The upcoming Easter holiday has gotten me thinking about eggs and baskets, and how combining the two – specifically putting all eggs in one basket – can be dangerous, for both grantseekers and grantmakers.
I suppose I should be writing about Passover symbols, but unleavened bread only makes me think about predictions that grantmaking will be pretty flat this year. But I digress.
For nonprofits, putting all grantwriting eggs in one basket – and more broadly, putting all fundraising eggs in one basket – can be a serious problem. A future post will be about grantmakers, and why they should not put all of their eggs in one basket, either.
The notion of eggs and baskets brings to mind an image of an investment portfolio. Those of us who have been taught about investing (either formally or informally) have been taught to diversify our portfolios, or not to put all of our investment eggs in one basket. A diversified portfolio mitigates risk by combining different asset classes with different levels of risk and reward.
Simply put, imagine you put all of your money into one stock, the ABC Corporation. If that stock price goes through the roof overnight, you could become a millionaire. But if that stock completely tanks, you could lose all of your money instantly. While a diversified portfolio (combining stocks and other assets like bonds, all with different levels of stability and predictability, and with different potential returns) means you are quite unlikely to become a millionaire overnight, it also means that you’re less likely to go broke overnight. So a diversified portfolio is a cautious, smart investment strategy for long term stability and returns.
The same is true for fundraising. Let’s say your organization needs to raise $200,000 from outside sources to support its programs for the year. You have limited resources, so you need to decide where to invest your fundraising efforts and fundraising dollars. While many nonprofits don’t think about fundraising this way, any staff time dedicated to fundraising has a cost – both the actual cost of salaries for the amount of time spent fundraising, and an opportunity cost in terms of other activities that cannot be pursued by fundraising staff. Say there is an online fundraising contest with a top prize of $200,000. All you need to do is have the most votes at the end of the contest. If you win, your fundraising for the year is complete, and you’ll be able to deliver all of your programs and services. All you need to do is win the contest.
If you invest all of your organization’s fundraising resources in that contest and win, that’s great! It’s like becoming a millionaire overnight. But how likely are you to win that contest? And what if you don’t win? It’s like putting all of your money on that stock that tanks.
Grantwriting is similar. Some foundations and governments award large grants. If you write one winning grant proposal for a $200,000 grant, then your organization is set for the year. But what if you invest a lot of time and resources, and don’t get the grant? What if, to have enough time to dedicate to writing the perfect proposal for a $200,000 grant, you let opportunities to apply for other, smaller grants pass you by?
Just as the economy impacts individual investing, and decisions investors make, it also impacts the nonprofit sector, and the funds available for nonprofits seeking support. As many nonprofits are painfully aware, government funding has decreased over the past several years while demand for services has remained steady and has increased in many cases. For organizations that were overly reliant on government funding, cuts in government support have been disproportionately painful – many organizations have had to cut programs or staff, and some have even been shuttered.
A wise approach to fundraising suggests a diversified portfolio:
- Overall, grants should comprise one component of your organization’s fundraising, but not at the expense of individual fundraising, fees for service, events, or other fundraising activities that are appropriate for your specific organization and issue area.
- Your grantseeking portfolio should be diversified as well:
- Pursue a combination of smaller and larger grants, ensuring that the total possible value of the grants far exceeds your needs. If you write $200,000 worth of proposals, and only half of the proposals are funded, you won’t meet your fundraising needs
- Pursue a combination of government and foundation grants. If a government grant disappears, diversified nonprofits will still have support from foundations. It’s not a panacea, but it is better to have some funding (and money in the bank) than none
- Pursue a combination of levels of government grants, from small local agencies, to state and Federal grants. Not all levels of government grants will be right for all organizations, so be sure to craft a diversified plan that is right for your organization
- Pursue a combination of foundation types. Different types of foundations have different mandates, and their giving patterns can differ when economic conditions or giving priorities change. Get to know the community foundation in your area, as well as the family foundations and corporate foundations and giving programs that support organizations in your geographic area and issue areas.
A diversified grantwriting portfolio is a wise fundraising strategy.
What are your tips for creating a diversified fundraising or grantwriting portfolio? Share them in the comments below.
Photo credit: http://www.flickr.com/photos/bobydimitrov/3461353547/