One of the biggest challenges for today’s nonprofits regardless of size is diversification or revenue sources. Most organizations are reliant on a couple “bread and butter” programs for the vast majority of their revenue.
The thing is, today’s donors are everywhere. Putting all your eggs in just a couple baskets creates long-term risk for your organization and may be keeping you from optimizing your revenue potential.
Too many organizations lean to one side of the revenue spectrum.
We see a lot of organizations that have many donors giving small gifts as a result of a strong direct response program, peer-to-peer programs, or through their run/walk/ride campaigns. But their mid-level and major giving tends to be a footnote, not getting much love or attention.
On the opposite end of the spectrum, we see organizations (mainly Higher Ed institutions and Hospitals) that are really strong in major giving and sometimes at the mid-level. But they are neglecting the pipeline of new donors that might come from that first $20, $50, or $100 gift.
If you’re a legacy organization that’s been around for a while, you may be heavy into direct mail. If you’re an organization that’s popped up in the last 10 years, you might be more in line with the digital strategy and haven’t found the opportunity yet to invest in mail. In both cases, your scales may be tipped too far in one direction.
Lack of diversification can limit or even hurt your growth potential.
Here’s an example of how lack of diversification can negatively impact your results. Coming out of the Great Recession, several large organizations found their fundraising programs were struggling for a couple of key reasons:
- They weren’t paying enough attention to the multi-generational aspect of fundraising. Specifically, the way that younger people wanted to interact with them. They were overly dependent on direct response and peer-to-peer match. The scales were tipped in that direction.
- They weren’t able to see that there were people giving small gifts who had the capacity to give more if they could connect with them in a different way. They didn’t have the deliberate programs in place to capture those donors and upgrade them across channels.
As a result, these organizations lost out on valuable donors (and valuable revenue). That imbalance limited their growth and opportunity.
The healthiest organizations strike a balance—showing an appreciation for diversified revenue sources.
Nonprofits that are thriving today are not overly dependent on just one or two programs like direct response, peer-to-peer match, or major giving. Instead, they have deliberate programs in place to connect with small and large donors and continually move them up the pyramid.
How can you better assess your fundraising program to more effectively balance your revenue sources? Download “The Intelligent Fundraising Health Check” to find out.