The New Reality of Nonprofit Funding
In my recent post on financial planning, I explored how nonprofit leaders can assess potential funding vulnerabilities and build organizational resilience through thoughtful scenario planning and adaptive risk management. Uncertainty and unpredictability continue to characterize the nonprofit funding landscape, and many purpose-driven entities are now experiencing the pain of funding cuts.
Being in a moment of financial uncertainty can be paralyzing. It’s natural to feel overwhelmed or not know where to start to fill in emerging gaps or supplement disappearing resources. While scenario planning and risk assessment help you understand your vulnerabilities, this post focuses on actionable strategies to close those gaps. We’ll focus on two key approaches: earned income and donor diversification, and we’ll discuss how to know if they’re right for you, what it takes to pursue them, and take a look at organizations that have effectively implemented them to build recurring, sustainable, mission-aligned resources.
Earned Income Opportunities: Mission-Aligned Revenue Generation
Creating an earned income pathway can sometimes feel antithetical to nonprofit leaders, and many caution that it might distract from the organization’s core focus. While this is important to keep in mind, generating earned income for your work doesn’t have to mean abandoning your mission. More often, it’s your way of protecting it. Two ways you can generate earned income are through a fee-for-service approach or a consulting services approach.
In a fee-for-service (FFS) approach, you charge a small cost for the service you provide, either directly to a constituent or to a third party that’s responsible for paying. This doesn’t always have to cover the full cost of providing the service. As long as it’s more than you’re charging now (which is often zero), it’s additional revenue you’re generating. Philanthropic donations were historically the backbone of Worldreader’s funding mix, but the organization recently pursued a fee-for-service model to cover a portion of its operational costs. While beneficiaries (who receive digital books and literacy resources) contribute only a small portion of the cost of program delivery, this marginal FFS approach has filled in gaps and driven organizational sustainability.
A consulting approach is when you leverage your specific expertise and knowledge to build capacity for another organization. You likely have a lot of knowledge about how to be successful in your field, and other organizations might want to pay you to learn more! Think about how you might be able to package materials you already have in a way that can help other organizations adopt your approach or learn from your model. Seaside Sustainability, a Massachusetts-based environmental nonprofit, has effectively packaged its technical expertise into a consulting approach that helps school administrators, students, and community partners implement sustainable practices. By thoughtfully organizing their existing know-how, the organization was able to establish a new revenue stream and magnify their impact.
Keep in mind that earned income requires upfront investment and may have tax implications, so be sure to consult with your accountant about Unrelated Business Income Tax (UBIT) if your earned income isn’t substantially related to your mission.
Tip for Nonprofit Leaders: Explore if a fee-for-service or consulting approach might be feasible for your organization. Start with small pilots that are built around your current organizational competencies before scaling.
Non-Traditional Donor Cultivation
Donor fatigue is a real challenge for nonprofits across the country, so identifying and cultivating new donors has never been more important for purpose-driven organizations. Three ways to identify and cultivate new donors are recurring giving models, peer-to-peer fundraising, and Community-driven campaigns.
Recurring giving models are when donors commit to automated, regular donations instead of one-time gifts. Sourcing these recurring gifts provides additional stability for nonprofits, and can be formalized by creating giving societies, circles, or clubs. These sustainer programs can come with exclusive perks like branded items or event access. The United Way of Southeast Louisiana’s Tocqueville Society is a great example of a giving program that encourages recurring gifts that sustain the organization’s mission, providing donors with special perks for their continued support. By creating clear giving tiers and cultivating a sense of community among major donors, the Tocqueville Society has built a reliable base of supporters who see themselves as long-term partners in the organization’s work.
A community-driven campaign is a fundraising effort that engages the broader community as active participants instead of as passive donors. This can look like a community competition, a local business partnership where a percentage of company sales go to your nonprofit, or a community event that brings people together around your mission in the form of a local concert, festival, or auction. Here in New Orleans, Bike Easy’s recent Bike Second Line is a strong example of a campaign that skillfully engaged the broad community in an activity and auction that both raised awareness and funds for the coalition. Combining a beloved local tradition with their mission of making New Orleans more bikeable, the organization attracted participants who might not have engaged with a traditional fundraising event while strengthening community ties to their cause.
Peer-to-peer fundraising is when supporters become fundraisers on behalf of your organization. They often will create their own fundraising pages and ask their personal networks to donate to a cause. This is often seen around events like marathons or other races that prompt participants to ask people to sponsor them, but can also be found on Giving Tuesday, where organizational champions reach out to their networks for support. Team Gleason, the New Orleans-based ALS nonprofit, has successfully used peer-to-peer fundraising through their annual fundraising events. Participants create individual fundraising pages and strive to raise the most money for ALS research and support, turning supporters into active fundraising ambassadors.
Tip for Nonprofit Leaders: Test different, new fundraising approaches with small campaigns to learn what resonates with your audience. You don’t know what might work until you try!
Conclusion: Diversification as Organizational Strength
Diversifying your revenue streams builds long-term organizational resilience, positioning your nonprofit to thrive regardless of external pressures. At Trepwise, we partner with purpose-driven organizations to develop sustainable revenue strategies that align with your mission and capacity. Whether you’re using scenario planning to assess your vulnerabilities, exploring earned income opportunities, or building new fundraising approaches, we can help you create a roadmap that makes sense for your organization. Let’s start the conversation.
