November 30, 2017
As 2017 winds down, it's time to start thinking about 2018 and your grant strategy for the coming year. If you don't already know which funders (private foundations, corporate philanthropy programs, government-sponsored grants) you're going to pursue in 2018, now's the time to start planning.
Creating a grant strategy involves identifying the funders you want to pursue and, to the degree possible, specific opportunities of interest from each funding source.
Developing a grant strategy also requires insight into your organization. You need to know your organization's long- and short-term goals, its capabilities and resources, and its tolerance for risk. To create a realistic strategy, you also need to be familiar with the general funding environment.
Being strategic means doing the research so you have a good idea of which grant opportunities are likely to be released in a given year and which ones are worth pursuing.
Assessing Your Organization
As a first step toward preparing a grant strategy, summarize your organization's known or anticipated revenue sources for the coming year. Whatever income is either certain (a payment on an existing grant) or can be assumed with a high degree of confidence (proceeds from annual fundraisers, fees from clients, etc.) should be part of the tally. This information will help you calculate the gap between your organization's projected operating expenses for the next 12-18 months and its projected income for the same period.
Determining how many grant applications to submit in a given year, and which opportunities to pursue, depends not only on the amount of money you believe you'll need but also on factors such as your organization's goals and staffing resources.
Some questions to consider are:
Budget Target: How much grant funding will you need to bring in to meet your revenue goals? Will you be okay if you do not win a grant for 6-9 months after the start of the year?
Current Funding Stream: If you are already receiving grant funding, how likely is it that current funders will continue their support, either through new awards or by providing additional funds to existing grants?
Resources: What are your organization's resources to pursue grant funding? Do you have the money/time/staff to work on 10 - 20 applications this year? How about more than 20? Do you have the resources to pursue several grant applications simultaneously? Will you need to hire a grant writer or depend on volunteer resources to prepare applications?
Reputation: Is your organization in good financial standing? Does it have a good reputation in your local community? How about in the donor community?
Knowing your 2018 budget is important, but unless you know some of these other pieces--such as what resources you have to prepare proposals--you won't be able to set reasonable expectations for your annual grant target. Your target numbers should be realistic on all fronts, from the number of proposals you think you can submit, to your expected win rate, to your anticipated award values.
Determining Proposal Win Rates
Your win rate is calculated by dividing the number of proposals won in a given period (usually your fiscal year, which may or may not be the same as the calendar year) by the total number of proposals submitted during the same period.
If you don't know your organization's win rate, assume you will win no more than 20% of the proposals you submit in 2018. While you might win 30 - 40% or more in a good year, your grant strategy and budget projections should be based on your average win rate, not your best win rate.
Budgeting for Proposals
If you are not sure of how much it costs your organization to prepare a proposal, as a general rule of thumb, assume that it will cost 10% of each proposal's anticipated award amount. So if you plan to pursue several grant opportunities worth $100,000 each, you should budget $10,000 per proposal to prepare it (the majority of this cost will be staff and consultant time).
Keep in mind that your proposal preparation costs cannot be charged to project or program funds. Your proposal costs must be paid for by unrestricted funds.
You can accumulate unrestricted funds in several ways. Any money you raise from a fundraiser will be unrestricted. If you have applied an overhead rate to past proposal budgets, that overhead can be applied to proposal preparation and general administrative expenses. If you are short on unrestricted funds, it's important to keep this in mind as you prepare your grant strategy, as it has implications regarding which staff (and how many staff) you can involve in your proposal efforts.
Any staff whose salaries are paid 100% by project funds will not be able to assist with proposal development — at least not as part of their regular workday — because they are already 100% committed. However, any staff able to charge time to overhead can be pulled in to assist with proposals.
Related to unrestricted funds, if you plan to use consultants to help you with your proposals, be aware that consultants must be paid for their work at the time of performance, by unrestricted funds. You cannot pay a consultant for work already completed through funds from a new award. A grant award is meant to cover future (usually programmatic) work.
The importance of unrestricted funds leads to the next piece of the grant strategy: being clear about which kinds of grants you can afford to pursue.
Deciding What You Can Afford to Pursue
If you are a small organization, or if your organization is pursuing grant funding for the first time, you may be tempted to say your grant strategy will be to apply to every opportunity you see that looks "promising." While it's understandable to pursue promising grant opportunities, this approach is neither strategic nor sustainable. If you take this approach, you'll find yourself unable to respond to perfect opportunities because you've tied up your resources responding to mediocre ones that happened to come out first.
So, which opportunities should you be looking for and applying to?
Answering this question involves thinking about both programmatic goals and opportunity costs. Programmatic goals include which programs you want to maintain, expand, or introduce. Opportunity costs include questions such as the resources you have, human and financial, to research and prepare grant applications, and how much it will cost to administer a grant award.
Programmatic Goals
If your goal is to expand your current programs, you may need to look at different funders than you have approached in the past. If the funders are entirely new to you, your chances of being funded by them are going to be low, much lower than if you were to pitch a known and successful program to a current and supportive funder.
If your grant strategy involves approaching new donors for new program areas, you'll need factor in the greater risk associated with launching new programs. If you are approaching new donors, your likelihood of success is going to be low, typically well under a 50% success rate. You can reduce this risk by planning incremental changes in your programs. This step-wise approach might also induce your current donors to support your new initiatives.
Questions about programmatic goals include:
What programs/services do you want to offer over the next year?
If you want to expand to a new service/program, will any of your existing funders be interested in funding this new area or will you need to find new donors?
Will you need to recruit and hire staff for either current or new projects/services?
For your existing services, do you have donors who offer regular support, or do you need to find new sources of funds for core services?
If you have existing grants, are those funders satisfied with your work, or do they want you to change how you deliver services?
Opportunity Costs
It takes money to make money, even in the nonprofit world.
Researching and applying for grants takes money. You need to pay staff to do the research and prepare the grant applications. If you are serious about finding grant opportunities, you'll also need to subscribe to a foundation database. You may need to hire consultants to write grant applications or serve as subject-matter experts. On the flip side, if you apply for a grant and are successful, the grant will cost money to implement and administer. Will the grant be worth it, or will it end up costing you money? If a funder is not willing to pay a percentage of your overhead (administrative) costs, the opportunity is probably not worth it.
Before you decide whether to pursue a particular funder or funding opportunity, you'll want to explore questions such as:
What award amounts (i.e., dollar value of the grant awards) are reasonable for your organization to pursue? Can your organization handle a grant of $100,000 or more? Will funders see your organization as being capable of managing six-figure grants? Or, is it more reasonable to expect grant amounts in the $10,000 to $25,000 range?
Is there a minimum grant amount that you will not go below? For example, will you only pursue grants worth at least $25,000?
Will you go after grants that do not cover administrative costs (i.e., indirect costs or overhead)?
Will you pursue a funding opportunity if doing so requires hiring consultants, either as grant writers or subject-matter experts?
How much are you willing/able to spend to prepare a single grant application?
How much are you willing/able to spend on researching and applying for grants over the next 12 months?
FACTORING IN THE WAITING PERIOD
Although we're talking about preparing a grant strategy for the coming year, your grant strategy is not about how much money you'll bring in in 2018. Your grant strategy is about deciding which grant opportunities you'll pursue in 2018 and identifying the resources you have to pursue them. As far as bringing in revenue to meet annual operating expenses, it's almost a given that the majority of grant applications you submit will not be awarded for several months, possibly six months or longer. If you have an urgent need for funding, you may need to pursue non-grant sources of funding to meet your short-term financial needs while you work on grant applications and wait for them to be awarded.
As you prepare your grant strategy, factor in the waiting period between the time you submit your grant application and the time you hear back from the funder. You may not hear back from a funder for 3-6 months after your application goes in. Sometimes longer.
Tracking & Preparing for Funding Opportunities
After you've assessed your organization's needs and capabilities and determined what kinds of grants you can afford to pursue, you're ready to research potential funders and their application requirements.
If a funder tends to use the same application format each year, you can see what types of supporting materials are typically required and start assembling them. If a funder is new to you, while you are waiting for an opportunity to come out, you can use the time to research the funder's interests, current grantees, and past giving. Everything you can do in advance to prepare for a grant opportunity is time well spent!
As a final step, after you've created your grant strategy and determined which funders and/or funding opportunities you'll pursue, plan to monitor funder websites so you catch new opportunities as soon as they come out.