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Independent Living News & Policy from the National Council on Independent Living

From Government Funds to Income Diversity: A Planning Map For The Quest – Your Ingenious Nonprofit

By Karen Eber Davis

Logo - Karen Eber Davis ConsultingMoving from government funding to diverse income is momentous. It might be easier to hike the Pacific Crest or Appalachian Trail. While most primarily government-funded nonprofits hope to make the journey, few anticipate or know how to minimize the hurdles they’ll face. Few know how to prepare for the journey. This article will help your ingenious nonprofit gear up for this difficult but definitely do-able adventure.

Why Diversify?

Government funds are shrinking. Even if this turns out not to be true for your organization, you will want fewer spending restrictions. You need funds for innovation. You seek to serve people who need your services without restrictions determined from afar. You might crave more community engagement, so that when you face major cuts, your local friends rally round you so you and your work survives. Or, quite simply, you want more revenue. 

What Makes the Journey Challenging?

Karen Eber Davis - HeadshotWhat makes the move from government funding to diversity so challenging? Successful government funding helps you to excel at working well with government personnel. It teaches political sensitivity and flexibility with changing electoral needs. You master precise guidelines, such as sign page four in blue ink. Expertise in government funding teaches this process to gain income:

  1. Identify opportunities.
  2. Complete paperwork.
  3. Submit.
  4. Wait on the outcome.
  5. Do the program.
  6. Repeat.

While valuable, these skills differ substantially from those required to generate the six other income streams. (Read 7 Nonprofit Income Streams to understand which stream or streams works best for your diversity.) Income diversity will require you to reorient your efforts. To be diverse, you create relationships that inspire donors and loyal customers. To gain these customers and donors, you must discover why they bring you money. You must know what they hope to achieve. You must ensure your customers and donors achieve those aspirations.

Besides re-orientating your focus and gaining skills, the journey to diversity challenges organization because it brings unpredictable returns. You’ll experience more trial and error. A potential donor decides, after all, to give her money to a sister nonprofit or spend it on a family reunion cruise.

Success will look different—at least at first. Motivating one hundred new donors to donate $20 is a high-five accomplishment worthy of a celebration. Yet the resulting $2,000 income stream is paltry compared to most government awards. (Part of your re-orientation includes shifting from considering the value of the money to the value of the new donors over years… and repeating the process that inspired the new donations.)

Despite these and other challenges, most primarily government-funded nonprofits seek, and often need, greater income diversity. It’s the way to achieve greater stability, sustainability, and self-determination.

Your Packing List for the Journey to Income Diversity

If you’re determined to make this quest, what should you, an ingenious nonprofit, pack? Start with these mindsets.

Mindsets: More Than Good Intentions

Like good hiking boots, these mindsets protect you from snakes and rocks you may encounter in the territory you cross.

1. Appreciate the Feat.

Ingenious nonprofits anticipate a long-term process. They anticipate realistic success. For most, it’s reasonable to grow non-government income by 10 percent over three to five years. (Almost always growth to the next 10-15 percent is easier.) The time and the results depend on where you start. If you’ve dabbled successfully in income diversity for years, this will be too modest a goal. If you’ve done nothing, set your goals even lower, such as earning 1 over eighteen months. In any case, gird yourself for a journey. Expect effort.

2. Grow. Have Faith. The skills that got you here—you guessed it—won’t get you there. Growth requires new skills plus commitment to the process. Roland Emerton, Development Director at Bradenton Kiwanis Foundation, and a decade-long fundraiser, recently reminded me of what I’ve dubbed the “Input here. Surprise! Output there,” concept. Translated: You work toward gaining a specific number of donors or customers, inviting them to come in your front door. Surprise! A different set arrives at the back door. Why is this important? You seek income. As you work, you must believe that the results will come from your effort but at an unknown point. Imagine how different waiting feels when working with donors or customers from waiting for the pre-established deadline about your government proposal.

3. Resist Temptations. Sometime during your journey, maybe more than once, you’ll encounter a humungous, glorious government opportunity. It will provide you with amazing revenue. Whether you pursue it or not, resist the temptation to quit your income diversity work. At some point, that new government stream will be exhausted. You’ll face the diversity challenge again. Starting from a full stop is harder. Avoid hiking the first day of a long hike twice or more.

Practical Items

Along with mindsets, what else do ingenious nonprofits pack? These practical items:

4. Money. You must invest money. Invest to gain new skills. Invest to support new relationships. You might need new personnel. You certainly need learning tools. Invest to keep your supporters and workers’ spirits high. Invest in help when you’re stuck.  Finding this money might be one of your first challenges. Ingenious nonprofits find sources. Here are a few ideas to start your thinking: grants from community foundations, board members, and supporters who “get it.”

5. Time. Despite the sector’s income challenges, time is more scarce. You need time today. You need time tomorrow—every day, from here on out. You must invest time when you don’t feel like it, when you don’t know what to do, and even time when other priorities scream for attention. In workshops I deal with this time shortage. I challenge participants to not check social media once per day. Instead I challenge them to commit to investing the time (every day) to diversify their income. You control at least some of your time. You can find it. Read the booklet Time Management for Nonprofit Organizations for more.

6. Map-Making Tools. Compared to your new streams, government funding offers a much clearer roadmap. (Remember the process outlined above?) For the other streams, the roadmaps are much more sketchy.  So you have to fill in the blanks and details. To do so, map out which income stream or streams to pursue. That’s like your destination city. Map out a strategy to obtain those streams, like selecting the interstates you’ll take. Plan how and when you make the trip, such as starting next Monday, we’ll drive from Miami to New York on I-95. Use your map-making tools to break your magnificent quest into today’s next steps. Make your map based on your strengths and what you learn and experience. Your map shows you where to go and what to do. Your map allows you to track progress.

Pacific Crest, Appalachian Trail, and Income Diversity

You start moving from government funding to diverse income in dim light, sensing the trees, the moss underfoot, feeling unsteady. Over time, the mindsets and practical items you bring with you help you to move through the forest to diverse income. You can do it. En route your organization will change. Your life will be enriched. When you get to diversity, you will be glad you made the trip. Nonprofits and through-hikers never regret the trek or the results. Commit to the journey. Begin by reading the linked articles and resources.

Karen Eber Davis, MBA, a professional advisor and consultant, founded Karen Eber Davis Consulting (kedconsulting.com) in Sarasota, FL almost 25 years ago. She is the author of 7 Nonprofit Income Streams: Open the Floodgates to Sustainability (CharityChannel Press, 2014). For a free excerpt from her book, email Karen@kedconsult.com.

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