September 1, 2011

One Idea for Helping a Nonprofit Grow

By: The Bridgespan Group

I often hear from donors who want to give gifts that keep on giving. This very likely describes you: You want to do more than simply donate money; you want to help a grantee grow and get results for years to come.

But this can sometimes feel like the Holy Grail. As a donor, you may get frustrated feeling you are just being asked to keep the lights on. Sometimes the best gift allows nonprofits to do just that, because in these challenging economic times, even building any sort of cash reserve can feel like a luxury. But if you really want to do more, one idea might be to work with grantees or potential grantees on how they could develop a more sustainable long-term funding strategy.

The conventional wisdom for nonprofits has long been that to weather tough times, they need to diversify their funding streams and gather revenue from a wide variety of funding sources—individual donors, government, and larger philanthropies. According to groundbreaking research by my Bridgespan colleagues, just the opposite is true: The few nonprofits that have grown really large over the last 30+ years have focused on one "funding model"—a methodical and institutionalized approach to building a reliable revenue base that will support an organization’s core programs and services. To be clear, this doesn’t necessarily mean one funder, but rather that these nonprofits honed in on a primary type of revenue source, such as government or individuals, that made sense for them given the work they were doing. Once the nonprofits determined this primary funding source, they invested to build organizational strength to tap this source more effectively.

Susan G. Komen for the Cure did just that. Because breast cancer resonates for such a wide swath of people, this nonprofit focused on gathering small gifts from many communities through races. The bulk of Komen’s revenue comes from gifts that average only about $35, yet it has grown into one of the largest nonprofits around. BELL (Building Educated Leaders for Life), a nonprofit whose mission is to enable the academic achievements and self-confidence of children living in under-resourced urban communities, relies on a different kind of funding model. Its strategy focuses on Title I funding through the No Child Left Behind Act (NCLB), a move that has set the nonprofit on a path to financial sustainability and growth, according to BELL CEO Dr. Tiffany Cooper Gueye.

What does this mean for you as a donor? As you work with a grantee or research potential grantees, ask about their strategies for attracting resources. If the organization is on the smaller side (less than $3 million in revenues), it can likely get by with idiosyncratic giving, so don’t expect a detailed strategy. As nonprofits grow beyond $3 million in revenues, research indicates that they will need a more defined plan to attract funding, and the resources to execute this plan, year after year.

If the nonprofit lacks a funding model or needs help in this area, what can you do? One idea is to collaborate with them to see what it might take for them to get there. Your support could offer them the breathing space to figure out their strategy, and build their organization appropriately—which may truly be the gift that keeps giving.

To see Bridgespan’s latest research on funding models, and read about the practical steps nonprofit leaders can take to get started (potentially with your help), read "Finding Your Funding Model."

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