My Board is at me constantly to "diversify our funding sources." I don’t know what the hell this means, as I’m already writing enough grant applications to demolish several old-growth forests a year. What am I supposed to do to satisfy them?
Signed, As Diverse as I Wanna Be
The best way to satisfy a Board is to tell it, "You’re right"–so do that. "You’re right, we do need a more diverse group of funders," you’ll say, "starting with the diversity of people in this room." Though you’ve probably read your Board right–that its members think "diversify your funding sources" means "file more grant applications"–you shouldn’t pass up this chance to educate them to the contrary. The phrase actually means just the opposite: to reduce the significance of grants by attracting support from new sources, especially individuals. And the first individuals to pony up should be the ones who sign your tax returns.
But your Board is only where you start an individual-giving program. Ask Board members to give, and ask each of them to recommend one new person as a target of solicitation. But also go to your client/audience/student/patient list and see who’s already giving you money who can be asked for more, or who isn’t already giving you money who could easily afford to do so. Take a look at the donor lists of agencies who do similar work and ask yourself, "If that person supports the symphony, why not our chamber group? If he’s contributing to the Lung Association, why not to our tuberculosis-recovery program?" Examine the list of people who’ve attended your benefit events and see how you can continue to cultivate their support. If you haven’t thrown a benefit event, think of something that sounds fun and invite everyone whose address you can find. Each of these is a step towards a comprehensive individual-giving program, and individual giving is the most important component of a diversified funding stream.
The other meaning of "diversify your funding sources" is "find sources of earned revenue to supplement donated revenue." Not every nonprofit agency can be a revenue-generator (our "social entrepreneur" friends to the contrary notwithstanding: if curing poverty were profitable it would long since have been done), but every agency that does generate revenue should regularly revisit its pricing structure. The Nonprofiteer once analyzed earned income at a local YMCA and discovered it was subsidizing its health club by overcharging for rooms in its hotel. Given that the health-club members were middle class and the hotel occupants were men on Social Security disability payments, this was neither mission-appropriate nor financially wise. If you charge for any of your services, make sure you’re charging what the market will bear–while factoring in the extent to which a nonprofit’s "market" consists of people who will simply go without services if they’re priced too high.
It is a good idea to diversify sources of funding, so that a change of mind in a single executive office somewhere doesn’t leave you begging on the street. But the solution isn’t to seek more and more and more executive offices in which to prostrate yourself; it’s to figure out a judicious system for picking the pockets of individuals. Good luck!