There are no hard and fast rules for any nonprofit’s fundraising program.
However, three elements seem to have outsize effects on fundraising, especially as it applies to grants.
- Diverse Sources count for a lot. Every nonprofit should have several baskets of income and several grants in the works so that the loss of one funding source will not be fatal.
- Thinking Local. Local community sources of financing seem to work best for small nonprofits. Locally-based family and corporate foundations prove to be reasonable hunting grounds when it comes to grants. Faith-based organizations, for instance, should look for grants from these sources. Also, consider local giving circles for grants.
- Proportion. All nonprofits, no matter their size need to be realistic about fundraising. Many new nonprofits think they can solve their funding problems just by finding grants That is not true. Grants should not be the first thing a small nonprofit goes after. It takes time to build a grant seeking process and grants are not likely to be immediate
In 2018, according to Giving USA, foundations contributed 18 percent to the overall philanthropic pie, corporations gave 5 percent, while individual giving accounted for 68 percent.
It is wise for nonprofits to keep those proportions in mind when they are developing their annual fundraising plans. Individual donors make up the bulk of most charitable giving.
However, donations and grants do not cover all of the expenses for nonprofits. Most charities also earn income by providing services for a fee, selling merchandise, or selling tickets to performances. As a new nonprofit, your organization should explore all income possibilities.
Grants, while important, should be secondary to raising money from people. That is where you should focus your attention and resources. Individual fundraising and earned income make up the main course while grants are a side dish.
However, most nonprofits do pursue grants. The question is where they should look for them, and how much time and energy they should pour into the grant-seeking process.
Picking the Brains of Three Fundraising Experts
I asked three grants professionals for their opinions on two questions:
- Is there a recommended ratio of grants to other income for small nonprofits?
- Where should small nonprofits look for grants?
Here is what they said:
April A. Northstrom, Pathway Associates
"It is difficult to put an exact formula to the ratios that small, medium and large nonprofits 'should' depend on grant funding. My own belief, through experience and research, is that any organization should not be more than 25 percent dependent on any type of grant funding.
Funding from foundations and corporations is usually responsive to the economy and thus, just like with any investment, you don’t want all of your eggs in one basket. Even foundations don’t want you to be too dependent on their funds and usually like to see multiple funders supporting one project or program.
"I usually like to say 10-15 percent of nonprofit revenue can come from foundations and 5-10 percent from corporations. The majority of charitable contributions still come from individuals.
"Where should a small nonprofit look first for grants? If your organization has never applied for a grant or doesn’t have a large number of donors, then local funding is the best place to start. You need to build credibility for your organization and build a group of supporters who will vouch for your success.
"If you are based in Oregon, have never received grant funding and apply to a foundation in Florida, where no one knows you, doesn’t see the value of your work, doesn’t know your Executive Director or doesn’t read about you in the local newspaper, your chances of winning funding are pretty slim. Why would they fund you when they can support a similar project closer to home?
"One of the biggest and most often overlooked factors in winning foundation funding is relationships. You need to build those first. After you have received support locally you can then move to regional and national funders.
" Databases are wonderful resources to help small organizations find funders who support a specific type of organization or field of interest.
"However, don’t forget to look at annual reports and newspaper articles. Who is giving to organizations that are similar to yours? Put any likeminded funder on your mailing list and start sending them materials about your organization (not too many) and the importance of your mission. Don’t let your proposal application be the first time a foundation hears about your organization."
Jake Seliger, Seliger and Associates
"How much should a small nonprofit depend on grants? As much it needs to. Some small nonprofits depend almost entirely on grants, while others don't. Most nonprofits of any size or stripe prefer more money to less money, so it's almost always in the organization's interest to get grants when they can. There are four basic ways to get money for nonprofits: grants/contracts, donations, charging for services, and investment income.
"A lot of nonprofits are basically limited to the first two, which means that, unless they're lucky enough to have a rich donor pouring money on their heads, they're stuck with grants if they're going to get beyond the shoestring phase.
"Where should a small nonprofit look first for grants? Depends on what they're doing. If they're eligible for a federal grant, there's no reason not to apply. Most foundations only fund locally.
"One common misconception is that small or new nonprofits can't get grants. But, really, when it comes to grants, size of the nonprofit is not always an issue."
Pamela Grow, Grow Consulting PA, Pamela Grow Blog
"How much should a small nonprofit depend on grants? A small nonprofit should never be too dependent upon grants - they should always be looking to build their individual giving.
"Is there an ideal ratio of grants to other funding sources? It depends and is so contingent upon many factors. Does the organization receive government support? Program revenue?
"The small nonprofit, particularly newer nonprofits, should look to small to mid-sized local and regional foundations to build their grant funding.
"Small to mid-sized foundations may be less restrictive in their grantmaking and be more open to funding general operating expenses because they are easier to administer.
"Find out if your state publishes a foundation directory. Also look at regional grantmaker associations. The Council on Foundations is a helpful resource."
There is no typical ratio of grants to other income for nonprofits. It depends on many factors. But if you keep in mind the three ideas of a variety of sources, local funding opportunities, and proportion, your small nonprofit can achieve a healthy and sustainable basket of income.