August 18, 2011

Finding Your Funding Model: A Practical Approach to Nonprofit Sustainability

Developing a funding strategy for financial sustainability is key to any nonprofit's growth. Yet exactly how to create such a model can be unclear. This six-step guide helps organizations identify and develop funding models that can put them in the best position to achieve their goals.

By: Gail Perreault, Peter Kim, William Foster

Developing a funding strategy that leads to financial sustainability is central to any nonprofit's ability to increase its impact. Yet understanding exactly how remains far from clear. Too often, reactive fundraising tactics or conventional wisdom, such as 'diversification is good,' substitute for thoughtful planning.

Building on years of primary research and consulting experience with dozens of nonprofits, The Bridgespan Group has developed an approach to help organizations identify and develop funding models that can best position them to achieve programmatic aspirations. Finding Your Funding Model provides practical guidance for the steps required, and the decisions and tradeoffs to be made, that will confront nonprofit leaders along the way.

This detailed guide outlines a six step journey to identify and build the funding model that is right for your organization.

  • In Step 1, you’ll analyze your organization’s current approach to funding: assessing the reliability of your existing sources of funds, crystallizing why current funders support your efforts, and evaluating your fundraising capabilities. This diagnostic will help you identify strengths a future funding model could build on, as well as weaknesses that may put certain funding models out of reach or signal the need for specific investments. This knowledge will help you home in on funding approaches that may be a good fit for your organization going forward.
  • In Step 2, you’ll learn from the funding approaches of peer organizations, surfacing ideas you may want to investigate for your organization. You’ll also explore how any differences between peer organizations and your own might affect the relevance of their approaches.
  • You’ll further vet these peer approaches in Step 3, when you identify and narrow your range of funding model options. You’ll be screening for peer funding approaches that are both sustainable and replicable, and thus rise to the level of a funding model. In addition, you’ll make an initial assessment of how feasible these models are for your organization, with the goal of selecting the two to four most applicable models.
  • Evaluating the revenue potential and costs of those short-list funding models will be your focus in Step 4. You’ll develop an understanding of the funding available for each model and how much of that funding your organization could reasonably expect to secure given the competitive environment and your organization’s relative strengths and weaknesses. You’ll also estimate the investments (e.g., expanding into new program areas, adding staff, upgrading IT systems) your organization would need to make. This knowledge will put you in a good position to make an informed decision about which funding model(s) to pursue.
  • Step 5 is all about making that big decision—selecting funding models to implement. You’ll draw on all you’ve learned in Steps 1 through 4 and commit to pursuing one or two of the models on your short list.
  • In Step 6 you’ll develop an implementation plan that will make your funding model plans actionable. The plan will describe in detail the investments your organization will need to make. It will also lay out a timeline for making those investments and implementing your funding model—assigning accountability to appropriate team members and specifying milestones and a learning agenda that will make it easier to gauge progress and correct your course as necessary.

Identifying and developing a funding model is a long-term investment that requires patience but is an investment that’s well worth making. Instead of seeing every funding lead as a good lead, you can methodically assess each opportunity. Instead of wondering where and how to invest in development capabilities (and generally investing too little into too many), you can have an intentional approach upon which to build. Most importantly, a well-defined funding model will better position your organization to attract the dollars needed to achieve your programmatic aspirations.

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