is likely to cultivate more corporate funding than the average organization. A scientific research institution may rely largely on government funding. Nevertheless, it’s a safe bet that you shouldn’t be putting all your eggs in one basket. The most important thing is to achieve a balance of funding that’s reliable, flexible and diversified enough to meet your needs.

A good starting point is to look at where charitable contributions come from. According to Giving USA 2011 by the Giving USA Foundation, charitable funding in 2010 (the most recent year available) broke down as follows:

  • Individuals: $211.8 billion (73%)
  • Foundations: $41 billion (14%)
  • Bequests: $22.8 billion (8%)
  • Corporations: $15.3 billion (5%)

These are charitable contributions. According to The Nonprofit Sector in Brief: Public Charities, Giving, and Volunteering, 2010, by the Urban Institute, government sources account for 32 percent of total nonprofit revenue and more than 24 percent of fees for service (such as through Medicare and Medicaid).

Therefore, your best course of action is to take a close look at your own sources of funding, your organization’s unique resources, as well as funding trends in your specific area of focus. It’s also important to understand who you’re competing with and where their funds are coming from. These insights will give you a good sense of the right funding mix for your organization. From there, you’ll want to establish goals and adjust strategies to meet your needs.

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