February 16, 2020

Developing a grant strategy involves identifying the funders and funding opportunities you intend to pursue over a certain period of time (usually a 12-month period, although it could be longer). Grant strategies should be updated at least annually. This is not only because the funding environment changes over time but also because an organization’s priorities, resources, and programmatic interests can change as well.

We first wrote on the topic of preparing a grant strategy back in 2018 in a post entitled "Creating a Grant Strategy for 2018.” While most of the original content remains relevant, the funding environment has seen some changes over the last couple of years, and this updated version incorporates our observations of recent trends.

WHY DEVELOP A GRANT STRATEGY?

You may wonder why you should bother developing a grant strategy. After all, if you are dependent on grant funding, aren’t you basically at the mercy of the funders? Who knows if a funder will release a funding opportunity in any given year, and if they do, if the opportunity will be a fit with your programs or if you’ll even be eligible to apply. With so many uncertainties, it may seem like an impossible task to plan out which opportunities you’ll pursue, when you’ll pursue them, and how much grant funding you can expect to receive from your efforts.

It is true that there are a lot of uncertainties when it comes to grant funding. It’s difficult to predict whether a funder will release the same funding opportunities from year-to-year. It’s also hard to predict the amount and degree of competition you might face in any given year for the opportunities you’ve targeted.

As you may have experienced first hand, receiving a grant from a foundation doesn’t guarantee you’ll receive funding from them again.

Despite these uncertainties, there are several reasons why you should consider developing a grant strategy. One reason is that doing so can help you plan how you’ll allocate your resources—human and financial—over the period in question. Seeking grant opportunities and preparing grant applications are resource-heavy activities, requiring significant investments of time. In the process of developing your grant strategy, you’ll be forced to consider how many opportunities you can reasonably pursue given your current budget and staff.

Does preparing a grant strategy mean you can’t pursue unexpected opportunities that may come up during the year that look interesting? Absolutely not. You can and should feel free to change course, adding new funders, discarding others, and increasing or decreasing your grant targets. Developing a grant strategy gives you a tentative map of how to get where you want to go. You can choose a new destination or route at any time as new information comes in throughout the year that may require a change in course.

Going through a process of creating a grant strategy will help you establish your annual grant targets, prepare your annual budget, and make preliminary estimates regarding how much time you’ll need to spend over the course of the year in the pursuit of grant funding.

ASSESSING YOUR ORGANIZATION

Developing a grant strategy requires you to evaluate your organization and how well it’s doing at defining and meeting its goals. To develop a grant strategy, you need to know your organization’s long- and short-term goals (programmatic and financial), its strengths and weaknesses, its resources, and its tolerance for risk. To create a realistic strategy, you also need to be familiar with the general funding environment as well as the funding environment specific to your area of focus, such as education, agriculture, health, or environment.

As a first step toward preparing a grant strategy, you’ll want to begin by summarizing your organization's known or anticipated revenue sources for the coming year.  Whatever income is either certain (e.g., a payment on an existing grant) or can be assumed with a high degree of confidence (proceeds from annual fundraisers, fees from clients, etc.) should be part of the tally. This information will help you calculate the gap between your organization's projected operating expenses for the next 12–18 months and its projected income for the same period. 

Determining how many grants applications to submit in a given year, and which opportunities to pursue, depends not only on the amount of money you believe you'll need but also on factors such as your organization's goals and human resources.

Some questions to consider are:

• Budget Target: How much grant funding will you need to bring in to meet your revenue goals? Will you be okay if you do not win a grant for 6–9 months after the start of the year?

• Current Funding Stream: If you are already receiving grant funding, how likely is it that current funders will continue their support, either through new awards or by providing additional funds to existing grants?

• Resources: What are your organization's resources to pursue grant funding? Do you have the money/time/staff to work on 10–20 applications this year? How about more than 20? Do you have the resources to pursue several grant applications simultaneously? If you don’t have the staff with the time or skills to prepare grant applications, can you afford to hire a grant writer, or will you need to depend on volunteer resources to prepare applications?

• Reputation: Is your organization in good financial standing? Does it have a good reputation in your local community? How about in the donor community? Handling your existing grants and contracts well is one of the best predictors of your ability to secure grant funding in the future.

Knowing your budget is an important part of developing your grant strategy, but unless you know some of these other pieces—such as the resources you can employ to prepare proposals—you won't be able to set reasonable expectations for your annual grant target.

SETTING REALISTIC EXPECTATIONS

Your grant strategy needs to be realistic on all fronts, from the number of proposals you think you can submit to anticipated award values. 

To ensure you have a realistic strategy, two important tasks are to determine your win rate and confirm that all the funders you’re interested in actually accept applications (solicited or unsolicited).

Determining Proposal Win Rates

Your win rate is calculated by dividing the number of proposals won in a given period (usually your fiscal year, which may not be the same as the calendar year) by the total number of proposals submitted during the same period.

If you don't know your organization's win rate, it’s safest to assume that you will win no more than 15–20% of the proposals you submit in any given year. While you might win 30–40% or more in a very good year, your grant strategy and budget projections should be based on your average win rate, not your best win rate.

Confirming Funder Application Policies

Part of creating a grant strategy involves identifying funders you intend to apply to over the next year. As you research potential funding sources, one crucial piece of information is whether the funder posts open calls for proposals. A growing number of funders no longer accept unsolicited proposals or post funding opportunity announcements. Instead, the funders research organizations and, based on the results of an internal vetting process, send a select number of organizations invitations to apply for grant funding.

If a funder you have identified as being a good fit for your organization no longer accepts grant proposals except from a handpicked group, you should not include it in your grant strategy. If your organization happens to receive an invitation to apply, that’s fine—you can easily modify your strategy. However, your strategy should not count on receiving any money from funders that have an invitation-only grant program. Likewise, if you intend to submit any unsolicited grant proposals (i.e., proposals that are not responding to a specific solicitation) over the next year, you could mention the planned submission (“submit 1 proposal on X to the Smith Foundation by X date”) in your grant strategy, but you should not count on receiving an award. The likelihood of receiving a grant as a result of an unsolicited proposal is so low as to be virtually zero. In other words, don’t write in your grant strategy, “We plan to receive $200K in grant funding over the next year from 15 proposal submissions. This list assumes a 20% win rate across all proposals, including an unsolicited proposal to the Smith Foundation.”

To learn more about the growing trend of invitation-only grant programs, check out our post “The Rise of Invitation-Only Grant Opportunities.”

BUDGETING FOR PROPOSALS

If you are not sure of how much it costs your organization to prepare a typical proposal, as a general rule of thumb assume that it will cost 10% of each proposal's anticipated award amount. So, if you plan to pursue several grant opportunities worth $100,000 each, you should budget $10,000 to prepare each proposal. The majority of this cost will be related to human resources, that is, the staff and consultant time required to prepare the proposal. Additionally, for some proposals, there may be travel costs associated with visiting potential project sites and meeting with stakeholders.

SECURING UNRESTRICTED FUNDING

Although an organization requires money to operate, grant proposal preparation costs cannot come out of project or program funds. Your proposal costs must be paid for by unrestricted funds, which are funds that are not restricted to direct program costs. If you don’t have adequate unrestricted funds to cover your resource development needs, you could ask staff to volunteer their time to work on grant proposals or you might be able to recruit community volunteers. Of the two options, having staff volunteer their time, while unlikely to be popular, is preferable. Staff members are in a better position to prepare competitive proposals than volunteers because they should be more familiar with organization’s history, capabilities, and programs.

You can accumulate unrestricted funds in several ways. Any money you raise from a fundraiser is unrestricted. If you have applied an overhead rate on past proposal budgets, this overhead money can be applied to proposal preparation and other general administration expenses. If you are short on unrestricted funds, it's important to factor in this limitation as you prepare your grant strategy since it will have implications regarding which staff members (and how many staff) you can involve in your proposal efforts.

Any staff member who has her salary 100% covered by project funds will not be eligible to assist with proposal development—at least, not as part of her regular workday—because she is already 100% committed. However, any staff member who is able to charge time to overhead, regardless of where she sits in organization, can be pulled in to assist with proposals. 

Related to unrestricted funds, if you plan to use consultants to help you with your proposals, be aware that consultants must be paid for their work by unrestricted funds at the time of performance. You cannot pay a consultant for work already completed through funds from a new award. A grant award is meant to cover future work.

The importance of unrestricted funds leads to the next piece of the grant strategy, which is being clear about the kinds of grants you can afford to pursue. 

DECIDING WHAT YOU CAN AFFORD TO PURSUE

If you are a small organization, or if your organization is pursuing grant funding for the first time, you may be tempted to say your grant strategy is to apply to every opportunity you see that looks "promising." While it's an understandable impulse to want to pursue any grant opportunity that appears to have potential, this approach is neither strategic nor sustainable.  If you take this approach, you'll find yourself unable to respond to opportunities ideally suited to your organization because you've tied up your resources responding to mediocre ones that happened to come out first.

So, which opportunities should you be looking for and applying to?

Answering this question involves thinking about both programmatic goals and opportunity costs. Programmatic goals include things such as which programs do you want to maintain, expand, or introduce? Opportunity costs include questions such as the resources you have to research and prepare grant applications as well as how much it will cost to administer a grant award if your application is successful.

Programmatic Goals

If your goal is to expand your current programs, you may need to look at different funders than you have approached in the past. If the funders are entirely new to you, your chances of being funded by them are going to be low, much lower than pitching a known and successful program to a current and supportive funder.

If your grant strategy involves approaching new donors for new program areas, you'll need to factor in the increased risk associated with launching new programs. If you are approaching new donors, your likelihood of success is going to be low, typically well below a 50% success rate (assuming a 10% success rate might be more realistic). You can reduce this risk by planning incremental changes in your existing programs instead of introducing entirely new programs. This step-wise approach might also induce your current donors to support your new initiatives.

Questions about programmatic goals include:

• What programs/services do you want to offer over the next year?

• If you want to expand to a new service/program, will any of your existing funders be interested in funding this new area, or will you need to find new donors?

• Will you need to recruit and hire staff for either your current or new projects/services?

• For your existing services, do you have donors who offer regular support, or do you need to need to find new sources of funds to cover core services?

• If you have existing grants, are those funders satisfied with your work, or do they want you to change how you deliver services?

Opportunity Costs

It takes money to make money, even in the nonprofit world.

Researching and applying for grants takes money. You need to pay staff to do the research and prepare the grant applications. If you are serious about finding grant opportunities, you'll need to subscribe to a foundation database. You may also need to hire consultants to write the grant applications or serve as subject matter experts. On the flip side, if you apply for a grant and are successful, grants cost money to implement and administer. Will the grant be worth it, or will it end up costing you money? If a funder is not willing to pay a percentage of your overhead (administrative) costs, the opportunity is probably not worth it. For example, it does not make sense to pursue a small grant if the funder imposes such heavy reporting burdens that you would need to hire a staff person just to administer the grant and handle the reporting requirements. Between covering the staff person’s salary and benefits (which would need to be covered by unrestricted funds), you could end up paying more than you receive from the grant.

Before you decide whether to pursue a particular funder or funding opportunity, you'll want to explore questions such as:

• What award amounts (i.e., the dollar value of the grant awards) are reasonable for your organization to pursue? Can your organization handle a grant of $100,000 or more? Will funders see your organization as being capable of managing six-figure grants? Or, is it more reasonable to expect grant amounts in the $10,000 to $25,000 range?

• Is there a minimum grant amount that you will not go below? For example, will you only pursue grants worth at least $25,000?

• Will you go after grants that do not cover administrative costs (i.e., they do not allow indirect or overhead costs)?

• Will you pursue a funding opportunity if doing so requires hiring consultants as grant writers or subject matter experts?

• How much are you willing/able to spend to prepare a single grant application?

• How much are you willing/able to spend to research and apply to grants over the next 12 months?

FACTORING IN THE WAITING PERIOD

Although we're talking about preparing a grant strategy for a year-long period, your grant strategy is not about how much money you'll bring in within a 12-month period. Your grant strategy is about deciding which grant opportunities you'll pursue in the next year and identifying the resources you have to pursue them. As far as bringing in revenue to meet annual operating expenses, it's almost a given that the majority of grant applications you submit will not be awarded for several months, possibly six months or longer. If you urgently need funding for your current fiscal year, you may need to pursue non-grant sources of funding to meet your short-term financial needs while you work on grant applications.

As you prepare your grant strategy, factor in the waiting period between the time you submit your grant application and the time you hear back from the funder. You may not hear back from a funder for 3–6 months after your application goes in. Sometimes longer.

TRACKING & PREPARING FOR FUNDING OPPORTUNITIES

After you've assessed your organization's needs and capabilities and determined the kinds of grants you can afford to pursue, you're ready to research potential funders and their application requirements.

If a funder tends to use the same application format each year, you can see what supporting materials are typically required and start assembling them. If a funder is new to you, while you are waiting for an opportunity to come out, you can use the time to research the funder's interests, current grantees, and past giving. Everything you can do in advance to prepare for a grant opportunity is time well spent! For more information about researching funders as part of a grant strategy, check out our post Discovering Funding Trends through a Landscape Analysis.

As a final step, after you've created your grant strategy and determined which funders and/or funding opportunities you'll pursue, plan to monitor funder websites so you catch new opportunities as soon as they come out.