Broken Funding Models

If we were to survey nonprofits that fail and ask them how they were trying to fund their new organization, we would probably find one or more of the broken funding models listed below being used.

They’re broken because they JUST DON’T WORK and leave you constantly begging for money. That’s not helpful as you try to get your new nonprofit off the ground.

Grants. Grants are a fantastic source of revenue but not for new nonprofits. Most funders want to see 2-3 years of history under your belt before they’ll consider a grant. It makes sense if you think about it – they want to see the results of your program to prove that what you’re doing works. If you’re thinking that you’ll fund your new nonprofit with grants, you’re going to be very disappointed.

Events. Events, or fundraisers, are common probably because they’re popular. You’ve seen other nonprofits hold events and they look successful from the outside. But the problem is they aren’t usually productive enough to justify the time and energy invested in them. Events are a lot of work and too many events are exhausting for you, your volunteers, your supporters, and the community. I call these events “heart-sink” activities – you work really hard on them then your heart sinks at how little you brought in. The right event has its place and when executed well, can bring big rewards in money, awareness, publicity, and new supporters. Unfortunately, most nonprofits don’t have a clear vision for their event, don’t have enough reach into the community to get attendees and sponsors, and don’t execute well, which adds up to an underwhelming event.

Rich people. If you think you can target “rich” people in town to get donations, you’re mistaken. Just because people have extra money doesn’t mean they’ll give it away, and if they are charitably minded, they may not give it to a brand-new, unknown nonprofit like yours. It’s best to focus on people who are most likely to care about your cause instead of staring at someone’s wallet (more about that in a bit).

Crowdfunding. Online fundraising can be great, but the “get everyone to give” mentality doesn’t work unless you’ve already developed a loyal following online. Even when you do get a good crowd behind you, you’ll never be able to get all of them to each give ten bucks (it just doesn’t work that way). Successful crowdfunding requires you to drive traffic to the crowdfunding site (again, you need an existing loyal following). It’s also not a “build it and they will come” model. No one wakes up in the morning and says “I feel like giving some money away. What crowdfunding site can I surf?” And some people just don’t trust crowdfunding websites, refusing to give to a cause they don’t know through a site they aren’t comfortable with.

Self-pay. Some founders who don’t want to fundraise try to skip it entirely and just pay for everything out of their own pocket. Unless you’re independently wealthy, this won’t work. As your nonprofit grows, expenses will grow, too, and you don’t want programs to be cancelled because you can’t write the check from your personal account to cover expenses this month.

Sole source funding. It’s very dangerous to rely on one source of funding, whether it’s program fees, earned income, or some single kind of fundraising. It’s like sitting on a onelegged stool – it’s a balancing act that could collapse any time.

With donor-based fundraising, it’s critical to gather people around you who believe in your cause and want to help. It’s work to build a donor base and work to keep them engaged. You might think of it like the story of the goose and the golden egg – take care of the goose and the golden eggs keep coming.

The bottom line here is this: To create the funding you need to run your nonprofit, you need donors. Lots of them.

The key to building a big donor base full of people who love your nonprofit is to know where to find them.