Let’s dive right in.
1. Individual Donations
Individual donations are the lifeblood of many nonprofits, but even within this type of revenue, there are multiple varieties:
- One-time donations: Small gifts (like those one-off $10 or $100 checks)
- One-time donations: Major gifts (larger contributions, as defined what by what your nonprofit considers “large” for its typical range. Some nonprofits say the threshold is $1,000. Others, $1 Million.)
- Recurring donations: Think of it like a monthly subscription to your favorite cause. People agree to give the same amount every single month. Pretty amazing.
Dashing a perception that grants make up the vast majority of nonprofit contributions in the world, I can share that individual contributions have generally constituted anywhere between 70 and 75% of contributions (according to Giving USA).*
*Disclaimer: I don’t mean individual donations make up three-fourths of ALL nonprofit revenue; just charitable contributions (because not all revenue = “contributions”). More on that later.
Tip: Create a donor program with specific goals (“fund this thing”) and messaging. Encourage recurring donations if you can, because having a steady stream of income can greatly aid in financial planning and sustainability.
2. Grants
Okay – SOME nonprofit funding is grants.
But it’s not as much as many people think. According to philanthropy reports (Giving USA), grants might account for a smaller percentage than many realize.
If we’re talking private foundation grants (family foundations, corporate foundations, etc.), we’re looking at around 16% of total charitable contributions averaged across nonprofits in the USA.
For government grants, maybe 9-10% (National Center for Charitable Statistics (NCCS)).
I’ve talked about this in videos on YouTube before, but the thing with grants is A) they are highly competitive, and B) they are easier to get depending on your mission (example: Direct service / human service nonprofits might fare better with, say, government grants than animal welfare organizations).
Tip: If you want to consider grant funding for your cause, focus first and foremost on collecting data and success stories from your programming. Even the best grant writers in the world can’t get funding for programs that aren’t showing impacts and results.
3. Earned Income and Program Fees
This one might be my favorite, because it’s so often misunderstood and unknown.
Earned income is basically income generated through the sale of goods or services. For example, a nonprofit theater selling tickets to its shows, or the Red Cross charging fees for CPR training.
The key is that the majority of these activities must directly further the nonprofit’s mission (or else the IRS could call your income “Unrelated Business Income” and hit you with tax penalties, even if you’re a tax-exempt nonprofit).
For example:
- Selling tee-shirts doesn’t directly further your nonprofit’s mission, because the act of selling a tee-shirt doesn’t directly tackle the issue of, say, helping get dogs adopted. Not to say you can’t sell tee-shirts. You just can’t generate a substantial amount of revenue from doing so before the IRS gets annoyed.
- But, offering dog training classes for potential dog adopters, and charging a fee for those classes, does directly further the mission of helping get dogs adopted (because training can reduce the rate of dogs being returned to the shelter).
Make sense?
Tip: Identify your nonprofit’s strengths and consider how you can leverage them to develop an earned income stream through charging reasonable fees for programs, etc.
4. Sponsorships
Sponsorships involve support from businesses or individuals in exchange for something of value, such as recognition or special access.
They are not the exact same as donations. Because with sponsorships, sponsors receive a tangible benefit in exchange. This usually means that a portion of their sponsorship is NOT tax deductible.
Sponsorships also come in many shapes and sizes. You’ve got event sponsorships, program sponsorships, special cause marketing campaigns and brand partnerships, etc.
Tip: Develop a sponsorship strategy that offers attractive benefits to potential sponsors while aligning with your nonprofit’s mission. Transparency about what sponsors receive in return can help in negotiations and maintaining long-term relationships.
5. Fundraising Events
Fundraising events, from 5Ks and galas to virtual trivia nights, are another popular way for nonprofits to raise money. Events can generate revenue through ticket sales, sponsorships, and direct donations.
Now, I admit I’m not a huge fan of events as a general rule, because they can take a lot of time and work (and lower your return on investment as a result).
BUT, in certain situations, they can be really helpful. Some of those situations might include:
- You’re just starting out, and you need to get the word out. An event can be a great awareness-raiser and community-builder.
- You’ve got a decent-sized audience and are confident lots of people will participate / donate / buy tickets, etc. So, the time spent marketing the event can be significantly decreased.
- You create a recurring event format that you and your team get really good at executing on, so the time you spend is actually minimized over time.
Tip: Always calculate the return on investment for your events – and make sure you include the time of your team planning and leading it as part of that calculation (even if you are unpaid volunteers).
Final Thoughts
If you take one thing away from this article, I hope it’s this:
Fundraising is not a one-size-fits-all endeavor.
What works for one organization may not work for another.
In reality, a well-rounded fundraising strategy might include a mix of individual donations, grants, earned income, sponsorships, and events. Lean into your mission, your strengths, and your community’s interests and assets to create your custom approach!
