January 01, 2017
From small community nonprofits to large NGOs, they all have one thing in common: A desire to achieve sustainability. While smaller nonprofits may seem to have an advantage because it takes fewer dollars to maintain operations, large nonprofit organizations are better positioned to achieve sustainability due to their name recognition, longevity (the largest nonprofits have been around for decades), and established role in delivering needed services to communities. Think of the International Red Cross or the Salvation Army.
This isn't to say that large nonprofits have it easy. Their large size requires securing millions of dollars each year to sustain operations. Additionally, given their size and public presence, fundraising strategies and programmatic decisions of large nonprofits are vulnerable to public scrutiny and criticism.
According to the National Center for Charitable Statistics, in the United States alone, there are more than 1.5 million nonprofits, with 30,000 new nonprofits forming each year. Many of these nonprofits will eventually pursue grant funding to sustain their operations. When they do, they'll face intense competition. Despite enormous sums set aside each year by governments, foundations, private individuals, and corporations, grant funding remains hard to secure, particularly for new nonprofits. Nonprofits with a solid track record of working on causes compelling to the general public have much easier access to grants than recently established nonprofits or those working on controversial issues.
While there are more than 127,000 foundations operating in the U.S., according to the Foundation Center, the largest nonprofits absorb the greatest share of those resources, making it harder for smaller and mid-size nonprofits with less name recognition to grow.
When it comes to grant funding, regardless of whether you are just starting out or have been in operation for years, it's not safe to assume that you'll be able to maintain your organization's operations on grant funding alone. Grants should be part of your business plan. Relying on a steady flow of grant funding as the cornerstone of your funding plan could put your organization at risk.
Grant Funding Isn't a Guarantee—So What Can You Do?
Achieving sustainability is the holy grail of the nonprofit world. Everyone wants it, few achieve it, and even those who do reach a level of sustainability go through periods of expansion when staff are added, and programs expand, and periods of contraction when staff and services are cut.
Many nonprofits, to help weather the boom-and-bust cycle, try to diversify their funding sources. Pursuing grants from multiple funding sources, from private foundations to government agencies, can be part of a diversification plan. But grants — even if they come from multiple donors — represent a single type of funding. For true diversification, you need to identify multiple revenue streams.
In addition to traditional fundraising strategies such as direct solicitation of individual donors and fundraising events, there are other revenue-generating options. They include participating in income-generating activities and entering into partnerships with other organizations.
Another complementary approach to achieving sustainability is to adopt practices that reduce your organization's operating expenses.
Alternative Funding Sources
In addition to grant writing, income-generating activities to consider include
Selling a range of general merchandise branded with your organization's logo that may (or may not) be related to your organization's mission (e.g., a coffee mug with your organization's logo);
Selling products made by your organization or your organization's clients;
Offering fee-based services to the wider community while offering free- or reduced-fee services to your clients;
Corporate partnerships and collaborations with other nonprofits; and
Membership fees or dues.
Examples of organizations that have used one or more of these approaches include the American Red Cross, Krotchet Kids, Goodwill Industries, PATH, and Seven Women:
The American Red Cross sells branded first-aid kits and other items through its online store.
Krotchet Kids, a U.S.-based nonprofit, funds the majority of its programmatic work through the sale of knitted items made by its client population (women living in poverty in Peru and Uganda).
Goodwill Industries provides job training and educational opportunities to seniors, veterans, individuals with criminal backgrounds, and individuals with special needs. The overwhelming majority of Goodwill's funding comes from its retail shops, which sell used clothing and household goods. In 2013, Goodwill's retail operations generated $5.37 billion.
PATH, a U.S.-based global health organization, leverages corporate partnerships to further its work. Partnering with a range of companies, from pharmaceutical companies to technology companies such as Microsoft, PATH has found innovative ways to secure funding and other forms of support for its work.
Seven Women, an Australian charity, began to help seven disabled women living in Nepal who were suffering from discrimination because of their disabilities. The organization has since expanded and now supports hundreds of women in Nepal through skills training. The project is funded in part through handcrafted products made by the women.
Although not a nonprofit, Toockies took a similar approach to Krochet Kids and deserves mention as another model for supporting charitable work. Just like Krotchet Kids, Toockies taught impoverished women how to knit, paid them for the products they made, and then sold the products (hand-knit cloths) to cover the program's costs. Tookies worked with women in Nababpur, India.
Strategies to Reduce Expenses
Another strategy to support organizational sustainability is to reduce operating costs. Many nonprofits reduce costs by relying on volunteers instead of paid employees. Depending on the type of work, volunteers can provide organizations with valuable services. That said, there are costs associated with training and managing volunteers, so a volunteer program is not entirely "free" labor. However, it is labor at a reduced cost, and those savings can be pivotal in helping your organization maintain its range of services.
Another strategy to reduce expenses and make your organization more sustainable is to partner with other nonprofit organizations in your community. This could take the form of using shared office space. It could also take the form of bartering, such as allowing a fellow nonprofit to use your conference space in exchange for help with your next fundraising event.
The Posner Center, based in Denver, Colorado, is a nonprofit with a novel approach to resource sharing. The Center fosters collaboration among Colorado-based organizations that work on international development issues. The Center's office comprises 50% shared space, which it rents to other organizations for meetings and events.
Sustainability doesn't always ensure a nonprofit's survival. If the goal is to create sustainable community services rather than keep a particular organization operating, nonprofit mergers—merging operations with another nonprofit offering similar services—can be a viable strategy.
Sustainability Requires More than Money
Organizational sustainability is not just about money. Sustainability also requires effective leadership. As in the for-profit world, nonprofit enterprises can be undermined by poor management and insufficient oversight. One way an organization can protect itself against poor management is to have a solid business plan with performance measures. If you have systems in place to monitor when the organization has gone off track, and you catch the problem early, you're in a much stronger position to remedy it before it fatally undermines your organization's fiscal health or programs.
Supporting staff and creating a positive work environment are additional aspects of fostering sustainability. An organization that supports its staff not only minimizes turnover (with significant implications, including costs) but also fosters a team environment that is more resilient and better able to manage changes in leadership and organizational structure.
Creating a Path to Sustainability
Achieving sustainability is not easy, but there are resources and established strategies.
Nonprofits can foster sustainable operations by diversifying their revenue sources and effectively managing their existing funding. To learn more about sustainability, consult the resources listed below. You can also find information through local and national nonprofit resource centers such as the National Council of Nonprofits.
Creating a path to sustainability requires combining sound management and effective leadership with creative thinking about revenue sources.
Grants are a valuable part of the funding mix for the nonprofit community, but grant money alone is not enough. Donors' interests can change, and competition for grant funding continues to increase. While multiple revenue streams may not translate into steady income, they can position an organization to withstand the loss of a grant without drastic service cuts.
Resources
Articles
Operating Reserves for Nonprofits, National Council of Nonprofits
How to Develop Sustainability Plans for NGOs, Funds for NGOs
Overcooked and Underserved: Sustainability in a World of Fast-Food Philanthropy by Regina Brayboy (Nonprofit Quarterly, pub. 9/6/2018)
Books
Nonprofit Sustainability: Making Strategic Decisions for Financial Viability 1st Edition
The Sustainability Mindset: Using the Matrix Map to Make Strategic Decisions 1st Edition
7 Nonprofit Income Streams: Open the Floodgates to Sustainability!
Finding Your Funding Model: A Practical Approach to Nonprofit Sustainability