One of the strongest predictors of a non-profit’s long-term survival is multiple revenue streams. Many organizations with only one or two found that out that the hard way when they failed during the 2008 recession. The same is likely to be true for non-profits that do — or do not — survive the current COVID-19 crisis.
Road Map To Diversification
Financially stable non-profits have a good mix of revenue sources, with no one source accounting for more than 25 or 30 percent of the budget. If you are not there, take steps to achieve the proper mix:
Perform and present your initial evaluation: Your board should evaluate current revenue streams as well as future plans and associated expenses. You can help board members understand the benefits of diversification by presenting them with multiple scenarios where costs are compared to revenues with and without current revenue sources. Nudge reluctant directors to embrace greater diversification by showing them how eliminating a revenue stream could jeopardize your mission.
Determine additional revenue sources: Consider a wide range of potential sources, weighing the pros and cons of each, including implications for staffing and other resources, accounting processes, unrelated business income taxes, and your organization’s exempt status. In addition, assess how well aligned potential sources are with your mission. For example, has that foundation grant you are thinking about pursuing ever been awarded to another non-profit serving your population? Does the company that has proposed a joint venture engage in practices that do not align with your non-profit’s values?
Develop strategies for each new source: You do not want to put all your eggs in one basket, but you also do not want to depend on too many ‘baskets’ because each new revenue stream will require its own strategy. Executing too many implementation plans can strain resources. Therefore, each plan should include initial and ongoing budgets, as well as any new systems, procedures, and marketing campaigns that will be needed. It also should have a timeline.
Review and adjust as necessary: Take time at the end of every month — do not wait until year end — to closely review each revenue source. Is it living up to expectations? Is it costing more than expected or falling short of revenue projections?
Patience Is Crucial
The current pandemic environment has curtailed everything from major gifts to corporate giving, fundraising events to individual donations, and foundation grants, so your non-profit is likely hurting even if you have multiple revenue sources. But as society and the economy begin to recover, look for ways to make your organization more resilient. Diversification is an excellent way to do it. Contact us.