« October 2016 Issue

Building the Movement by Diversifying Revenue: Five Takeaways

When you lead a fundraising program, there is typically one answer to the question: How much money do we need to raise? “MORE.” Sure, more is better, but the push for more can lead to inefficient tactics and ineffective strategies for generating and diversifying revenue.  

The success of the health care consumer advocacy movement depends on a steady influx of revenue that can be invested to achieve both short- and long-term goals. True as this may be, settling upon a stable funding model can feel like chasing a moving target. There is a lot of advice that goes around within the non-profit sector about how to generate resources and diversify funding. On any given day, my inbox is inundated with sales pitches offering the latest breakthrough formula to engage and communicate with donors, write “winning” proposals, and improve the funding trajectory of my organization. It is easy to get caught up in all of the trends: “We need more followers on Facebook!” “We should be targeting the twenty-somethings.” “Lists! We need to buy lists!” The fact of the matter is diversification is more intricate than simply stockpiling names and email addresses.

The road to diversification is paved with a lot of assumptions that need to be tested. In 2012, Community Catalyst launched a five-year strategic plan in which we set out to do just that. Nearly 100 percent of Community Catalyst’s revenue is from charitable foundations. We are well aware that there are only so many foundations that actually fund what we do at a level significant enough to sustain our programs and operations, and Community Catalyst is or has been a recipient of funding from most of them. We expect the same could be said by many of our state-based consumer advocacy partners across the country. While we are grateful for the generosity of our foundation funders, we recognized that for the sake of our own growth and for the growth of the movement, we had to be creative about our vision for sustainability. Given our strong base of support from national foundations, we agreed to explore individual giving, federal funding and business development/consulting to expand and diversify our revenue streams.

Why diversify?

Interestingly, there is some evidence to suggest that a single-source funding model is smart. While it’s smart for mid- to large-scale non-profit organizations to invest wisely in an anchor-funding stream, Community Catalyst’s landscape analysis suggested we would be wise to investigate other funding options to supplement charitable foundation support. Furthermore, in the context of our strategic planning process, we wondered if we were selling the organization – and our skills – short by concentrating on one revenue stream. Community Catalyst has built its “brand” on its ability to build relationships with stakeholders across the health care sector. We asked ourselves if we were missing out on opportunities to leverage those relationships and increase funding while staying true to our mission and values.

Now, four years later, we are actively implementing and assessing each of the three different funding streams we agreed to test. We are learning as we go. Here are five key lessons that advocacy and other non-profit organizations can right-size and factor into their decision-making about the risks and rewards of diversification.

1)  Buy-in from the top is essential. Testing the viability of different funding streams involves risk and resilience, and the organization’s board, executive director, director of development and key members of the senior management team must be willing and ready to go down what will most definitely be a circuitous path. They each may have their own opinions about which approaches are most likely to succeed or fail, but they must be up for the journey and all it entails – investing money, time and living for a while with the unknown. In due time, they will have a role in implementing the organization’s funding plan, so it is not worth proceeding unless/until ALL of these players have pledged their support and commitment.

2)  Myth-busting costs money and time. I bet your organization, like mine, has some myths about different funding streams that will or will not work for one reason or another. I refer to them as myths because they usually come from some yesteryear occurrence, message or opinion. Often, they are not based on any tested reality; or, they may have been tried just once (resulting in either success or failure) and were never tried again. Settling upon an informed diversification strategy requires money. For example, exploring a new business venture will likely involve hiring consultants who know how to research and develop a realistic business plan. Diversification also demands time – working hand-in-hand with those consultants to undertake a comprehensive competitive analysis. And, after investing both money and time, the evidence could show that the proposed approach actually shows no strong likelihood for success (e.g., there really is no market demand for what you have to offer), or it could reveal a new, promising funding model worth pursuing. In either case, your organization has to be well-positioned to invest some money and time, absorb potential “losses,” (should the result be a “no go”) and be ready to move on. Let the evidence be your guide.

3)  Be prepared to feel like a novice. If your organization is A+ in one type of fundraising, but has yet to really explore one or more others, the staff, board and leadership will be swiftly reminded about how it feels to be inexperienced at something once the organization commits to testing new approaches. Some folks may even get a little impatient about it. For instance, if you have built a strong cohort of major donors whom you can contact readily and ask for support, it is going to be a different story when you venture into the world of foundation relations and realize you have no direct line to program officers at any of the foundations you identified as hot prospects. This is not an insurmountable problem, but you will be starting from scratch and will feel like a novice.

4)  Your organizational culture will have to change. No matter what new path you choose to take, diversification will undoubtedly require a shift in how your organization does business. That means new expectations about big picture aspirations such as mission alignment and strategic partnerships. It could also mean a change in day-to-day roles and responsibilities such as requiring all staff – not just the executive director or development director – participating in some form of fundraising that they had not been a part of before. Culture change may engender angst for some and excitement for others. Factor in room for these tensions in your process and timeline and keep in mind that if the transition feels easy, you probably aren’t stretching enough.

5)  Let your curiosity fuel your enthusiasm. As we continue to conduct our tests at Community Catalyst, I wonder what the next surprise discovery will be. It has been a delight to watch some of our staff really shine at the new opportunities (e.g., negotiating contracts, working directly with members of our board) that our diversification tests have allowed. Will we decide that some of these avenues present an insurmountable risk that we cannot justify taking – “nice idea, but not enough payoff?” And, finally, how will the organization be transformed over the long term by these methodical steps and risks we are taking now?

Above all else, non-profit organizations should approach diversification as a slow build, not a quick fix. Invest time and money now and make choices about those streams of funds that will allow your organization to thrive in the future.   

Diane M. Felicio, Director of Resource and Business Development