Funding sustainability is a critical concern for businesses, nonprofits as well as other organizations that rely on external funding to support their mission and programs. While grants are a common and important source of funding, relying too heavily on any one source can be risky. In this blog post, we'll explore the importance of diversifying your funding sources and provide strategies for building a sustainable funding portfolio.

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The Importance of Diversifying Your Funding Sources

Diversifying your funding sources is important for several reasons. It can help you weather the funding crisis and changes in the funding landscape. For example, if a major funder changes its priorities or reduces its funding, having a diversified funding portfolio can help you weather the storm. Diversifying your funding sources can help you access new sources of revenue and support, such as individual donors, corporate sponsors, and earned income. It can also help you build a more resilient and sustainable organization.

Unfortunately, many organizations fail to diversify their funding sources and become overly reliant on one or two sources. This can be a recipe for disaster, as the following examples illustrate:

• An NGO that relies heavily on government funding sees its funding cut due to budget constraints or changes in political priorities.
• A start-up that relies on a single major donor sees its funding dry up when the donor experiences financial difficulties or changes its investment priorities.
• A social enterprise that relies on earned income from a single product or service sees its revenue decline when the market shifts or competition increases.

To avoid these pitfalls, it's important to diversify your funding sources and not put all your eggs in one basket.

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Strategies For Building A Sustainable Funding Portfolio

#1. Identify a Range of Funding Opportunities

To diversify your funding sources, you need to identify a range of funding opportunities beyond traditional grants. Here are some tips for how to do so:

• Research potential funding sources: Use online databases, publications, and networking events to identify potential funding sources. Look beyond traditional grants and consider individual donors, corporate sponsors, and earned income opportunities. Check how to stay updated on grant opportunities here.
• Evaluate potential funding sources: Consider the fit between the funding source and your organization's mission, goals, and values. Evaluate the potential impact and return on investment of each funding opportunity.
• Diversify your funding mix: Don't rely too heavily on any one source of funding. Aim for a mix of funding sources that provides stability, flexibility, and growth potential.

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#2. Develop Relationships with Multiple Funders

Developing relationships with multiple funders is important as it helps you build a broader base of support and access to new sources of funding. It also helps you build a more resilient and sustainable organization by reducing your dependence on any one funder. It can help you build your reputation and credibility in the funding community.

Here are some tips for how to cultivate and maintain relationships with funders:

• Communicate regularly: Keep funders informed about your organization's activities, achievements, and challenges. Share success stories, impact data, and other information that demonstrates your impact and value.
• Be responsive: Respond promptly and professionally to funder inquiries and requests. Be transparent and honest about your organization's needs and challenges.
• Demonstrate impact: Show funders how their support is making a difference in your organization and in the community. Use data, stories, and other evidence to demonstrate your impact and value.

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#3. Explore Alternative Funding Models

Alternative funding models, such as social enterprise and impact investing, can provide new sources of revenue and support for nonprofits and other organizations. Here are some examples of alternative funding models:

• Social enterprise: This is a business model that generates revenue while achieving social or environmental impact. Examples include fair trade, microfinance, and social impact bonds.
• Impact investing: This involves Investing in companies, organizations, or funds to generate social and environmental impact as well as financial return.
• Crowdfunding: Raising small amounts of money from a large number of people, typically through online platforms.
• Earned income: Generating revenue through the sale of products or services related to your mission.

Exploring alternative funding models can help you diversify your funding sources and build a more sustainable and resilient organization.

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#4. Balance Diversification with Focus and Mission Alignment

While diversifying your funding sources is important, it's also important to balance diversification with focus and mission alignment. Pursuing funding opportunities that are not a good fit can dilute your mission, strain your resources, and undermine your credibility. Here are some tips for how to evaluate funding opportunities for mission alignment and potential impact:

• Define your mission and goals: Be clear about your organization's mission, goals, and values. Use these as a guide when evaluating funding opportunities.
• Evaluate the fit: Consider the fit between the funding opportunity and your mission, goals, and values. Is the funding opportunity aligned with your mission and goals? Will it help you achieve your objectives and make a difference in the community?
• Evaluate the potential impact: Consider the potential impact of the funding opportunity. Will it help you achieve your goals and make a difference in the community? Is it a good use of your resources and time?

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Conclusion

Diversifying your funding sources is a critical strategy for building a sustainable and resilient organization. By identifying a range of funding opportunities, developing relationships with multiple funders, exploring alternative funding models, and balancing diversification with focus and mission alignment, you can build a more sustainable and impactful organization. Remember to be strategic, proactive, and persistent in your funding efforts, and don't be afraid to explore new and innovative funding models.