Public charities, also known as 501(c)(3)s by the IRS, must support themselves as they work on fulfilling their missions. Much of that support must come from the public.
To receive public funding charities must run fundraising campaigns directed toward individual donors. Nonprofits can also apply for foundation grants. Nonprofits can also charge fees for services, sell merchandise, and sell tickets for performances. There are specific rules for ow much income may be generated from charging for services. That revenue is called "earned" income, and many charities benefit from establishing these income sources.
There is no avoiding fundraising, preferably using a multitude of techniques and strategies. With the large amount of fundraising advice, sources, strategies, and tools, a new nonprofit, can be very confused.
Six simple steps for a nonprofit fundraising plan
1. Develop Your Fundraising Goals
You should have goals for the amount of money you need to raise, plus what the funds will be used for. Will you use it for overhead expenses? To fund an ongoing or new program? To build a new facility? To develop an emergency fund for a rainy day ? To close a deficit? You will likely have several goals. If so, develop a fundraising plan for each one. Goals should be designed with your board of directors, and have the board's sign-off. Getting your board involved will also set the stage for their active help with fundraising.
2. Write Down Your Fundraising Plan
It is essential not just to go from one fundraising scheme to the next. Develop a written plan that states how much you need to raise, from what sources, and how you will do it. Don't worry; you can revise the plan as you go along. Not all of your ideas will work out, or you may find new sources along the way. Start with your current programs and funding. Is that amount of money covered, or is there a gap? Do you want to do more but lack the funds? This preliminary financial review will help you arrive at what your monetary goal should be for your fundraising.
3. Estimate How Much Your Fundraising Program Will Cost
Include costs such as postage, creating your website, running special events, the cost of staff dedicated to fundraising, and the personnel costs of managing the volunteers who will help you raise funds. Be realistic when estimating costs, but plan to use cost-efficient methods so that costs don't eat up all your fundraising proceeds.
How much of your budget should be spent on fundraising? Watchdog groups such as Charity Navigator and the Better Business Bureau recommend amounts from a low of 15 percent to 35 percent, There is no firm figure, but the IRS will see your income and expenses when you file your annual 990 tax form and will expect that a good portion of what you spend goes to your programs, not executive salaries or perks. In other words, most of your expenses should be spent on doing what you were founded to do.
4. Develop a Timeline for Your Fundraising Plan
Fill in a year's calendar with specific activities, and identify who will be the lead for each of those projects. Go further by developing timelines for each fundraising activity, such as the annual fundraising campaign, the Giving Day you've chosen, or the special event. Anticipate potential grants (use a grants calendar and include time for researching, writing the proposal, and waiting for approval). Plan time to consult with your board of directors and to train them about the part they will play in fundraising. The timeline will undoubtedly change during the year, but having one to start with will ensure that you get something accomplished. Tweak the schedule as you go along, and at the end of the year, evaluate how it went and adjust accordingly for the next year.
5. Identify Funding Sources
Can current sources be leveraged to produce more income? Are there audiences you are not tapping? Have you considered government or foundation grants? Civic groups, churches, or universities? How about employee matching gifts or sources of earned income? Are you making the most of your online fundraising? Do you have a monthly giving program? How do you retain your donors once you have them?
6. Evaluate Your Fundraising Plan during the Year
Evaluation will improve your results. Plan to evaluate what you are doing every few months. Develop what criteria you will use, such as the amount of money raised, the number of new donors, how many contacts you've made with foundations, and improvement in donor cultivation activities.
What accounted for the successes? What were the biggest challenges? What should you change, drop, or add? Once your organization gets the hang of raising funds for a year's operation, you'll want to move on to multi-year plans, higher goals, more sophisticated strategies, and newer techniques.
While it’s a common practice among most nonprofits to seek funding from multiple sources, research has shown that 90% of the largest nonprofits have embraced funding models built around a single dominant source of revenue.
5 STEPS TO SELECT A FUNDING SOURCE FOR YOUR NONPROFIT:
Step 1: Plan, don’t firefight.
Many nonprofit organizations are guilty of reactive fundraising. Nothing is a substitute for thoughtful planning. Take some time to think about your funding model before you start going through the motions of fundraising. If you’re already raising funds, you can take the time to reevaluate your funding model.
Step 2: Assess and evaluate.
Start from where you are. Take a look at what you’re already doing. Realistically assess your current funding sources. Are they all aligned to your mission, vision, and values? Do they all deliver a good return on investment? Is there space for investigating other funding sources? What about moving away from some?
Step 3: Explore
Organize brainstorming sessions with your team. Get creative and think outside of the box. Look at what other similar organizations are doing and see if there’s something that could work for you.
Step 4: Analyze.
Consider how much you can realistically fundraise from each funding source. Narrow down your brainstorm to a set of funding model options that are sustainable, replicable, and feasible.
Step 5: Select and begin.
Commit to pursuing one or two of the models on your shortlist and develop an implementation plan that will make your funding model plans actionable. A thought-through and well-defined funding source can help your organization better position itself to attract funds, ensure long-term sustainability, and increase impact. By intentionally choosing a funding model, you can strategically focus your development efforts on the most promising funding sources and build the internal capacity needed to make the most of them.
Nonprofits Can Use These 6 Main Funding Sources To Help Fulfill Their Mission:
• Individual Donations
• Grants
• Corporate Sponsorships
• Membership Fees and In-Kind Donations. Check out our other blog posts for additional resources.
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