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.
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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.
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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.
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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.
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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.
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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.
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.
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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.
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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.
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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.
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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.
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.
Does your NGO have an established fundraising mix? How important do you think it is to have a diverse range of income sources? Support the community and let us know in the comments.