|Learn how to pay for things that have little to do with your active community work and avoid them becoming the focus of your work.|
Ed. note: Portions of this section have been adapted from The Spirit of Coalition Building.
Strategies for financial sustainability
Choosing among strategies
Finding and keeping money for a group to do its work is a constant challenge for those who have the task of keeping an organization financially afloat. Sometimes, it is a headache some would rather avoid, but financial sustainability is an essential goal for most community organizations. Financial sustainability allows you to stay in the game long enough to accomplish your goals.
Often, in order to be successful in our work, we need to pay for things that have little to do with our active community work. Think about rent for the office, the gas bill, and the salaries of our staff. These things can add up quickly and, all too often, they sneak up and become the focus of our work before we even realize what has happened.
This section is here to help you avoid that. Some time and energy spent on financial sustainability in the beginning will save you quite a bit in the long run.
Strategies for financial sustainability
No matter what other strategies you use in pursuit of financial sustainability, you will need to think about marketing your organization. Marketing, at least in a commercial sense, is a concept with which you are probably familiar. We've all seen commercials, giveaways, and sponsorships of events by corporations, but how about marketing by and for nonprofit groups?
One of the best definitions of marketing for nonprofit organizations comes from the Amherst H. Wilder Foundation. In their words:
"Marketing is a process that helps you exchange something of value for something you need."
These kinds of exchanges occur all the time. For example, an adult literacy program offers education and skills training, which will lead to a more capable work force for employers in the community. In return, the organization that runs the program needs clients, referrals, and resources to allow the program to continue.
The concept of marketing requires you to look at everything you do as potentially helpful or harmful to your campaign. When the receptionist at your office picks up the phone, you probably don't think of that as part of marketing, but it certainly is. How he or she greets the caller says a lot about your organization: what you do, how professional or casual you are, and so on. The same is true of the follow-up to that phone call--whom the caller talks to next, the information he receives in the mail, or the visit he makes to the agency. Image may not be everything, but it probably counts for more than we would like to admit.
Marketing is much more than simply acquiring funds. Think about the following :
- Membership development
- Community relations
- Political activities
- Citizen education
...You're not just trying to raise money.
In this chapter, we will assume that the bottom line for your marketing plan is managing resources--either money or in-kind support--but you should keep in mind that marketing may have many other purposes and results.
Another strategy for sustaining your initiative is collaboration with other organizations. Collaboration can take place in a variety of different ways, from writing grants together, to sharing such resources as space, equipment, or staff. Like marketing, this strategy is broad and may encompass many of the other strategies that follow.
The important thing to remember when collaborating is to think carefully about who your natural partners are, and whether you share enough of a philosophical and practical base to work together successfully. Before you enter a collaborative arrangement, think about what you need. Ask yourself whether and why sharing positions or resources would meet both your needs. Although resources may be one important reason to collaborate, it's generally not enough if it's the only thing you have in common.
A line item is a part of a budget that is dedicated to one general need. For example, line items often exist for office supplies, payroll, and travel. Your group may be picked up as a line item by another organization, especially if your operating costs aren't too high. For example, a church or council of churches may be willing to pick up the cost of running the local Peace and Justice Coalition, if the main costs are office space (which will be free for the church), a half-time coordinator, and basic office and mailing expenses.
Alternately, an organization may decide to pick up one of your programs as a line item. For example, the local school district may be willing to pay for a mentoring program your organization has started.
In this strategy, your organization starts an activity or service with the goal that, within a few years, that activity will be taken on by another community group. An alternative method is for the group simply to plan the activity with representatives from the community group that will be responsible for the program. This strategy can be especially useful for community coalitions.
How might this work? Check out these examples, taken from Coalition Building Tip Sheets:
- A coalition might begin an after-school program, and plan for the YMCA to pick up the program after a few years.
- An organization might develop a school-based alcohol and drug abuse prevention program, with the goal of shifting its management to school health educators.
- The coalition might start a program to prevent homelessness, and work with the interfaith council to adopt it.
Another source groups often use to work toward financial sustainability is grant funding. Grant money may come from public sources or from local or federal foundations. Many communities have some community foundation or local trust whose funds must be spent locally, so take advantage of them.
For our purposes in this chapter, grants mean monetary awards to your group or organization to carry out a community project you have proposed. However, grant awards are sometimes given in resources other than cash (e.g., travel expenses, time off the job), and occasionally, especially for research, grants can be made to individuals as well as groups.
Personnel resources are people and positions that exist in other organizations and that can be shared by your organization for little or no cost.
Some common examples include:
- Time-share positions
- College work-study positions
- In-kind donations of time
In-kind support simply refers to resources other than money that are available to your group. In-kind support includes those resources you would have otherwise needed to pay for with money. For example, the local hardware store might donate paint to renovate your office. When someone volunteers to give you a service, supplies, or free help, you're receiving in-kind support.
In-kind support may come from within your organization or from the broader community. It should not be seen as inferior to cash donations, but as an equally important part of the resource pool available.
Seeking in-kind support is a core part of a sustainability plan. If your group is going to succeed, you'll need more than just money: you'll want goods, people, and services, too.
A fundraiser is an event sponsored by an organization to raise money for the group and its programs. Fundraisers usually require the group to provide a product, a service, or an event that will allow others to contribute money.
Examples of fundraisers include Girl Scout cookie sales, car washes, and carnivals. In each case, the group charges money for a product (cookies), service (car washing) or event (carnival) to raise funds to support their cause.
Of course, there are fundraisers and there are Fundraiser. That is, there are the cookie-jar events that raise enough money to replenish the pantry, and there are the six-figure-and-up mega-events. Although the underlying spirit is the same, the activities connected to each type of fundraiser will be somewhat different.
Third-party funding takes place when someone not directly involved in work being done provides resources that allow two other parties to interact. The funder in these instances is called the "third party."
For example, if a staff member and student are having counseling sessions, an HMO may reimburse the staff member's time if the student belongs to that insurance plan. Or, a private business may pay for the salary of someone from a nonprofit organization to do job training with adolescents.
Usually, the third party has some interest in providing financial support.
In the examples above, the HMO has an interest in a healthy client, and the private business has an interest in a better-prepared workforce in the area.
A fee-for-service structure requires that clients pay for some services as they receive them.
For example, the local crisis counseling center may charge for sessions or parents may pay to attend a "Living Through the Teen Years" workshop.
Of course, charging fees may make your group's services less available for people with little money. To counteract this, some groups use a sliding scale, to make services available to more people. It's also not uncommon to have a policy of helping everyone regardless of ability to pay; if potential clients are unable to pay, the fee is waived.
Another option is offering some services free of charge, but have a fee for others.
Another way to sustain your initiative is to obtain public money or resources. This is often money appropriated from a state legislature, city council, or other similar governing body.
By working with your legislators, you may be able to acquire public funding for your group on an annual or regular basis. Don't overlook this rich opportunity when you are looking for resources.
An endowment is a gift given to an organization which is invested to that an annual income is produced. An organization uses the interest earned by the fund and leaves the principal to gain further interest. An endowment may be the result of a grant, bequest, or cash contribution.
Planned giving arrangements are gifts that are donated to the organization and can be used immediately--they do not need to be invested. These charitable gifts may be acquired through wills, trusts, gift annuities, life insurance, securities, and real estate.
Some planned giving arrangements are referred to as deferred gifts. Deferred giving is an arrangement between a donor and an organization in which the donor earmarks funds for an organization's future use. When the funds become available to the organization is decided upon by the donor. Some allow the organization to use a certain percent of the funds during the donor's life, while others make the funds available upon the death of the donor.
If formal fundraising is not your style, you can always explore the use of membership fees or dues.
The main advantages of using this strategy to gather resources include:
- Dues are a simple form of income to generate.
- Because they come from your own members, dues test commitment to the group.
- Membership dues increase the organization's self-reliance.
The main drawbacks:
- Dues tend to yield less money than outside sources.
- Sometimes, not enough potential members can afford paying dues to make dues collection worthwhile.
- Dues make money a condition of membership, which may be contrary to your group's principles.
Some coalitions skirt this last point by calling dues "donations" or "sponsorship fees." Similar to that which can be used for fee-for-service programs, a sliding scale can lighten the burden for some members. You may also have different support expectations for organizations and single individuals.
Some groups decide to try to raise money through creating a business to support their work. A business plan is a written document that describes in detail what kind of business you intend to operate, how you intend to operate it, and why you believe it will succeed. It is backed with logical, factual, and financial documentation. A business plan is similar in form to other types of plans you may have seen, however, "success" in this case is in large part defined by making a profit.
Your group may decide to form a business as a nonprofit organization or form a separate "for-profit" side of the organization in order to avoid some of the often confusing regulations put on not-for-profit organizations.
Choosing among strategies
The above list of strategies should give you an idea of the more typical possibilities available for sustaining your initiative. It is important to remember that no one option is best and there is no need to choose only one of the strategies. Certainly, your group can choose from among these alternatives. They are not mutually exclusive; they can be combined. And more alternatives can always be created.
The question remains, however: how do we make these decisions? What is the best way to choose among strategies, and pick the one (or several) that make most sense for your organization?
Look over the steps below, decide which make sense to you, and modify the process to fit your own needs.
A note of caution: The steps below are meant to be a starting point, not an ending point for your group's financial sustainability work.
- Decide who will make these decisions. If you have developed a financial sustainability committee, as we discuss in the next section of this chapter, these are the folks to do the work. If you don't have such a committee in place, you might consider forming one (or at least a temporary working group). Board members are often key to this type of committee. Choosing among strategies is easier, more enjoyable, and more effective with shared leadership.
- Have your mission, vision, and objectives in mind as you begin this work. This should help to orient you to what is important to think about as you discuss the possibilities.
If you are working in a group, you might make a handout with your mission, vision, and objectives listed, so that they are right in front of members as they work. At the very least they are worth stating at the beginning of the meeting.
- Brainstorm possible strategies for your organization. You might start with the list given in this section, but be sure to think about the options in the context of your own unique situation. Which of these possibilities definitelly won't work? Which need to be modified for your group? How? Are there other possibilities that are unique to your organization?
- Gather input from key people, such as current funders, staff, volunteers, and clients. The more people you listen to, the more you stand to gain from different perspectives.
- Choose the strategy or strategies that make most sense for your organization. Diversifying your funding by using several different strategies is often very helpful for groups. By having multiple funding sources, you are less likely to be in trouble if one source dries up.
Remember to be careful that you don't use all of your time and personnel resources trying to earn money or obtain resources. It's an easy trap to fall into. Try to strike a good balance.
Also, take advantage of your current resources and talents. If your group has someone who is very good at writing winning grants, for example, write lots of grants. If, on the other hand, you have had excellent luck with state legislators, then work with them to continue getting state funding. In short--build on what works.
There are many different possibilities for funding that community groups can take advantage of. This section has only touched on some of the more common of these prospects; later sections go into more detail on each strategy. We invite you to think strategically about your funding needs to develop a vibrant approach that will allow your organization thrive for a long time to come.
Community Building Resources is a training site that also provides information about funding opportunities in Canada.
Children, Youth, and Families Education and Research Network (CYFER) researches the survival of community-based programs and has developed a training program on sustainability.
The Chronicle of Philanthropy is a comprehensive newspaper for the nonprofit world. Many of its features, such as the guide to grants, are by subscription, but much is available for free.
The Grantsmanship Center Magazine contains articles and how-to information on fundraising, program planning, and nonprofit management. Free subscriptions, and back issues are available by e-mail.
The Program Sustainability Assessment Tool: A New Instrument for Public Health Programs is from the CDC. This "PSAT" is a new and reliable instrument for assessing the capacity for program sustainability of various public health and other programs.
Promoting Sustainability of Community Health Initiatives: An Empirical Case Study describes an empirical study of strategies used to promote sustainability of community health initiatives. A total of three initiatives for prevention of adolescent pregancy and three initiatives for prevention of adolescent substance abuse in Kansas were studied.
Smart Communities Initiative concerns sustainable development as a strategy for economic development that also benefits the local environment and quality of life.
The CDC's article entitled Using the Program Sustainability Assessment Tool to Assess and Plan for Sustainability is a helpful resource that includes a case example of a chronic disease program that completed the Program Sustainability Tool and engaged in program sustainability planning.
Amherst, M. (1994). Coalition building tip sheets. AHEC/Community Partners.
Berkowitz, W., & Wolff, T. (1999). The spirt of coalition building. Washington, DC: American Public Health Association
Lefebvre, R. (1990). Strategies to maintain and institutionalize successful programs: A marketing approach. In N. Bracht (Ed.), Health Promotion at the Community Level (pp. 209-228). Newbury Park, CA: Sage Publications.
Rogers, E. (1983). Diffusion of Innovations. (3rd Ed.). New York, NY: Free Press.