Nonprofit Revenue Diversification: Now? And How?

Did you hear it live at AFP ICON, or did you get an email from a colleague? There's quite a buzz about AFP's release of the Fundraising Effectiveness Project's quarterly fundraising report. Released at the conference, the report analyzed data and reported on Q4 2023. And the news isn't as rosy as nonprofits had hoped.

The report noted that donations, dollars, and retention were down in the fourth quarter. While there were some bright spots, such as year-end giving showing a sharp increase, it's clear that the pandemic's giving boom has continued its slow erosion.

The Timing is Right

AFP announced that nonprofits must "foster a culture of philanthropy that withstands economic fluctuations." We discussed that in the good old days of 2022 when the economy was sputtering.

The timing is still right. It's always a wise idea to shore up your nonprofit's foundation. For now, volatility across the spectrum is all but assured, and our clients are finding it helpful to look at proactive measures they can take.

In light of the renewed interest in ensuring a resilient nonprofit, we wanted to revisit one of our favorite topics: revenue diversification for nonprofits. It’s a good topic for a fundraising software provider like CharityEngine because a system with native tools lets you run many diversified campaigns from one system.

Revenue Diversification for Nonprofits

Diversifying how you raise funds is critical for sustainability and resilience. Other concurrent paths to sustainability include leaning heavily on volunteers and partners, creating innovative programs, and rock-solid fiscal management.

The idea is that the more substantial and broader your foundation and the more funding sources you have, the more able you will be to withstand almost anything. We know all too well that this could include a crazy pandemic that shoots your fundraising skyward or a recession that has everyone pinching pennies.

5 Ways Nonprofits Can Diversify Revenue

Will all of these work for every nonprofit? Perhaps not. But if most of your revenue comes from an event and your year-end campaign, you're putting the bulk of the stability in your donors' hands.

On the other hand, expanding your revenue streams mitigates your risk in case one stream is impacted. It helps you branch out, reach new supporters, and solidify new partnerships.

Let's look at five strategies you might want to consider:

1. Consider Alternate Financial Vehicles

Have you investigated donor-advised funds? They're piggy banks for donors, and the resulting funds are disbursed to nonprofits. To access these, you need to build relationships with the sponsoring organization. It's not always easy to find those, but a little internet sleuthing (or previous grants to your organization) can help identify them. Your board members might know of potential opportunities or relationships you can mine.

Social impact bonds are another potential avenue for your nonprofit. These private/public partnerships provide social service grants that are repaid by the government when goals are met. These might be attractive if your nonprofit's mission appeals to a social initiative the government has identified and if you have or can create a program with goals and measurable impact. This PNC and Strong Beginnings case study shows you what this might look like.

2. Embrace Corporate Partnerships

Large corporations often have robust giving programs (to the tune of billions of dollars a year they're mandated to distribute to nonprofits).

Corporate partners can write checks, sponsor events, offer in-kind gifts, provide volunteers, and help you apply for community grants (which they might even underwrite). We always tout the benefits of gift-matching programs—if a local business doesn't offer matching gifts, seek to establish a program.

Aside from the revenue from corporate partnerships, you'll get access to expertise and resources and increased visibility and reach.

3. Add a Shopping Cart

While adding e-commerce to your website might conjure images of branded water bottles, that's not all you can sell. Granted, water bottles, baseball caps, and T-shirts will sell, but those require lead time and cash. (They're good ideas, though.)

What if you let people subscribe to monthly donations? Or sold engraved bricks to pave a walkway at your offices? Could you sell memberships that give tiered members access to different things, such as lunch with your board, tours of your facilities, being added to a "vetted volunteer" list that serves more intimately, or a premium table at your event? Heifer International offers an irresistible shopping cart, including a "Give Where Needed Most" option.

This shopping cart also exemplifies the strategy of qualifying donations. A $30 donation isn't just a donation; it's honeybees, a hive, a bee box, and training so recipients can double the yield on small farms. If you were a food bank, you could "sell" a sponsorship that would feed a family for a week, a month, or a year. If you have anyone on your team who's crafty, have them create whatever they love and sell that.

When I was with Help Heal Veterans, we sold finished therapy kits to supplement our year-end campaign. While these kits didn't catapult us over our goal, they were effective conversation-starters and helped with our brand reach. Interestingly, we commonly received a more significant donation from someone who learned about the organization from the store and wanted to provide more support than purchasing a kit.

The benefit is that once you set up an online store, people will continue to visit it. Remember always to add a donation-form option to make the purchase recurring.

4. Commit to Multichannel Outreach

Let's return to your donors for a moment. While it's true that you don't want all your fundraising to rest with your donors, you do want to maximize that revenue stream. The easiest way to do this is to ensure your campaigns use multichannel outreach.

This is where your choice of fundraising platform can make a difference. Different systems offer different tools; some are integrated, and some are native. If you can run an email campaign, phone outreach, direct mail, and an SMS/text campaign from one system, your data stays in that system without syncs and downloads, making the data more accurate and actionable.

Even if your system doesn't offer multiple tools within the confines of the platform, they likely integrate with third-party apps that will help you plan a multichannel campaign. And these campaigns are effective! According to Nonprofits Source, campaigns that use direct mail plus one other form of digital media experienced a 118% increase in responses compared to using direct mail alone.

5. Grow Your Network

Nonprofits want to find new donors and expand their network, but sometimes, you must think outside the box. Funraise offers some (fun!) ideas for expanding globally, but sometimes, growing your database is as easy as running a peer-to-peer campaign and bringing in new donors. Petitions and advocacy outreach are also terrific, low-cost ways to expand your network to include new people with a shared vision or mission.

We'd be remiss if we didn't stress the importance of building a solid sustainer program among your existing (and prospective) donors. Life and world events can certainly impact monthly giving, but it remains strong as one-time or occasional donations begin to slow down. You can also ensure you retain more funds from your sustainers to maximize the return.

Sustainers are often referred to as a nonprofit's lifeblood, and for good reason. This revenue can help your nonprofit weather downturns.

A Diversified Nonprofit is a Stronger Nonprofit

Revenue diversification is one tool in your toolbox that can help keep your nonprofit safe from uncontrollable events. Multiple revenue streams are rarely all affected, and it's a vital strategy to ensure financial stability and long-term success.

Additionally, exploring new income sources and reducing reliance on traditional funding methods will allow you to adapt to changing circumstances without decreasing your impact. Regardless of your primary funding source, we encourage nonprofits to explore options. If, for example, you are a grant-funded organization, consider traditional fundraising efforts. Deploy as many diversification efforts as possible, no matter your current funding.

Contact us if you'd like to explore how fundraising software can help you diversify your revenue streams, outreach, and campaigns. We exist to help all nonprofits succeed, whether it's offering technology or just sound advice.