My big lesson in the importance of revenue diversification in your fundraising strategy came as a result of two national disasters–September 11 and Hurricane Katrina.
At the time, I was working at a nonprofit that raised the majority of their annual revenue from special events. Although we had some other revenue streams, the majority of our revenue was generated on the day of each event.
9/11 happened a couple weeks before our New York events, which were both canceled–tanking our revenue for that quarter. The same thing occurred after Hurricane Katrina devastated the South.
These two tragedies revealed how reliant we were on this one revenue stream, and that when push came to shove, we didn’t have enough fully developed revenue streams or a back-up plan to switch gears quickly.
We all know what happens when revenue streams decrease. Operational expenses are cut, which impact your fundraising, and important programming is reduced or eliminated. Having too few gifts can even threaten your status as a public charity.
We’ve established that revenue diversification is really important. So, where do you start?
The first step to expanding your revenue streams is identifying all possible revenue streams–including what streams you currently tap into and new ideas.
Here is a list of places to start brainstorming. (Note: This is not an exhaustive list, and not all of these might be the right fit for your audience!)
Many nonprofits make the mistake of trying to jump into generating new revenue without understanding what’s currently working–and what isn’t. But you shouldn’t just jump into new fundraising strategies in a vacuum or without understanding how it fits into your overall organization strategy and budget.
After all, diving into new areas of revenue takes a lot of resources. That might include staff time, building materials, investing in new software, purchasing mailing lists. And if you’re not resourced properly, it’s not going to be worth it.
This also includes having a strong understanding of your current audience and donors. If you’re not sure where to start, check out today’s freebie, which is a chart that will help you understand the groups and individuals that are your strongest supporters: Identifying Your Organization’s Key Audiences.
Once you’ve reflected on your budget, fundraising strategy, and current audience, we recommend asking yourself the following questions before creating a new revenue stream:
Let’s say you are adding a peer-to-peer program. In order to do that right, you’re going to need to invest in new technology that supports this and a subscription.
This will also take a lot of staff time–to learn the new system and get set up in the new technology, identify prospects for this program, build the strategy, and do outreach to the folks who will be participating in your peer-to-peer fundraising program.
Every fundraising strategy comes with overhead costs. Make sure you factor these into your decision.
You’ll also want to establish your goals and success metrics for generating new revenue. Are you hoping to add a certain amount of new donors? Increase the level of gifts? Establish specific membership goals?
The final step is building a budget for each potential new revenue stream so you can see which best aligns with your goals and audience.
Make sure this budget includes both how much revenue you anticipate building from each source and the upfront costs.
This will help you identify which new revenue streams are the best bet for you and your organization!
P.S. In case you missed it, today’s freebie is a super useful chart that will help you identify the individuals and organizations who are your biggest supporters–a crucial piece of understanding what revenue streams will be best for your audience. Good luck!
Download it today: Identifying Your Organization’s Key Audiences.