Revenue Generation for Nonprofits: Part Two

In this two-part series, I've been expanding on some of the methods nonprofits can use to fund their work. Here, continue learning about the various ways your nonprofit can raise funds, in particular by building relationships with businesses, foundations, and government organizations.

Check out Part One.

Business Donations

It's helpful to differentiate raising funds through local and regional businesses from pursuing larger corporate grants. Going after local support is much like soliciting individual donors, whereas soliciting corporate gifts is more akin to major donor fundraising.

When I first began raising funds from local businesses, I quickly learned four significant things:

The amount of the donation is fairly small ($500 to $5,000).
The amount of work it takes to plan and ask for the donation is reasonable.
An annual campaign, rather than simply asking for donations here and there, is more efficient and generates more gifts.
It is important to connect with the local chamber of commerce.

Almost any nonprofit can raise funds from local and regional businesses even if the work is controversial or unpopular in some circles. It is all about finding that connective tissue between your work, those you serve, and the business you approach.

If you are just launching your nonprofit, then this campaign can be somewhat limited, maybe targeting 10 businesses, which could result in four or five gifts. If your organization is more established, you can build the campaign out a bit and engage your local chamber of commerce. The cornerstone of these local campaigns is the recurring gift. Many local businesses that make a donation to your organization and are treated well will give year after year with little solicitation necessary. Most of your work goes into that first ask.

The importance of determining exactly what you should ask for — product, services, or cash — and when you should submit that request is really half the battle when it comes to raising funds from local and regional businesses. Closely following this is creating a recognition package that will intrigue and engage the CEO or the marketing department of the business.

Research is the key to securing local business support. In today's fast-paced decision-making environment, business owners typically only react favorably to a request that reflects familiarity with their business and that will help promote their products or services to the public.

Obviously, there is a bit of upfront work to be done, but once you secure that initial donation, most businesses, if treated well, will continue their support for years, so it is a good investment of time.

To be successful in today's funding environment, it is essential that you keep each company's perspective in mind and carefully determine what is — and what is not — a rational request. This means you need to understand each business you approach: what products and services they provide, how many employees they have, who makes up their market, and so on.

If the business has never engaged with your organization in any capacity, it might be wise to start with a product or service request, eventually moving the business to a cash donor.

Undertaking this research is a great job for the fundraising committee or a volunteer. Their work will save you time and allow you to focus your efforts on the actual solicitation process.

I offer a four-part, on-demand course through GrantStation, The Art of Raising Funds From Local Businesses, that walks you through this fundraising approach from start to finish.

Corporate Giving Programs

Soliciting support from larger businesses — regional, national, or global — often comes in the form of a full-blown grant proposal. These businesses almost always have grant support guidelines, set deadlines, a review process, and so on. The corporation may even have a separate foundation for handling these requests.

Corporations often participate in matching gift programs, where they match the gift of their employees to a nonprofit, or they demonstrate community support by encouraging their employees to volunteer their time (usually for a one-off project). Taking advantage of both of these types of matching gift programs involves some work on your part; however, they can both result in ongoing support year after year.

Corporations actually offer a whole range of giving options, but the two mentioned above, plus cash grants, are the most common. Again, research is the key to securing grant awards from a corporation, and unlike the local or regional businesses you work with, these are most likely not recurring. Every time you need their support you will have to write a new grant proposal. However, these awards can be fairly substantial and are often worth the effort.

Foundations

Foundations come in many colors: private, independent, family, community, religious, associations, giving circles, and corporate foundations. You can learn a lot more about foundations in general at the Council on Foundations' website.

If you are a newer organization, then you might want to focus your grantseeking efforts on your regional community foundation, local giving circles, and perhaps a regional family fund. The application process is easier, and you may be recognized regionally. There are some national funders that will give to smaller, grassroots organizations, but they are few and far between.

Identifying the right grantmakers to approach can be a stumbling block. Using a database, such as GrantStation, will allow you to keep the research down to hours rather than days, as well as help you find funders you may never have heard of. Whether you subscribe to GrantStation or another searchable database, it is a wise investment that will save you many hours of research.

Another hurdle is fiscal accountability. If your organization is fairly new, then financial management may be an obstacle, particularly if you apply to a national funder. In this case, you may want to consider engaging a fiscal sponsor. Your organization will still be responsible for understanding and conducting ethical business practices consistent with IRS regulations, all applicable laws, funder restrictions, and fiscal sponsor policies, but a fiscal sponsor will allow you to submit an application to funders you might otherwise not consider. The formal name for such a relationship is Pre-Approved Grant Relationship Sponsorship. For more information check out the National Network of Fiscal Sponsors.

Government Support

Government support for the work you do comes in several forms: surplus property donations, contracts, technical assistance, and grant awards. Local governments, state governments, and the federal government all provide different levels of support. If you are a young organization, you probably want to steer clear of federal support. Securing support from local and state governments will help prepare you for going after those big federal dollars in the future, so it is a good place to start.

Many local and state governments have programs that provide used surplus equipment and vehicles. Some of these items are at no cost; some are up for auction.

Government agencies, at all levels, increasingly rely on nonprofit organizations to address social issues and deliver publicly funded social and cultural programs and services. A contract is the vehicle both federal and state governments use to purchase products or services that are for the direct benefit and use of a government agency. It is a legally binding agreement, and for most nonprofit organizations, contracts usually fall under the Department of Health and Human Services, although other agencies also engage in contracts, such as the Economic Development Administration.

Contracting with a government agency has a number of pros and cons. On the plus side, the pay is competitive, the potential for renewing is high once the contract has been awarded and you demonstrate you can do the work, and you can count on prompt payments. On the downside, there is a ton of paperwork that needs to be completed just to get into the system, job security can be an issue if your nonprofit relies on government contracts, and you must follow rigid regulations.

Technical assistance, also known as TA and commonly referred to as consulting, is the process of providing targeted support to an organization with a development need or problem. It is an effective method for building the capacity of an organization. Both federal and state agencies may provide technical assistance to help grantseekers or grant awardees improve their ability to manage grant programs — such as training on project monitoring and evaluation. Agencies provide technical assistance through various means, including one-on-one instruction, live group events, and web-based information or guidance. Agencies also tailor their assistance to the grantees' needs and objectives.

A federal grant is a financial award given by an agency for a beneficial project. The grantee is not expected to repay the money but is expected to use the funds from the grant for their stated purpose, which typically serves some larger good. Again, government grants can be quite tedious in terms of the application process and management. However, as your organization grows, you may want to consider such support.

Capital Campaigns

Capital campaigns are intense fundraising efforts designed to raise a specific amount of money within a defined time period to build an organization's assets and capacity. You can use a capital campaign to renovate or build new facilities, fund special projects requiring capital investment, and increase an endowment. These campaigns invite donors to make special gifts over and above the recurring, annual operating gifts they make to an organization. Most nonprofits conduct a capital campaign every 10 to 15 years, so this type of fundraising should not be integrated into your overall funding plan until your organization is at least a decade old.

You can read a lot more about capital campaigns in this article published by Capital Campaign Toolkit. It's a great resource that explains the basics of a capital campaign.

Planned Giving

This is another fundraising program you won't want to launch until your organization is at least a decade old. A planned gift is a contribution that is arranged in the present and allocated at a future date. Commonly donated through a will or trust, planned gifts are most often granted once the donor has passed away.

DonorSearch provides a comprehensive guide about planned giving if you'd like to learn more.

Diversify Your Revenue Generation

Most experienced fundraisers agree that nonprofits that are fairly new — say under five years old — will often find that their most profitable means of securing the funds they need to do their good work comes through individual small donors, in-kind contributions of products or services, special events, and individual major donors. Adding solicitations of local and regional businesses is also a successful approach once an organization is a few years old and has started building a name for itself and its work. And, of course, community foundations and giving circles also fall into this category.

Just recognize that this all comes down to asking. Keep these programs small and manageable at first, allowing you to take the time to make a considered ask of each potential donor, whether it is a business, an individual, a government agency, or a foundation.