Episode 63: Diversifying Your Funding Streams
A nonprofit is a business with a philanthropic purpose. Every business should diversify its funding streams so that the organization is not dependent on just one source of revenue, leaving it vulnerable to sudden and unexpected change. Learn how to diversify a nonprofit’s funding streams for long-term sustainability, adaptability and impact.
LINKS:
Nonprofit Elite
SmallBizPro
NONPROFIT SPOTLIGHT: ScholarMatch
Podcast Transcript
Speaker 1 (00:04):
Welcome to On Air with Amber Wynn, where nonprofit leaders learn to fuse passion and commitment with proven business strategies to create long-term funding, impact, and sustainability. And now here's your host and resident Philanthrepreneur, Amber Wynn.
Speaker 2 (00:28):
Hey Fam, welcome to On Air with Amber. I am back in the hot seat, and today we are talking about something that is near and dear to my heart. For those of you who know me, you know that I have 30 years in the game and I have been in every position imaginable in the nonprofit sector. But, for those of you who know me, I'm all about that dollar because if you have money, you have options, and you guys are doing the work, nine times out of 10, you're not being paid, and if you are being paid, you're not being paid the market rate. So for me, my focus is typically always around generating revenue. Today's topic is focusing on diversifying your funding streams and why every nonprofit should have at least 10 streams of revenue. 10 y'all, 1, 2, 3, 4, 5, 6, 7, 8, 9, 10. 10. It seems like a lot, but when you're sitting in that strategy session and walking through all of the ways that you can generate revenue because you're not doing them all at the same time, it's doable.
Speaker 3 (01:39):
Not only is it doable, but it is necessary. Nonprofits that try to survive off of grants, you're setting your organization up for failure, which then means that you are setting your community up for failure, right? So when nonprofits close their doors, that means that people who need your services no longer have access to them. That's another reason why it's so important for me, having grown up in Watts, California, we had a plethora of nonprofits coming into our community, but they were never there for a long time. They start, they stop. They start, they stop. So one of the things that I committed myself to was long-term sustainability nonprofits, because once you get a kid excited about getting out of the community, you want to be able to sustain that. But if you start and stop or you just tap out altogether, you've created these dreams and now the kid has no way of bringing those dreams into reality. So that is how I got that started with making sure I understood the funding cycles and how or why nonprofits stop and start. It typically has to do with revenue. So when we come back for this commercial break, I am going to talk to you about diversifying the funding streams of a nonprofit and why every nonprofit should have 10 streams of revenue. When we come back.
Speaker 4 (03:09):
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Speaker 3 (04:30):
Welcome back. You're On Air with Amber, and today we're talking about nonprofits diversifying their funding streams. Here's the thing, they tell you this all the time for for-profit businesses, oh, you don't want to put all your eggs in one basket. They tell you that for the same thing when you're investing, right? If you're at a corporation and you have stocks or whatever, don't put all of your eggs in one basket. Don't invest in just one thing. It is the same for a nonprofit. Nothing was made clearer than the unstability of nonprofits during the pandemic, right? Nonprofits were used to delivering programs and services, but most importantly, they were used to during their fundraisers in person. So when an organization completely relied on its revenue streams coming from in-person activities and events, all of that shut down. Guess what else shut down? That nonprofit. So it is important that an organization realizes that they cannot survive off of grants alone.
Speaker 3 (05:44):
The statistics for grants in terms of how much they fund nonprofits in general is 17%. 17% of revenue come from grants, 69% comes from individual donors. I did a complete episode on how to increase your individual donors because that's where the bulk of the money comes from, but so many nonprofits out there are trying to survive off of grants, and you're setting yourself up for failure. Every nonprofit should have 10 streams of revenue. What does that look like? Well, I'm going to start a series in a couple of weeks on what those different streams of revenue can be, but today, I just want to lay the foundation and the groundwork. A nonprofit is a business, and in order for a nonprofit to be able to weather the storms, meaning if there's a pandemic or if the individual that normally funds your organization can no longer, or if you have two or three methods of revenue that dry up, what happens to your organization? It can no longer function.
Speaker 3 (06:57):
But if you have 10 streams of revenue and two go away, you may not be operating at 100%, but you can still function at 80%. What happens if half of your funding streams go away and you only have two? Guess what, your organization is going to close? So diversifying your funding streams is extremely important, especially when we talk about restricted funds and unrestricted funds. Restricted funds are those monies that are given to you with specific instructions of how they are to be used. Those are typically grants. So you get a grant, you can only use this money for programs. So if something else happens in your organization, you have no money. You can't just take that money that's caught mismanagement of funds and you will go to jail or lose your tax exempt status. So if you get $250,000 for programs, something happens for a funding source and now you don't have salaries to pay your staff, you can't tap into that $250,000.
Speaker 3 (08:01):
That is not how it works. Those are restricted dollars. So if you have four or five ways of generating unrestricted funds, when something happens to one of those resources, it dries up, you can still meet your payroll. So, as a business, it is important that you understand that diversifying your funding streams is the key to long-term sustainability. If you're just relying on one source, you are putting your organization in jeopardy. So what types of revenue can a nonprofit generate? Well, you can have fee-for-service. That's when the outside community pays you for what you deliver. You don't have to give everything away for free as a nonprofit. As a matter of fact, you should not. You should not for two reasons. One, because your nonprofit needs revenue, right? Two is because you want the people in your community to be invested. When something is given to you for free, it's not appreciated.
Speaker 3 (09:04):
You don't think that's true? Ask a mother. I'm just saying. But even if it's $5, $25, your clients should be paying some type of money because when they pay the money, they are invested. If you're like, oh, well, we serve marginalized communities, $5, $10, $25 and make it for the year, I don't care. But they should contribute something so that they have some buy-in into what it is that you're doing. So that's one. Secondly, when you generate money, fee-for-service, let's just say it's a registration fee. My boys were at Challenger's Boys and Girls Club off of Vermont and 50 something, and they had a registration fee. In order for you to be a part of the club, you had to pay $75 a year. Now, $75 a year is not a lot of money for a year. I had two kids, so that's $150, but if you have 400 kids, you multiply 75 times, that's $30,000.
Speaker 3 (10:09):
That $30,000 can cover something in your organization, whether that's the utilities, whether that's somebody's salary, whether that's snacks, because food is typically something that government grant will not cover. Generate that revenue so that you have money to cover something. It doesn't have to be a lot. If you have a hundred participants and they're all given $25, you know what I mean? That's money. $2,500 that you can use to pay something. So think smart, think wise. No, you don't have to pimp your constituents, but you do want them to contribute something. So fee-for-service is something that you can consider. You have other options like selling merchandise, corporate sponsorship, advertising, space, naming rights, your board dues. Your board should be providing you with unrestricted funds through their board dues. What else? Contracts, grants, individual donors, major donors. If I said naming rights already, things like having people on a wall, having people put their names on bricks, things like that.
Speaker 3 (11:20):
You can generate multiple ways. Yes, there are galas. Yes, there are events, and they should be a part of your strategy, but they shouldn't be your only strategy. You want to have multiple ways during the year. You should have a direct mail campaign. So you're sending out emails saying, Hey, can you support us at the end of the year? Can you support us during Giving Tuesday? Can you support us during our anniversary? Hey, today is my birthday. I know you love me. I don't want anything for me, but I'd love it if you donate $50 to celebrate my 50th birthday to the organization. Different ways of generating revenue so that if there's an emergency or if there's a shortfall, you have other ways of plugging in those gaps. That cannot happen if you're sitting there just writing grant after grant, hoping that it's going to cover all of your business expenses.
Speaker 3 (12:14):
Number one, it's not realistic. Number two, you are setting your organization up for failure. So, when we talk about diversifying your funding streams, we are talking about creating a solid foundation by which your organization can survive year after year. A variety of ways of generating revenue is going to give you a variety of ways of keeping your doors open. That is the truth. All right, so yeah, 10 streams of revenue, and over the next couple of weeks, I'm going to spend more time on different ways that you can generate revenue to support your organization. But today, I really just wanted to set up the foundation, get you in the mindset of a nonprofit cannot be sustained solely on grants. Grants only make up 17% of the revenue that comes into nonprofit organizations. So that means there's a whole world of opportunity for that other what, 14, 16%, whatever that is. I'm sorry, 84, 86%. So we're going to talk about that in the upcoming weeks, but for now, let's get your mind wrapped around how you're going to diversify your funding streams. We're going to pause now for another commercial break, but when we come back, I get to answer one of your questions on Ask Amber when we come back.
Speaker 5 (13:41):
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Speaker 5 (14:07):
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Speaker 3 (14:53):
Welcome back. You're On Air with Amber Wynn, and today we're talking about nonprofits diversifying their funding streams and why every nonprofit should have at least 10 streams of revenue. This is the part of the episode where you get to ask me your question. It's Ask Amber. Today's question comes from Chastity in Culver City. Hi Amber, this is Chastity from Culver City. Can our board member file our 990? She's a certified public accountant and she won't charge us for the fees that these CPAs are trying to charge us. Hi, Chassidy. My answer is your board member can oversee the process, making sure that the outside CPA has all of the documentation that's needed to complete the filing, but generally speaking, your 990 should be prepared by an objective certified public accountant. These are the documentations, your financial statements, that the IRS is going to use to determine whether or not your organization is functioning within the rules and regulations of a tax exempt organization.
Speaker 3 (16:08):
So, you want an objective person to file that. Yes, a CPA is certified, meaning that they are going to follow the rules and regulations that a certified public accountant must follow. But you also want it to be so where there's not any, what's the word I'm looking for? There's no conflict of interest. So the board can definitely help guide the process, but remember, you're running a business and a business has fees. So accounting is huge because if your 990s are not filed consecutively for three years, you could lose your tax exempt status. My recommendation would be to ask your board to donate money, to pool their money to cover the cost of the CPA. And your CPA should take the charge on that because they understand how important it is to have a CPA put their stamp of approval as a certified public accountant for those financial statements. Thank you for your question, Chastity. Next, we're going to move on to the nonprofit spotlight, and that's when I get to put you guys on stage and highlight the work that you're doing in your community. For this episode, we're going to focus on an organization called ScholarMatch. ScholarMatch provides a seven year continuum of services for students who are first in their family to attend college. These services include individualized college advising, targeted financial support, and career mentoring all the way through college graduation. Let's take a look at ScholarMatch.
Speaker 6 (17:59):
I am a sister.
Speaker 7 (18:00):
I support my Mom.
Speaker 8 (18:01):
I am a translator to my family.
Speaker 9 (18:04):
I am the biggest soccer fanatic.
Speaker 10 (18:05):
I am an older sister.
Speaker 11 (18:07):
I am a zombie apocalypse enthusiast.
Speaker 9 (18:09)
I'm the middle child of 10 children.
Speaker 12 (18:12):
I am a future software engineer.
Speaker 8 (18:15):
I am majoring in criminal justice.
Speaker 12 (18:17):
I'm a mentor for an early childhood literacy program.
Speaker 7 (18:20):
I aspire to be an engineer.
Speaker 10 (18:22):
I am studying global poverty and practice.
Speaker 9 (18:25):
I go to my dream school, UC Berkeley.
Speaker 6 (18:27):
I conducted original research for my senior thesis at Yale.
Speaker 12 (18:33):
I'm a first generation college student.
Speaker 7 (18:35):
I'm the first person in my family to attend college.
Speaker 10 (18:38):
I am the first one in my family to attend college.
Speaker 11 (18:41):
I helped start the architecture club at my college. My name is Naina Chambers and I go to Raul Wallenburg High School.
Speaker 9 (18:44)
I'm Miguel and I'm a senior at John O'Connell High School.
Speaker 7 (18:50):
My name is Melanie and I'm a freshman at Mills College.
Speaker 12 (18:53):
I'm Valerie and I attend St. Mary's College of California.
Speaker 11 (18:56):
My name is Jasmine Petway and I'm an architecture student at City College
Speaker 8 (19:00):
and I attend San Francisco State University
Speaker 10 (19:02):
And I am a graduating senior at UC Berkeley.
Speaker 6 (19:05):
If it weren't for my wonderful mentors at ScholarMatch, I would have never considered Yale a possibility for myself. Thank you so much to ScholarMatch for changing my life.
Speaker 3 (19:21):
Thank you Scholar Match for all that you do to give youth the vision that they can not only attend, but complete college. And if you want to support Scholar Match, you can check them out at www.scholarmatch.org. And now as we wind down, we're going to head into the section called Mindset Minute, and it's where I share with you my thoughts and hopefully help you shift your thoughts about whatever topic I'm talking about today. And today, my question for you is, aren't you tired? And I'm speaking specifically to my Executive Directors, more likely my Founders, but for sure my Executive Directors. And aren't you tired? Aren't you tired of doing it all? Aren't you tired of being everything? I mean, scheduling, fundraising, programs, outreach. Aren't you tired?
Speaker 3 (20:22):
And if are, if your answer to that is yes, then give something up. When I talk to my nonprofit leaders, a lot of them suffer from this thing called martyrdom. I have to do everything. It's me, it's me. Some of them suffer from founder syndrome; did a whole episode on that. Check that out. But at the end of the day, here's what I want to say to you. When you do it all, it all lands on you. People aren't typically going to say, Ooh, what can I do to lift the burden? They're not going to do that. And if you're serving your community, a lot of people don't even have the resources to do it. I am saying to you to put yourself first. Put your oxygen mask over your face and get air into your lungs so that you can breathe. Stop doing everything, because at some point, your body's going to say, I can't do it all.
Speaker 3 (21:16):
Before your body gets to that place where it forces you to have high blood pressure, where it forces you to have a stroke, where it forces your organs to shut down, where it forces you to stop. I'm saying put yourself first. Say, I am only going to work 40 hours a week, not 60, not 80. Say, I'm only going to run one program, not four or five, because the need in your community is four or five. Only do one because you need to preserve you because you hold the world up on your shoulder. I'm saying to you, make your board accountable, and if the board that you have sucks, rotate them off. And get board members who support your cause, who roll up their sleeves, who fundraise, so that you can hire people so that you're not doing everything. Put yourself first. Stop whining. Stop complaining.
Speaker 3 (22:10):
Stop suffering in silence. I'm saying, aren't you tired? And if you are, do something about it. Put yourself first. We have too many nonprofit leaders who are sick, who are struggling, who are doing probably worse than the people that they're serving because they're depleting their resources to make sure that other people have it. So if you are tired, I am saying to you, put yourself first. Okay? That is my Mindset Minute. As a matter of fact, that is the end of the episode today where we focused on diversifying your funding streams and why every nonprofit should have 10 streams of revenue. I hope you enjoyed today's episode because I always enjoyed being in your space. I love you. I support you. Check out my website. It's www.amberwynn.net. Hit me up. If you have any questions, you can hit me up on Anchor. You can leave me a
DM. You can email me at amber@amberwynn.net. I am here for you, to support you. Take care of yourself because we need you in our community. We'll see you next week.
Speaker 1 (23:20):
Thanks for listening. If you enjoyed this episode, subscribe and leave a review on iTunes. Head over to www.amberwynn.net/podcast for the links and resources mentioned in today's podcast. See you next time.
