Sources of Funding for a Not-for-Profit
The size of the nonprofit sector is very large, contributing an estimated $1.047.2 trillion to the U.S. economy in 2016, composing 5.6 % of the country’s gross domestic product. According to statistics from the National Council of Nonprofits, there are 1.3 million registered non-profit organizations in the United States. They employ 12.3 million individuals and 64 million serve as board members or volunteers.
An estimated 25.1 percent of US adults volunteered in 2017, contributing an estimated 8.8 billion hours. The value of these hours is approximately $195.0 billion.
Successful non-profit organizations operate similarly as do for-profit businesses with cash flow management top of mind. We will review the various sources of funding for non-profits and how that relates to developing a sustainable business model.
Contributions, Gifts and Grants
This is the primary source of revenue for most non-profits and also requires an equal amount of effort in development activities. Consider the following when determining how to solicit contributions for your cause:
- Who are the people and organizations with an interest or ties to your cause?
- Who are you serving? Does your organization have members?
- There is an entire industry that has been developed around grants and grant proposal writing. Seek an experienced professional for advice.
- Corporate and individual giving for the general good of the community that your organization supports is another source of funding.
- Other nonprofits may also be a source of funding, and the most well know example of this is United Way.
- Vendors may become a potential resource. While your primary goal for your business relationship with your vendors is to receive the best service for the best price, you may find that when your vendors get to know your organization and mission, they will support your cause.
Building a Sustainable Business Model
Organizations and individuals contributing to a nonprofit will want to feel comfortable that they are supporting a nonprofit that is being run in a financially prudent matter, and one that will still exist to
fulfill its mission in the future. Having a sustainable business model and documenting realistic, justifiable projections that show the ongoing viability of the nonprofit are crucial to raising funds from any source. Monitoring performance compared to the business model and plan (both financially and in terms of service provided) and updating the model as circumstances change are important to maintain funding sources and to ensure the sustainability of the nonprofit organization.
Founded in 2001, FocusCFO is the leading onsite fractional CFO services provider in the Midwest and Southeast, with more than 100 CFOs and Area Presidents throughout Ohio, Indiana, Kentucky, Michigan, North Carolina Pennsylvania, South Carolina, West Virginia and Tennessee. FocusCFO works closely with small to medium sized businesses helping business owners gain control over three key financial and operational areas: increasing cash flow, reducing business risk, and creating a platform for scalable growth. This allows business owners to then realize full financial control and increased value in their businesses.