Topic 1: Setting targets for a diverse funding mix

In today’s dynamic nonprofit landscape, organisations are increasingly recognising the importance of diversifying their funding sources to ensure financial sustainability and resilience. 

By setting targets for a more diverse funding mix, nonprofits can reduce dependency on any single source of funding, mitigate risks associated with fluctuations in funding streams, and create a more stable financial foundation.

Understanding the Importance of a Diverse Funding Mix

Before diving into setting targets, let’s revisit why a diverse funding mix is paramount for small NGOs:

1. Risk Mitigation: Relying heavily on a single funding source exposes you to considerable risk. By diversifying funding sources, NGOs can spread risk and minimise the impact of funding fluctuations or changes in donor priorities.
2. Stability and Sustainability: A diverse funding mix provides stability and sustainability by offering a range of revenue streams with varying characteristics and timelines. Think back to the smiley table with the various characteristics of different funding sources.  This helps smooth out cash flow and ensures the organisation’s long-term viability.
3. Flexibility and Adaptability: Diverse funding sources provide flexibility to adapt to changing circumstances and capitalise on emerging opportunities. NGOs can pivot more easily in response to funding gaps or new initiatives, safeguarding their mission and impact.
4.  Independence and Autonomy: By reducing dependence on any single funding source, NGOs maintain their independence and autonomy. This allows organizations to pursue their mission without being beholden to the priorities of a single donor or funder.

Setting targets for a more diverse funding mix involves several key steps. Take a look at the image below to learn more about the steps needed to gain diverse funding.

Let’s illustrate these concepts with an example. Suppose you’re the director of a small environmental NGO or leader of a team within an NGO aiming to enhance its funding mix while achieving total cost recovery. After assessing your current funding sources and costs, you identify a need to diversify revenue streams and ensure that all expenses are adequately covered.

Here’s how you might set targets:

1. Assess Current Funding Mix and Cost Recovery: Analyse your organisation’s revenue sources and cost recovery rates to identify gaps and opportunities for improvement. Use the funding grid we introduced in earlier sections to help.
2. Set Specific Targets: Aim to increase individual donations by 20% annually, secure $50,000 in grant funding for new projects, and generate $30,000 in revenue from ecotourism activities within the first year.

Now you have a specific enough plan. 

To conclude, setting targets for a more diverse funding mix is essential for nonprofit organisations seeking to build financial resilience and sustainability. By diversifying your funding sources, you can better weather economic uncertainties, reduce dependency on any single source of funding, and create a more stable financial future. 

By taking proactive steps to set and achieve diversification targets, your nonprofit can position itself for long-term success in advancing its mission