7 Steps to Diversify Nonprofit Revenue

Nonprofit leaders have long recognized the importance of diversifying revenue. Today, as government funding grows more unpredictable, diversification is becoming a much more urgent priority. And the fact that individual giving is in a steady decline only adds to the pressure.

Recent trends show:

• Less than half of U.S. households give to registered nonprofits. Giving USA reports that the number of donors and the real value of donations (after inflation) are falling.
• There’s a generational drop-off. A NORC Center for Public Affairs Research survey found that adults under 45 are significantly less likely to give, as they find themselves strained by student debt, rising costs, and economic pressure.
• Household budgets are tight, leading many families to scale back their charitable contributions.

What can you do now to diversify your nonprofit’s revenue streams?

To backfill any funding cutbacks and become more resilient in the future, your nonprofit must diversify revenue sources aggressively. Here are seven strategies to help you act now.

1. Amplify your voice to decision makers

Explore ways to increase your visibility and voice to elected officials and federal/state agencies. You may be able to influence government funding decisions by increasing awareness of your mission, building and mobilizing a vocal constituency of beneficiaries, and generating compelling stories in the national or local media. You may also want to enlist lobbyists on your behalf for direct representation before legislators, agency leaders, and their staff.

2. Reinvigorate your individual donor strategy

Individuals still represent a crucial funding base for nonprofit organizations. Now is the time to increase awareness and outreach among prospective donors. 

• Pursue a high-touch fundraising strategy aimed at major gift prospects who may be aligned with your mission and financially able to respond to a compelling call to action. Serving them opportunities to direct major contributions and participate in programs can be effective.
• Engage younger prospects through storytelling via the channels they use. Younger generations are shifting toward informal and peer-driven giving methods like crowdfunding. They are quick to support brands and missions who have values that align with their own (and to boycott/avoid those who don’t). 
• Leverage your board members and volunteers as ambassadors to reach out to their contacts in peer to peer fundraising efforts.
• If appropriate, engage local community groups or schools to help build awareness, generate word of mouth, and stimulate families to contribute. 
• Across audiences, promote opportunities to contribute to specific, tangible activities, pairing donation dollar amounts with actions. For example, a donation of $X will fund a summer science camp for three children. 

3. Prioritize retention

Expanding your donor base is essential, but keeping the donors you already have is just as critical. Donor retention is significantly more cost-effective than donor acquisition. When donors feel seen and valued, they’re more likely to give again — and to give more. Be attentive. Focus on building lasting relationships through thoughtful donor recognition, personalized communication, and sharing measures of success related to their gifts. One of our clients presented to a donor a nicely designed book featuring a program that they are funding. The donor displayed it on a coffee table to show visitors.   

4.  Expand foundation funding and corporate sponsorships

Double down on your efforts to secure funding from local businesses, private foundations, and corporate giving programs. These target funders are easily identified and often provide more flexible, mission-aligned support than government grants. Corporate partnerships offer added visibility and momentum through sponsorships, employee giving programs, and cause marketing campaigns.

5. Identify earned income opportunities

Identify your nonprofit’s unique knowledge, capabilities, and systems. Then brainstorm opportunities to convert that value into fee-for-service offerings. For example, can you offer paid training and workshops, certifications, or direct services to other organizations or individuals? Can you monetize your intellectual property, technology, or know-how through consulting engagements, subscriptions to reports, or packaged toolkits and resources?

6. Rethink what’s worth your resources

Exploring earned income opportunities will also help you evaluate which programs and activities are profitable and sustainable, and which may be straining resources. You may need to make some hard decisions to optimize resources within your organization without sacrificing your mission. A structured scenario planning exercise, with contingency strategies, will help prepare your team for any further shifts in public funding.

7. Use brand and impact to win support

Remember: other nonprofits are competing for the same funding. They all represent worthy causes. You must establish a compelling brand presence and case for your specific mission. Create a fruitful giving environment by establishing constant visibility, a compelling social imperative, and dramatic impact stories that show real results. Your communications and creative must make your case unforgettable.

By implementing a mix of these revenue streams, you can reduce your nonprofit’s dependence on government funding and build a more resilient financial future. Some or all of these strategies may have been on your radar for some time. However, the landscape has changed, and action is needed. Nonprofits that adapt with creativity, discipline, and a clear sense of purpose will survive and lead.