NGOs should never really on just one
form of fundraising, however lucrative or secure it may seem at the
time. It leaves your organisation open to significant risks that could
bring down an otherwise successful operation. Nothing should be taken
for granted, as we’ve all experienced through the recent financial
crisis and recession, not even large endowment funds locked up in banks
are immune from changes in the economic climate.
Rather, NGOs should seek to create a
balanced mix of different income streams that enable them to be
sustainable and resist shocks to their finances. Creating the right mix
of fundraising sources is not just a vital component in your NGOs
financial health,
but also a major factor in encouraging other donors to contribute to
your cause, especially over the long term. Major grant making
organisations, corporate business and increasingly individuals will be
reluctant to contribute funds to your NGO if they are fearful that you
are too reliant on a single type of income that could dry up at any
point. Not only does a healthy mix of income sources reduce the
likelihood of financial collapse, it actually serves to encourage donors
to invest more in your organisation than they might otherwise.
All organisations are different and they all operate in their own unique environments,
but a general rule for the industry is to be conscious if any of your
income streams account for more than 30 percent of your total income.
The theory behind this rule is that NGOs and similar organisations give
themselves an opportunity to adapt if they suddenly lose 30% of their
income, but if they lose much more it becomes exceptionally difficult to
survive in a meaningful way.
With these issues in mind, each NGO
needs to reach its own conclusions about the different types of income
it wishes to target. Established NGOs may already be successful in a few
areas and are simply looking to diversify their income whereas new
organisations have a great opportunity to start on the right foot.
A common frustration remains within many
NGOs though in that often people don’t appreciate the wealth of
different fundraising options available to them. We’ve produced an
overview of all the major income streams that are common within NGOs
around the world to help you decide which income streams are right for
your organisation. Different income sources work better in different
environments. For example, legacies are a much more significant source
of funding in the developed world than in less developed countries. You
should select the income streams you wish to target by evaluating your
strengths and assets. If you can work to your strengths, whether that is
a great board of directors or great community links, you will be able
to identify which sources are best for your NGO.
Online Fundraising
An ever increasing number of NGOs are
turning to the internet to raise funds to support their work. The
methods vary hugely from the basic donate button on an organisation’s
website through to crowdsourced fundraising tools such as Kickstarter
and Indiegogo. Other great examples of organisation’s utilising the
internet to raise funds are the NSPCC in the UK
who operate a search engine which generates micro donations every time
it is used. Whilst Better The World provides tools that allow supporters
to view adverts in return for small donations to the charity. New
opportunities are emerging all the time with an ever greater proportion
of charitable income stemming from online sources.
Corporate
Corporate support to NGOs was estimated
at around $15 billion in 2010 and as one of the fastest growing sectors
of giving that figure is only likely to grow further. Corporate support
comes in a huge variety of forms with the biggest being corporate
grants, employee fundraising and gift matching. Throughout the world
more and more corporations are investing in Corporate Social
Responsibility (CSR) and already more 65% of Fortune 500 companies offer
gift matching programs whilst 40% offer employee fundraising and
volunteer programs. Like funding from grant making organisations,
securing corporate support can be extremely competitive and generally it
is best to approach companies that your organisation has a synergy
with. For example, a company that specialise in childrens products and
services are more likely to support a cause related to children whilst a
company that sells spectacles is more likely to support organisations
that support older people.
Trading
Most fundraising opportunities involve
securing a charitable gift to support your work with little or no
tangible return for a contribution. Trading is more in keeping with a
traditional business where a price is set on the delivery of products
and services. This is the mainstay of most social enterprises who work
to be sustainable by selling something of value. This may be as big as a
major service to a government or as small as charity beneficiaries
making small but regular contributions to support the organisation who
provides services to them. The Girl Scouts in the USA are a great
example of a non-profit organisation who derive a significant amount of
income from trading, in their case the selling of cookies. Sponsorship
is another option for NGOs who can include a companys name on a
building, vehicle, promotional materials or some other form of
recognition in return for their support. Charity shops that sell second
hand goods are another great example of NGOs using for profit tactics to
support their non-profit activities.
Events
Events are another source of funds for
many NGOs. From sponsored runs and gala balls to concerts, non-profits
often use events to raise both money and awareness of their work which
help them to reach new audiences and attract donors to other income
streams. Income can be generated from sponsored participation as is
common in sponsored events like runs or they can come from ticket sales
themselves which you would expect at a concert. Normally organisations
provide further opportunities to donate to their cause through other
income streams at the event whether through a simple donations box, text
giving, auctions, raffles or sponsorship in the event program. Events
can be quite time consuming and there is often competition so NGOs
should be aware of what is demanded of them before deciding to raise
money through events.
Individual Donations
For many NGOs, especially in the
developed world, individual donors have long been and continue to be the
greatest source of funding available. This donor balance is also common
in countries with an established record of philanthropy. NGOs in India
for example have reported that 75.7% of them receive the majority of
their income from individuals whereas just 24.3% reported that they
recieve the bulk of their income in the form of grant funding.
Individual donors can be targeted through a myriad of means and
represent a less intensive form of fundraising compared to project
proposals and corporate fundraising. NGOs can particularly benefit from
individual donors by working to develop and nurture their donors over
time to create a stronger bond and in turn greater financial
contributions as well as powerful word of mouth recommendations.
In Kind Gifts
Contributions in the form of goods or
professional services can be a great asset to an NGO and operates as a
cost effective way for a business or corporation to offer effective
support. Examples of In Kind gifts include a telecommunications company
donating either phone handsets or discounted air time to an NGO. This
serves to reduce costs for the NGO and allow them to spend a greater
proportion of their income on supporting their beneficiaries.
Legacies
Gifts from estates via a Will, trust or
another beneficiary designation represent a potentially lucrative
opportunity for well established NGOs. Securing legacies is a much
longer term investment than almost all other forms of fundraising but
can also provide significant rewards that can make a huge different to
the prospects of your organisation. Contributions of this type are
normally from long term supporters of organisations, often from services
users and their familys. Many people will arrange their Wills of their
own accord but to maximise this potential income stream NGOs can provide
access, information and support that can encourage and enable
supporters to leave a legacy gift.
Grants
Grants are normally larger sums of money
that are designed to fulfil a specific NGO need. Support for
development projects is normally secured by an application process to a
grant making organisation that details what your NGO plans to do, how it
will do it, what difference it will make and how much it will cost.
Grant applications vary from just a short, unsolicited letter through to
demanding, technical and multi-stage proposals than can take up to two
years to generate a result. Grant income if often targeted by NGOs due
to the size of contributions which can kickstart new projects, purchase
equipment and buildings and generally provide a large financial
injection into the organisation. Due to the significant sums involved,
most grant opportunities are over subscribed with rival competition
meaning that a significant amount of work and skill is required to be
successful.
Campaigns
Such campaigns are generally conducted
to raise a significant sum of money, often for a specific cause, whether
it is to provide support in an emergency situation or make major
purchases such as buildings and sophisticated equipment. Campaigns are
designed to encourage both new donors to support the organisation for
the first time as well as encourage regular donors to make either
additional or larger donations than they would normally. Campaigns can
be conducted privately in person or among a smaller selection of
targeted donors as well as opened up to the greater public at large.
Financial Endowments
A good number of NGOs, especially larger
organisations, receive annual income from financial endowments, which
is a sum of money that is invested to generate an annual return. These
are often created when an NGO receives a large sum of money from a major
donor, legacy or variety of sources. They are designed to provide a
relatively secure and stable income to the NGO that will enable it to go
forward with additional financial security.
Face to face Fundraising
F2F as Face-to-face funding is known as
can be a cost effective way for NGOs to find new donors to their cause.
This type of fundraising is characterised by a representitive requesting
a donation either on the street, in shopping centres, events and by
visiting peoples homes. Either one off donations or regular gifts via
credit cards can be solicited with the former often generating a better
response and the latter offering greater returns over the long term.
This tactic demands the ability to sell the benefits of your NGO quickly
and powerfully as the window to secure a donation is limited.
Major Donors
A number of NGOs owe their existence to
just a single individual who has either provided seed money or repeat
injections of funding to support the organisations activities. Some
individual donors will be sufficiently invested and supportive of your
organisation’s mission as well as having the financial means to make
significant contributions. Attracting and nurturing these individuals
involves a different approach to smaller donors with a greater
investment in one on one time a common tactic to secure major gifts,
often over a number of months or years. Most major donors or propsective
major donors are well known in their communities and are often targeted
for financial contributions meaning that you need to be as
sophisticated and adaptable to their personality and values in your
approach. Most major donations are ultimately secured by a simple ask,
but suitable groundwork needs to be done beforehand and NGOs will get
the best result if they are able to offer a tangible return, in the form
of impact or development, for any contribution.
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