As a CFO specializing in nonprofit organizations, leaders often ask me, “How can our nonprofit make more money?” This question is critical because financial stability directly impacts an organization’s ability to deliver on its mission.
Fundamentally, there are two primary strategies: increasing revenue or cutting costs. So how can you decide on what do? Focusing on revenue generation offers the most sustainable benefits. Cost-cutting is often the first thought that comes to mind and may yield short-term relief. Still, it usually results in overburdened staff, reduced program effectiveness, and a potential decline in donor and grantor trust.
Here, I’ll walk you through both strategies, focusing on how nonprofits can effectively generate more revenue while weighing the pros and cons of each approach.
6 Key Ways To Generate More Revenue
1. Grant Maximization
Grants are an essential revenue source for nonprofits and are a key contributor to how to make money for a nonprofit. Here’s how to maximize their potential:
- Strengthen Grant Processes: Improve your grant management and reporting processes to streamline your grant writing and make your nonprofit more appealing to funders.
- Leverage Government Funding: Research Federal, State, and Local government grants in your area. If awarded, utilize those funds to approach private funders to ‘Match’ or give additional funding for that programming. Funders see this as getting more “bang for their buck”.
Pros:
- Significant funding with minimal upfront cost.
- Aligns well with mission-driven programming.
- Enhances credibility with stakeholders.
Cons:
- Time-intensive and highly competitive.
- Funds are often restricted to specific uses.
Specific Action Steps:
- Create a Grant Calendar – Research local foundations with a focus on your mission and Federal, State, and local government grants available for your programs. Put together a simple spreadsheet outlining who you will target for grants, which programs they will be for, the application due date, and what year that funding opportunity will apply to internally. Need some help? Start with our grant tracking spreadsheet.
- Create a Master Grant Application template – A master grant application is a document that serves as a blueprint for answering the most common and in-depth questions that are asked in foundation and government grant applications. Suppose you have a history of getting grants already. In that case, you can use previous grant application questions and answers to prepare your master grant application template at the beginning of the year. This streamlines the completion of grant applications when they come due.
- Pro Tip: Do the same for grant reporting and cross-reference the two to better align the grant application with the results you plan to report on.
- Get Meetings With Donors – If you are doing great work in the community the word of that will get around. Rely on others in your network to get advice on how they can get meetings with specific funders. The best approach, especially early on, should be to express gratitude for what those funders or people in your network do in the community and introduce yourself. Early on, don’t focus on money but on the relationship.
- Pro tip: Be prepared for when you get the opportunity. Be ready to learn more about the donor and explain your programs and how they produce impact.
2. Program-Specific Funding
As a nonprofit leader, you already know that getting donor money for general operations is tough. A great way to maximize your general operating dollars is to get program-specific funding, otherwise known as “restricted” grants or contributions to supplement your funding. To do this, you’ll apply for grants that will fund specific programs or costs within that program. Due to limited capacity and financial acumen, many nonprofits limit their budget design to the organizational level. Design budgets and fundraising campaigns around specific programs to attract mission-aligned donors.
Pros:
- Creates clarity and alignment for donors.
- Facilitates better internal resource allocation.
Cons:
- Often comes with restrictions that limit flexibility.
- Dependence on program-specific donors can create vulnerabilities.
Specific Action Steps:
- Develop Program Budgets – Clear, compelling program-based budgets help attract donors and align funding with specific outcomes.
- Work In Overhead Costs – By working in overhead costs to the program budget, your donors expect there to be some allocation of overhead costs to the grant. Work with a good nonprofit accountant to take advantage of this in your fund accounting system. I might just know one 😉
3. Monthly Giving Campaigns
Recurring donation programs are another way of how to make money in a nonprofit organization. They help stabilize cash flow and foster donor loyalty.
- Engage Board Members: Implement a “give or get” policy for board contributions that require board members to give money (minimum $10/mo) or get money from their network or employer. Pro tip: Communicate this upfront as part of your Board of Directors onboarding process.
- Engage Program Participants: If your programs are effective as you know they are, program participants are grateful for your work and are highly likely to contribute to your organization if they can. Collect contact data such as emails from them at the start and keep them engaged with regular communications. Pro tip: Ask for a donation immediately after a huge success story when they are still in their most grateful state.
Pros:
- Predictable and consistent revenue.
- Builds a base of long-term supporters.
Cons:
- Requires sustained donor engagement.
- Takes time to scale and establish.
Specific Action Steps:
- Make It Easy On Your Donors – Utilize an online giving platform that makes collecting donations online, by credit/debit card, and in a recurring manner easy. You want them to “set it and forget it”. Many nonprofits we work with utilize Paypal or Stripe. Pro tip: If you can afford it, there are great giving platforms like Qgiv, Funraise, or Little Green Light that make donation and donor contact information collection, and donor stewardship easier on both parties.
4. Corporate Sponsorships
Partner with corporations for sponsorships, offering branding opportunities at events or programs in return. Think through your programs and their purpose to find connections with local and national corporations with the same values.
Pros:
Increases visibility and credibility.
Yields substantial funding.
Cons:
Alignment of values is crucial.
Reputational risks if the sponsor faces controversies.
Specific Action Steps:
Research corporations in your area – Use online tools like Google, LinkedIn, Guidestar, Charity Navigator, Foundation Directory Online, & Benevity to pinpoint potential partners, analyze their priorities, and initiate engagement. Utilize local chambers of commerce and local business journals, which often feature lists of top companies in your region.
Get Meetings With Donors – Contact the corporation’s public relations department or utilize network connections to get meetings with people who work there. Other networking opportunities include industry conferences, trade shows, and corporate mixers. Remember, initial meetings are not about asking for funding. Express gratitude, tell them about your organization, and discuss ways the corporation may align with your programs and the impact you provide in that area. Eventually, discuss potential volunteer opportunities and/or Board of Director roles for those within the corporation.
5. Fee-for-Service Models
Charging for specific services, such as workshops or training, can diversify income streams. Especially those services that provide direct tangible benefits to participants. Have you ever taken a course that you paid for vs. another course that you didn’t pay for? Which did you take more seriously? It can be easy to think that if something is free, it encourages more participation, but in fact, the opposite is true. Charging for it often brings more accountability and ownership.
Pros:
- Provides unrestricted funds.
- Encourages participant buy-in.
Cons:
- May exclude those who cannot pay.
- Risk of shifting focus away from the mission.
Specific Action Steps:
- Develop a pricing strategy – One simple strategy is cost-based pricing. This includes analyzing your costs + markup % to determine your price. Pro tip: When analyzing costs, don’t forget about overhead. This is often overlooked or ignored.
- Research competitors – Price-sensitive shoppers will analyze competitors to find the best value for their money. Research your competitors, differentiate yourself by providing more value, and ensure you market that differentiation.
- Ask for Reviews – One of the first things people do when searching for a product or service is go to Google and see who has the best reviews. You can differentiate yourself by setting up a Google My Business account and asking for Google reviews from your clients.
6. Fundraising Events
Events like galas, virtual campaigns, or community volunteer events can energize supporters and generate substantial revenue. It is a way to bring everyone together (foundations, corporations, individuals, community members, etc), celebrate successes, and market the continued need for your organization in the community.
Pros:
- Engages the community.
- Creates a platform for donor recognition.
Cons:
- High upfront costs and labor-intensive planning.
- Revenue may not always justify the investment.
Specific Action Steps:
- Feasibility Planning – The coordination and work required to combine events like this are more work than you think. Talk to your donors, partners, and community to gauge interest and pick the correct type of event for your organization. There is no one-size-fits-all.
- Make a Budget – Like everything else, the effort must be worthwhile financially and in the community. Put together an event budget (including your time) and ensure the event will provide a positive return on investment. If not, scale back and start smaller.
- Partner With Corporate Sponsors – Events are great opportunities for corporations to get involved through their employees volunteering their time, sponsoring the event, or both.
- Follow through – Pick a date, time, and plan the event itinerary. If possible, engage local community leaders as an event Chair to help gain better interest and produce a lead gift.
3 Keys Ways to Cut Costs
While it should be the last option, external forces may force you to decide to cut costs. The best thing you can do in this situation as a leader is to plan accordingly, make your best effort to reallocate resources, and deliver the news as early as possible to allow those affected to make plans accordingly.
1. Reduce Overhead
Usually are the first costs to go when an organization needs to save money. Reducing overhead expenses helps to free up those dollars to be spent on program costs. The net effect is more donor dollars being spent on programs and happier grantors. Remember, this can cause extra stress on those still here so find ways to offer additional benefits for those taking on the extra work.
Pros:
- Frees up funds for programming.
- Increases donor trust.
Cons:
- Overhead cuts can limit organizational capacity.
Specific Action Steps:
- Analyze Your Budget for Fluff – If you’ve been in growth mode, there are likely items in your budget that are more wants than needs. Be honest with yourself about those items and make the cuts.
- Digital Tools Automation – Implement software solutions for expense management, donor tracking, and grant reporting to save time, reduce costs, and improve efficiency. Look for capacity-building grants that could help with these one-time additional investments. Change can be challenging for some, so plan accordingly.
- Take Advantage of Fractional Services – It is usually harder to outsource program services. Things like Accounting, Grant Writing, and Marketing are easier to outsource and can be more cost-effective than in-house personnel. Use your network or Google to find organizations that serve your niche and have great reputations.
2. Program Evaluation
Use a Mission/Money Map to identify programs with the least ROI programmatically and financially to reallocate resources. Sometimes, good staff can be retained by reallocating them to other areas of the organization or positions within the same program for which funding is available.
Pros:
- Focuses efforts on impactful programs.
- Supports long-term sustainability.
Cons:
- May lead to difficult decisions about scaling back beloved programs.
Specific Action Steps:
- Develop the Mission/Money Map – Collaborate with organization leadership to develop the mission/money map.
- Identify Areas With Funding – Analyze programming with sustainable funding and reallocate resources in the most effective manner. Work with your accountant to analyze your program budgets for any potential open positions or funding that is not being fully utilized.
- Lean On Your Network – Work your network to show them your Mission/Money Map to find other funding opportunities you may not already be thinking of.
- Make the Necessary Decisions – After exhausting all efforts, it may be time to scale back the program. Work with your accountant to analyze direct program expenses and potentially staff positions that need reduced or eliminated.
3. Staff Reductions
While often a last resort, downsizing can have immediate financial impacts. Oftentimes, staffing is an organization’s largest expense and can have the biggest impact on the budget if reductions are necessary. Remember, this will have the highest short-term effect on the bottom line because these are the highest costs, but has long-term effects of shifting the work burden to others resulting in overwork and/or reduced program effectiveness.
Pros:
- Significant short-term savings.
Cons:
- Risks overburdening remaining staff and reducing morale.
- Potential negative impact on service delivery.
Specific Action Steps:
- Utilize the Mission/Money Map – Combine the mission/money map along with staff performance reviews to determine the least effective programs and least effective and/or efficient staff.
- Reallocate Staff to Other Programs – If other funding is available, consider moving good staff to different positions, as good help is always hard to find.
- Deliver the News With Empathy – If all efforts have been exhausted, deliver the news of the staff reductions with empathy. A strong leader will offer to help them find their next position and be a resource for them in their next job hunt.
Key Takeaways for Nonprofit Leaders
Nonprofits face unique challenges in balancing mission-driven objectives with financial stability. Generating revenue through diverse strategies such as grant maximization, recurring giving, and corporate sponsorships can position your organization for long-term success. While cost-cutting measures may be necessary, they should be approached strategically to avoid long-term consequences.
As a nonprofit leader, your focus should be on sustainable growth, empowering your team, and delivering impactful services to the community.
Ready to take your nonprofit’s financial strategy to the next level?
Book a free consultation with Velu today, and let us guide you toward financial self-sufficiency and mission success.
