July 26, 2018

Several times a week, we receive email messages from organizations in search of money to accomplish their missions. The organizations are usually tiny, and they're struggling to address big needs with limited resources.

Every nonprofit organization—from established organizations to small start-ups—struggles to create a sustainable funding stream. While all nonprofit organizations need to secure funding, there are key differences between small, struggling organizations and large, well-funded organizations other than the obvious difference in size. The first difference is that larger organizations have systems in place to identify, pursue, and track funding resources. The second difference is that larger organizations tend to put a greater emphasis on cultivating partnerships with donors and other organizations.

If your organization is struggling to find money, below are suggestions you can use to up your grant game. 

Short on time? If you scroll to the bottom of the article, you’ll find a summary of the key points.

CULTIVATE YOUR EXISTING RESOURCES

If your organization is experiencing funding challenges, you can improve your chance of receiving funding by managing your existing resources better. These existing resources include your current donors and organizations you may have partnered with in the past.

• Maintain Donor Relationships: Look at your current donors (individuals, foundations, or government agencies) and find ways to keep your supporters informed about your work and connected to your mission. How you foster that connection depends on your resources and what resonates best with your donor community. Examples of what you could do include sending out newsletters, holding an open house, inviting donors to travel with you on site visits, and providing updates via your website and social media accounts.

• Foster Connections: Your organization has probably collaborated with other organizations in your local area. No two organizations have exactly the same funding stream. Similar? Yes. Identical? No. The fact that organizations have different funding sources is an opportunity. If your organization wants to expand its donor base, one of the easiest ways to do this is to leverage your relationships with other organizations to gain introductions to new donors. To get your organization in front of a new institutional donor, collaborate with a partner organization to submit a proposal to one of the partner’s existing donors. You can also use partnerships to move into new areas of work. By partnering with organizations offering complementary services to your own, your organization can apply to opportunities it would be unqualified to pursue otherwise.

• Track Information: Large nonprofit organizations can afford robust information management systems to track proposal activity, organizational history, and project milestones. The databases are invaluable and serve as the organization's institutional memory. Unless you have a system in place to document and easily retrieve information about past projects, it's difficult to write proposals and marketing materials. To tell a compelling story to potential donors, you need information about what you’ve done in the past, including project descriptions, information on successes and failures, and details about project funding. Fortunately for smaller nonprofits, you don’t need an expensive database. With a little work, you can customize no- and low-cost tools to record organizational history and project information. A free resource is Google Sheets. For a low-cost option, if you have access to Microsoft Office, you can use Excel. Information to track includes the name and contact information of your current and past donors, grant/gift amounts, project periods, and project outcomes. In addition to data that can be tracked on a spreadsheet, you should also store all submitted proposals, project reports, and any marketing materials (e.g., newsletters) in an accessible, Cloud-based, searchable location such as Google Drive or OneDrive. Creating an information management system using a patchwork of free tools takes time, but it will be worth the effort. Once you have the system in place, it will help both your proposal writing and your project management. If you don’t have an information management system in place, consider putting your grant writing on hold until you do. It's that important!

UNDERSTAND DONORS AND THE GRANT PROCESS

Many newly launched nonprofit organizations don't understand the grant process or how foundations operate.  This lack of knowledge prevents them from writing quality proposals and applying to the right donors. If you're new to grant writing, below are some things to keep in mind as your develop your grant strategy.

• Demonstrate Competency: Whether you're doing traditional fundraising or grant writing, ultimately you are asking for money. There's a term fundraisers use called “the ask,” which refers to the final moment when, after a period of time cultivating a donor, you ask them for money. Timing is everything. You don’t begin the donor conversation with The Ask. You end with it. Few people are going to give an organization money based on reading a couple of paragraphs describing what the organization does and the problem it's trying to solve. To be successful at fundraising, you need to have data (this is where the information management system comes into play) about the number of grants your organization has received and the number of people it has served. You should also be able to share details about the results of your work and how you’ve transformed lives and communities. It’s not enough to tell someone that your organization serves a vulnerable population. Lots of organizations serve vulnerable populations. You need to make a case that your organization is making a difference and achieving results. Just as important, you also need to be able to demonstrate that your organization is a good steward of the money it receives.

• Anticipate Concerns: If your organization is just getting off the ground, you’re not going to have information to share about past work and existing sources of funding. If this is your situation, you’ll have to do things a little differently as you prepare to approach donors and write your first grant. The data you’ll need to have ready includes why there’s a need for an organization like yours and what your organization will do to achieve results. As part of making your case, you should be able to talk knowledgeably about other organizations serving the population you wish to serve and how your work will complement the work already being done. Donors will see a new organization as a risky investment. To convince donors that your organization is a good investment, take the time to think about what systems you'll use to manage money and projects. You don’t need to create the systems before you raise your first dollar, but you should be able to describe to potential donors what administrative systems will be put into place to manage their money. 

• Understand that Donors Fund Their Vision, Not Your Mission: Nonprofits need to be able to tell their story in a compelling way to attract donor support. However, what donors really want to know is how your organization can help them to achieve their vision. In terms of communicating with donors, you need to show that you understand the donor's priorities and the end result they want to accomplish in the world. Your grant proposals and other donor communications should reflect donor interests and clearly demonstrate that you can help them to achieve their goals. Reflecting donor interests is not always easy. If you seek funding for core operating expenses, you’re going to have to package your organization’s core expenses as a means to an end, and that end has to relate to the donor’s goals. If your goal is to find money for basic operating expenses, and you don’t want to change or add-on to your current services, you may want to pursue individual donors or other fundraising activities over the pursuit of grant money. 

• Choose Donors that Are A Good Fit: One of the biggest mistakes we see nonprofits make is submitting proposals to donors that are not a good fit for the organization. If your organization wants to secure grant funding, you have to submit well-written proposals to donors that fund the type work you do AND fund organizations like yours. To determine if a donor funds organizations like yours, you have to research the eligibility requirements of grant programs. You also should look at the donor's list of current and past grantees. If the donor focuses on large organizations with budgets of more than $10 million/year, and your organization has a budget of less than $50,000/year, this is not the donor for you, regardless of whether your organization’s mission relates to one of the donor’s interests. The issues the donor is interested in, the part of the country or world it works, the type and size of the organizations it funds, all of this matters. Research potential funding opportunities thoroughly and be discriminating about the opportunities you pursue. 

• Know What Donors Will (and Will Not) Fund: Grant funding is great for some things and not so great for others. If you want unrestricted funding—that is, money you can use for any purpose you want, from operating expenses to programmatic ones—grant money is not the best source of funding. Some donors do not cover operating expenses at all, while others cap operating expenses to a percentage (often 10%) of a grant application’s total budget. It's uncommon to see grants that can be used entirely for general operating expenses. If you do not have a source of unrestricted funding to tap into, you should avoid grant opportunities that do not allow at least a percentage of funds to be dedicated to general operating costs.

DIVERSIFY YOUR FUNDING

Grant money is good to have as part of your funding mix. Grant money cannot, and should not, be the only source of funding for your organization. If you’re looking for a target amount, there's no set answer. Some experts say that you should aim to get no more than 30–40% of your budget from grant funding. The rest of your funding should come from things that generate unrestricted funding such as fundraisers and revenue from selling products or services. (To read more about sources of sustainable income, check out the blog posts Should You Be Relying on Grant Funding?  and Paths to Nonprofit Sustainability.)

If your strategy is to be 100% funded by grants, you’re going to run into a few challenges. First, there’s the issue of unrestricted funds. If you are 100% dependent on grants, it is going to be difficult to pay for the administrative costs related to running your organization (this includes your executive director’s salary). Second, if you're dependent on grant money to keep the doors open, you’re going to be looking for new grant opportunities continuously. In any given year, you’ll always face a risk that there will be few opportunities to apply to or that you'll experience a low win rate.

Additionally, researching and applying for grants costs money, and it's work that can only be covered by unrestricted funds. This brings us full circle. If you are 100% dependent on grant funding, you’re not going to have a lot of money for grant research because grant research depends on unrestricted funding. However, you need the grant research to get the grant money. It’s a bit of a vicious cycle. To reduce the pressure of winning grants, it’s highly recommended that you branch out into other sources of funding.

TO SUMMARIZE:

If you want to bring in grant money, you should know the following:

• Donors fund organizations they know and trust. Cultivate relationships with donors and partner organizations to make your organization known to the donor community.

• Information management is key. To make grant writing and project reporting efficient, you need a system for managing information. If your organization can afford it, you can purchase a subscription to a built-for-purpose program like Granthub. If you have budget limitations, you can create a system using free and low-cost tools from Google and Microsoft.

• Foundations want to fund work that furthers their mission, not yours. To be successful as a grant writer or fundraiser, you need to cast your needs in a way that fits with the donor’s vision.

• Grant opportunities are not created equal. Evaluate each grant opportunity carefully. To avoid wasting your time (and the donor’s), before you begin a grant application, confirm that your organization is eligible to apply and has a reasonable chance of winning.

• Diversification of funding is essential. Grant funding is risky. In any given year, you may not find many grant opportunities to apply to or may experience a low win rate. To minimize the impact of ebb and flow of grant money, diversify your organization’s funding through fundraising and other tactics. The benefit of fundraising is that it will provide your organization with much-needed unrestricted funding, which can be used for operating expenses.