Not-for-profits that rely on a single income source, or only a few, are vulnerable to economic shocks. The COVID-19 pandemic has made this particularly clear. Most organizations have had to scramble to make up for lost revenue when at least some of their usual support dried up in 2020 — and has been slow to return. If you’ve had a hard time staying afloat over the past couple of years, you may need to diversify your nonprofit’s income stream.
In general, financially stable nonprofits have multiple revenue sources, with no one source accounting for more than 25% or 30% of the budget. If your revenue stream is narrower than this, take the following actions:
The initial evaluation should include a review of future plans and anticipated expenses, too. Present your board with multiple scenarios where those costs are compared to revenues with and without the current revenue sources. Seeing how eliminating a revenue stream could jeopardize (or has already jeopardized) your mission may be the nudge reluctant directors need to embrace diversification.
Not everything that glitters turns out to be gold. If a new revenue source doesn’t pan out over time — particularly if it demands significant staff effort — eliminate it and move on. Contact us for help evaluating current income and for revenue stream ideas.