What's Holding Back Your Organization's Sustainability? Essential Fundraising Tips

If you’ve found your way here, chances are you’re as passionate as I am about making a real difference in the world through your nonprofit. But let’s face it, navigating fundraising can sometimes feel like a rollercoaster ride with unexpected twists and turns. Nonprofits often find themselves chasing any available funding, instead of focusing on fundraising that will lead to long-term financial sustainability.

In Chapter 3 of my book, Become a Nonprofit Pro: 9 Common Pitfalls and How to Avoid Them, I highlight the mistakes that frequently impact an organization’s sustainability: the lack of revenue diversification, limited individual giving and missing opportunities to maximize your  return on investment (ROI) when it comes to fundraising strategies.

Diversify Revenue Streams

A nonprofit relying on one revenue source (grant funding, one major individual donor or one event) for more than 50 percent of its total funding is financially at risk. No single funding source is guaranteed to come back every year. By diversifying revenue streams, nonprofits can better adapt to changes in giving interests and donor preferences, ultimately ensuring long-term financial sustainability. Ideally, funding streams should break down this way: at least 33 percent from individual giving and a maximum of 33 percent each from grants and events/corporate giving. Each organization’s funding breakdown will be different, but this 33 percent rule is a good guide to follow.

Maintain Strong Cash Reserves

In a perfect world, nonprofits should aim to have a minimum of six months’ worth of cash reserves on hand, but not exceed 18 months’ worth. If you have less than six months, a funder may see your nonprofit as a financial risk for investment. If you have more than 18 months, they may question whether you need the money. Organizations with inadequate reserves should strategize to build reserves into their annual fundraising plan by focusing on securing unrestricted revenue above and beyond that which is needed to operate. Organizations with more than 18 months’ cash on hand should consider investing in program or operational infrastructure or placing the funds in endowment or another restricted fund for future capital needs.

Leverage Grant Funding for Greatest Impact

Sometimes, as nonprofits grow, they fall into the trap of shaping their identities solely around available grant funding. I’ve witnessed organizations go as far as creating entirely new programs that don’t align with their mission or existing activities, all in pursuit of funds. This, however, often leads the nonprofit to drain their operational resources to then implement those new but eventually unsustainable programs. That tactic also signals mission creep and creates reliance on a single funding source, leaving organizations vulnerable when that funding dries up.

Another common mistake nonprofits make is limiting their funding by making overly narrow grant requests. Whenever possible, request general operating funds. This allows the flexibility to allocate funds where they’re most needed within the organization. It’s crucial to convey to funders that your organizational leadership is best positioned and qualified to put those funds to use most effectively.

When determining how much funding to request for a program, first develop a comprehensive program budget that reflects the true cost of the program. Program budgets should include all potential expenses, from staff salaries to marketing and administrative support. For example, if a program budget comprises 33% of the organization’s overall budget, and administrative expenses are $60,000, then 33% of those expenses, or $19,800, should be allocated to the program budget. Additionally, incorporating in-kind contributions and volunteer time helps provide funders with a complete picture of program costs, allowing you to request the maximum amount possible within grant guidelines.

Expand Individual Giving

Individual giving is a cornerstone of sustainable fundraising, offering a reliable source of unrestricted revenue through a diverse donor base. Unlike grants and event revenue, which often come with restrictions, individual donors are typically more inclined to provide unrestricted gifts, especially if you do not overly constrain your requests and appeals. Organizations that neglect cultivating individual donors and rely too heavily on grants and events may find themselves vulnerable during financial downturns and donor fatigue. To offset this risk, nonprofits must strive to expand their donor base (the larger, the better) and nurture relationships with donors who contribute smaller amounts consistently. This approach not only promotes financial stability but also helps mitigate the impact of donor attrition over time.

Maximize Event ROI

The main objective of a fundraising event is to generate revenue for your nonprofit’s mission. While raising awareness is a valuable side benefit, it should not overshadow the primary goal of bringing in money. If an event breaks even in revenue and expenses, it’s actually losing money after the value of staff and volunteer time is factored in. If raising awareness is the primary justification for an event, it may be time to consider discontinuing it.

According to industry best practices, event expenses should not exceed 25 percent of gross revenue. This calculation excludes staff time, which is a critical consideration in the long-term sustainability of fundraising strategies. If staff or volunteers spend significant time on activities that don’t generate revenue, these are missed opportunities. Every aspect of an event, including games and entertainment, should contribute to its overall ROI. Conducting a cost/benefit analysis helps determine if resources are being used effectively.

Successful fundraising events also require substantial planning and preparation. Not starting this process until shortly before an event decreases your effectiveness and triggers crisis mode. You can end up with an event that drains resources and doesn’t deliver any meaningful returns. But utilizing an event committee composed of dedicated volunteers can turn your event into a lucrative fundraiser, provided that clear expectations are set from the beginning. After the event, dive into efforts to convert attendees into givers, which will only add to your individual donor base and reduce your reliance on event revenue.

Ensuring you make a return on your investment through planning is essential for sustainable fundraising practices. Our event planning tool is designed to assist with this goal.

The makings of a resilient organization requires diverse revenue streams, a foundation of unrestricted revenue and high ROI fundraising strategies. Don’t make the mistake of relying too much on restricted grants or ignoring the importance of individual giving. Conduct a cost-benefit analysis on your most expensive and time-consuming strategies to set out on a path of long-term financial health.