Tips for Widening Your Funding Net
A diverse income stream might have about seven different sources of revenue, including grants, earned income and individual donors. That's what organizations should be shooting for, Adams said — a profile that has a lot of different income streams where no one has a dominant piece of the pie. But she said many organizations she's worked with go through this exercise and develop a chart that has only two or three sources, often with state or federal funding as a source.
Each organization should come up with its own variations on these, but some rules of thumb — or what Adams called a "reality check" — for diversifying income streams include:
- Have at least four or five different types of funding sources.
- Between 30 percent and 50 percent of income should come from individuals.
- With the exception of individuals and earned income, no single source of funding should exceed 25 percent of your annual income.
- Seven percent to 15 percent of an organization's annual income should come from businesses/corporations.
- Earned income/nonprofit enterprise should make up 10 percent to 15 percent of your annual income.
- Special events should generate 10 percent to 15 percent of your annual income.
- Grants from private grantmakers should make up about 5 percent to 10 percent of your annual income.
After you have developed the pie chart and created a reality check sheet, do an income source assessment where you itemize the strengths and weaknesses of each income source and talk about ways to improve it.
"Don't be scared to drill down," Adams said. "Really try to drill down and have a conversation about the weaknesses in these programs."
Then incorporate all of these findings into a strategic funding plan, which should have objectives and a strategy for each objective.
"Objectives are quantifiable and measurable; the strategies are how you achieve your objectives. And your plan of action really coordinates the two," Adams said.