Updated: Feb 4, 2022
In the last blog post, we focused on "Make an Impact without Grant Funding" #Funding Goals. Next, we'll dive deeper into funding models and how they create financial clarity in social impact organizations.
Strategy and financial clarity are imperative for operating a successful business. Yes, nonprofits are a business aimed to solve social issues community. Unfortunately, nonprofits get stuck in a rut of running programs and asking for funding. They think core funding such as government grants or foundation funding will provide them with the financial stability and movement of new programs and services they need to be impactful.
Foundations and government rarely FUND new programs and services without evidence that the current programs"already in place are working" and proof that they will be sustainable for new ones.
The caveat to that is Impact is one of the most poorly defined and most misunderstood terms in the nonprofit world. So how can you put a value on IMPACT? Nonprofit leaders are focused on doing the work and don’t know what and how to measure IMPACT in a way that informs and inspires their community. But where going to help you with that tuhday!
Quick Recap, a funding model, is a strategic and standardized approach to building a reliable revenue base to support an organization’s core programs and services. In other words, how you can grow an organization without being overly dependent on government funding.
We hope we get government funding, donations." Operating on "hope" and not a funding strategy usually results in:
Programs cut, delayed, or never started.
Funds do not flow to other essential areas such as staff development, salaries.
CEO and Staff burnout that means high turnover
A chaotic scramble in all efforts, especially in fundraising attempts
Inability to present proficient grants proposals that win funding
Every nonprofit needs a fundraising strategy to ensure funds are available each year to meet programs expenses AND it should not be 97.8% funded by the founder.
Before we go into different funding models, we first need to review the expenses and determine a budget to fulfill the organization's mission. This needs to be resolved first because it gives the framework for fundraising. Therefore, we created an excel template,” Get Your $ Together to assist in maintaining the nonprofit’s annual budget.
Example: Our mission is to provide a healthy breakfast for children BEFORE school, aiming to improve children's health and grades because a healthy diet increases focus.
What are the Impact goals for the year? For the sake of math, let’s say our data states 1,000 children in the area do not have access to healthy breakfast before school, and it affects their grades.
What do we need to accomplish the goal and feed 1,000 children healthy meals?
· Fruit, granola, orange juice
· Containers or bags
· Post its for inspirational notes
Determine the market price of each item and multiply by 1,000. Yes, you HOPE to get it donated, but you don’t want to plan your budget on HOPE. An excellent resource for buying items in bulk is Good360. Plus, funders love to see when you take the initiative.
After some math, you have determined to feed 1,000 children; it will cost you $5,000 total, which equates to $5 per child. Break down the significant goal into manageable timeframes. Aim to serve 250 children per quarter with an expense of $1,250.
HOW are we going to get the food to the children?
Now that you know what you need, another component of achieving your goal is HOW. How many volunteers, How much fuel, How we transport, How we were going to tell them marketing, and general operating expenses. According to a research report conducted by Independent Sector in 2021, the current value of each hour volunteered is $28.54. Each state varies. Click the link to find the rate for your condition. Financial statements can include the matter of volunteer hours in financial statements and annual reports. Although volunteers are invaluable, it is a way to show community contribution and the IMPACT they have serving the organization.
I know this isn't fun or easy. But, that is why Our Heavenly Father has gifted people with the Financial/CPA anointing. So, feel free to schedule a strategy session with our friend and network Certified Public Accountant, C.P.A. Chyla Graham of CNRG Advisory Accounting.
The funding model(strategy)is the action plan for raising that $12K. The most impactful organization has a diverse funding portfolio. NO matter the stage of the organization. You're all familiar with following
· In-kind donations
· Individual donations
· Government funding/ grants
· Earned income (Watch Fundraising Replay with African American Expressions)
· Corporate sponsorships
(Download Our eBook) for resources that the programs in eBook can implement to start making an Impact with the above-listed methods.
There are more funding models, but you'll find a few geniuses to help sustain your organization outside of the above listed.
1. Members ONLY Model:
There is a formal and informal approach to membership. There are many 501 nonprofit determinations, BUT we won won't go into the differences in this post, but Examples of 501(c)(4) are
Chambers of Commerce
Real Estate boards
Jack and Jill of America is an example of a MEMBERS ONLY. No matter your personal opinion or experience with this organization. Their history is quite interesting.
The NAACP is a 501 (c)(6) and charges a yearly membership fee. However, this membership fee is not tax-deductible because of their(c)(6)status. But, again, that's another post for another day. You don't have to resubmit your paperwork to change from a public charity; 501 (c)(3). You can implement memberships only with monthly donor contributions.
For $25 a monthly you can feed 4 babies, $50 a month 8 babies etc.
Things to consider with Members ONLY Model
Make sure you provide a "Members Only" incentive
How can social activities benefit the member?
What do they want and value? Can you give that to them??
How can you encourage members to advocate/recruit others?
Will you remain true to your Mission/Vision (Brand)?
What processes need to be in place to maintain your Brand?
How will you measure that?
2. "Started from the Bottom, Now We're Here" Model
lol, but seriously, this type of funding model relies on past clients to become donors and or volunteers because the mission impacted them. This approach is excellent for organizations that have a very niche audience. Hospitals Emergency Relief funds like American Red Cross depend on this model. All organizations would strive to maintain long-term relationships with their constituents, but it is an indirect way to gain support and increase awareness of the cause.
3. "Flip the Free" Model
This model recycles donated resources from businesses (tax breaks). Some examples are food banks and thrift stores. I think this is an excellent and sustainable method but must be executed VERY STRATEGICALLY. Whatever your recycling must align with the organization's mission and values. For example, Goodwill sells their good to provide job training to help people improve their quality of life. BONUS, they can also shop at Goodwill until they get on their feet. We have NOT seen this type of model in the Nonprofit Communities of Color(Yet).
4. "This Is What We Do" Model
This Funding Model works directly with government agencies and contracts services to allocate funds. An example would be HUD, Job and Family Services, and Career Training. Hospitals like Promedica are also considered service providers. This is an excellent opportunity to expand the Impact and go where your target clients are and DO IT BETTER because you have a heart for the people and not just checking boxes.
One of our goals at Collective Impact is to introduce our network of nonprofits to government contract opportunities. More about that in 2022.
Things to consider with developing this type of funding model
Is the mission a natural match with one or more large, preexisting government programs?
Can you demonstrate that organization will do a better job making more Impact than other service providers?
Are you willing and able to take the time to secure contract renewals regularly?
If you're still reading, God Bless Ya! I know it was a lot of information. Our prayer is that we consider this type of fundraising strategy for 2022 and beyond. Large "well-positioned" organizations have modeled the effects of strategic planning. However, it seems to get lost in translation in communities of color. Our organizations matter too. It just takes intentionality and openness to connect with KINGDOM-Minded individuals. Together we can rebuild and advance HIS Kingdom, all for HIS glory!