Nonprofit Revenue Streams: Diversify Your Funding Sources

Whether you work for a large nonprofit or run a small two-person shop, the question “How do we bring in more revenue?” is probably constantly running through your mind. After all, nonprofits are driven by the need to raise funds to support their missions and cover their costs.

You’ve already asked existing donors for more support, raised membership fees, and exhausted your events budget, but no matter how much you raise, the need keeps growing and the bar keeps moving up.

Is there anything else you can do to bring in more revenue?

Actually, yes! In fact, having multiple diverse revenue streams is a sign of a healthy, sustainable organization.

Read on to find out why diversifying your revenue streams is absolutely crucial for the growth of your nonprofit, browse through a dozen different ways to raise funds, and learn valuable tips to help you start diversifying your nonprofit revenue streams today.

Let’s get started!

Why Diversify Your Nonprofit Revenue Streams?

Apart from the obvious — diversifying your revenue streams often results in more revenue — there are a few great reasons to pursue multiple streams of revenue.

For one, it creates security and stability for your organization. Having your eggs in more than one basket, so to speak, can help your nonprofit stay flexible, adaptable, and resilient in times of risk and uncertainty.

The other great benefit of diversifying your revenue streams is that doing so helps expand your network. The more partners you find in donors, members, corporations, and government bodies, the stronger your community becomes. You never know which of these partnerships will lead to the next big opportunity to grow even further, increase revenue, and advance your mission.

12 Nonprofit Revenue Streams to Consider

Now that you understand the benefits of diversifying your organization’s revenue streams, let’s take a look at some of the most common ways that nonprofits can raise funds.

1. Member Dues & Fees

If your nonprofit is a membership organization, you’re likely already taking advantage of membership dues. With an effective membership model, it’s a reliable source of regular revenue that benefits both your organization and your members. If you don’t already, be sure to use a membership management software to make keeping track of member dues and sending membership renewal reminders a breeze.

2. Events 

Whether in-person or virtual, events are one of the best ways to raise funds. They’re also a great opportunity to bring your community together, give an update on your work to existing supporters, and introduce new faces to your organization.

The majority of your revenue will come from selling tickets — in return, your attendees get a fun, valuable, or educational experience and maybe even some refreshments or a full meal. If your event is on the larger side, you can also incorporate a silent auction for additional revenue or consider securing sponsorships (more on that later).

3. Selling Merchandise

Selling goods and services to generate revenue is not just for for-profit businesses. Though it should never be your main source of revenue, there’s nothing wrong with your nonprofit selling merchandise through an online store. Members of your community would love to support you by purchasing a t-shirt or subscribing to a regular publication. Plus, when people wear your branded merchandise, it helps spread the word about your organization.

Just be sure to check with your state and with the IRS about how selling merchandise will be taxed, since different income-generating activities have different rules for nonprofits.

4. Individual Donations

A single donor may only donate $20/year to your organization, but with every new donor, these contributions can really add up and make a massive difference. To make the most of individual donations, keep the following in mind:

• Make it easy to donate in-person, over the phone, by mail, and online
• Encourage donors to give monthly and optimize your donation forms to give them that option
• Send out special appeals at least once or twice a year (with one appeal around the holiday season)
• Give donors the option to make tribute donations (i.e. in honor of a person or an occasion)

5. Major Gifts

According to the Pareto Principle, 80% of funds are donated by 20% of donors. These 20% are what we call major donors. What’s considered a major gift varies from one organization to the next — for some it’s gifts above $1,000, while for others it may be gifts above $10,000. These can be cash gifts, gifts of securities (for example, stocks), or legacy gifts (i.e. leaving an organization in one’s will).

The process for securing major gifts is very different from getting small individual donations — it requires a lengthy period of building a relationship with the prospective donor before there’s even any mention of making a gift. If you’re thinking of implementing a major gifts program, you’ll need at least one staff member who can dedicate all their time to just that!

6. Corporate Giving

Corporate giving is similar to major gifts, but the donation comes from a for-profit business or corporation. These gifts can come in the form of a substantial one-time gift, in-kind donations, or employee gift matching.

When looking for corporate donors, it’s important to look for companies that share the same values as your organization. When their leadership and customers truly care about your cause, these companies give larger gifts and tend to renew their support year after year.

7. Sponsorships

Sponsorships are different from corporate giving in that the company receives something in return for their contribution. Usually, this is brand awareness and exposure to your nonprofit’s audience in the interest of attracting new customers. Sponsoring a nonprofit event is also a chance for the company to demonstrate their corporate social responsibility and increase their public goodwill.

8. Cause Marketing

Cause marketing is a partnership between a nonprofit and a for-profit business for mutual benefit. A great example is when a product-based business promises to donate a percentage of every sale to a nonprofit. Much like sponsorships, it’s a win-win because the company receives a good public standing and increased sales, while the nonprofit receives financial support.

9. Peer-to-Peer Fundraising

You’ve likely already seen peer-to-peer fundraising in action if you’ve organized or participated in a nonprofit run, walk, or cycling event. The idea is for each participant to raise funds from their friends and family before donating the total to a nonprofit. In addition to sports events, you can encourage your most engaged donors to raise money in association with their birthday or even organize their own mini fundraising event and direct the proceeds to your nonprofit.

10. Crowdfunding

Crowdfunding is not just for startups! It’s an effective way to spread awareness about your organization and garner support from a large number of new donors. Nonprofits can use platforms like Kickstarter and GoFundMe (with a few rules) or organize their own crowdfunding campaigns using social media. Successful crowdfunding campaigns usually revolve around an inspiring story and engaging content that resonates with the general public and compels them to share it with their networks.

11. Grants

Grants offer financial support from the government, foundations, or corporations. They usually involve strict eligibility requirements, application rules, and a limited amount of funds, so nonprofits tend to compete for funding. To take full advantage of grants, be sure to do your research and maintain a calendar of various application deadlines, so you never miss any opportunities for funding and give yourself ample time to prepare an application that stands out.

12. Loans and Program-Related Investments

Loans and program-related investments are issued by foundations and some financial institutions. Unlike grants, they do need to be paid back, along with interest (though it’s usually much lower than what a for-profit business would be charged). Even then, loans can be extremely beneficial to brand new nonprofits because they help cover the initial start-up costs and fund future fundraising activities.

Follow These Steps to Diversify Revenue

It may be tempting to dive in and try the above revenue streams all at once, but you’ll quickly find that doing so is unsustainable and can be quite costly. Instead, follow the below steps to create a plan that’s right for your organization and will help you increase revenue in the long term.

1. Evaluate your current streams of revenue

How is your organization currently bringing in revenue? What’s working and what isn’t? What are some things your team is particularly good at and what are some gaps you’d like to fill?

2. Identify opportunities for new revenue streams

What’s something you already have the means to implement but haven’t tried yet? What’s something you think will work well but need more time to build out? What are other nonprofits doing? Don’t hesitate to consult your peers about what’s working for them and how they were able to implement it.

3. Create a plan of action

Start small and set realistic expectations about what you can achieve and how long it will take. Remember that, depending on the size of your organization, some revenue streams may require a full-time staff member to manage, so be sure to plan accordingly. Determine whether you’ll need to hire more people or lean on volunteers, third-party help, etc.

4. Test your assumptions

Not every revenue stream you plan to implement will work for your organization, so before going all in, find a way to test your plan with minimum effort, time, and money spent. For example, before investing thousands into a crowdfunding campaign with professionally produced videos and photography, run a small in-house version to see if your social media audience is willing to participate.

5. Continue to evaluate your revenue streams

Even after implementation, there’s no guarantee that a revenue stream will remain successful,  so make a habit of continuously analyzing the results of your efforts. If a revenue stream isn’t worth the work it requires, don’t hesitate to redirect your efforts somewhere else.

Tips for Increasing Revenue Streams for Nonprofit Organizations

Ready to diversify your revenue streams? Keep the following tips in mind to help you do it successfully:

1. Continue learning

There was a time when revenue streams like crowdfunding didn’t even exist, so keep your eyes peeled for new trends and best practices you can try. Look to other nonprofits, as well as for-profit businesses — there’s a lot you learn from other industries!

2. Report on everything

Keep track of as much data as possible — this will help you analyze your efforts and decide whether or not a new revenue stream is working.

3. Keep your messaging consistent across all revenue streams

Clearly communicating your mission and your needs to prospective donors and partners can result in revenue streams crossing into one another. An individual donor could become a major donor; their company could get involved and become a corporate donor; they could then take interest in your upcoming event and become a sponsor, and so on.

4. Stay flexible

Even if the majority of your revenue came from one revenue stream this year, don’t expect that to be the case next year. Grants could get cut, a sponsor’s priorities may shift, a global pandemic could hit and cancel all events. Always be ready to shift gears and try something else.

Drive Revenue with Your Membership Program

One of the most reliable revenue streams for nonprofit organizations is through a membership program. When you focus your efforts on engaging and retaining members, it can provide a sustainable source of revenue for years, and even decades!

To maximize your success, use membership management software. It will automatically send member dues reminders, process payments, issue receipts, and take care of other administrative tasks, freeing up your time for what really matters — building relationships and advancing your mission.

Want to try out the #1 membership management software and see how it can help you save time and money, while increasing revenue? Click here to start a free 60-day trial!