How nonprofit boards can support a sustainable funding strategy 

Developing an effective funding strategy is vital to any nonprofit’s ability to sustain or increase its impact. And nonprofit boards play an important role in virtually every organization’s funding strategy. 

So how does that play out? Too often, nonprofits jump at flashy fundraising tactics (“Let’s host a gala!”) or fall back on conventional wisdom (“Diversification is good!”) without thoughtful planning. And their boards are often complicit: Many nonprofit leaders have been asked by a board member why they aren’t pursuing a particular fundraising activity that others are. After all, aren’t you leaving money on the table by not seeking funding in more ways? 

Focus on one or two revenue categories 

A recent study by The Bridgespan Group, based on an analysis of the 297 nonprofit organizations founded in the United States since 1990 that have over $50 million in annual revenue, sheds some light on this question. The study found that these organizations grew to their current size mainly by focusing on a single revenue category—such as government, program revenue, corporate, or philanthropy—rather than diversifying across categories. And they built dedicated capabilities to raise revenue from the one or two categories that were at the core of their funding strategy. While our research was focused on larger nonprofits, in our experience, many smaller organizations also benefit from this combination of focus and dedicated capabilities. 

Here are two ways nonprofit boards can support their organization’s leadership to find and implement an effective funding strategy. 

Develop a focused, effective funding strategy  

The effort it takes to develop or refine a funding strategy is an investment well worth making. Instead of seeing every funding lead as a good lead, focus on those that align well with its strategy. Instead of wondering where and how to invest in development capabilities, determine the dedicated capabilities needed.  

The process should focus on three main questions:  

1. What is our current funding mix, and what has it taken for us to bring in that money?  

2. What are the one or two revenue categories with the highest potential for our organization?  

3. What capabilities do we need to successfully raise significant money from those revenue categories?  

The board can support this strategic review in a variety of ways, including encouraging the executive director and senior management to take the time and space necessary, playing a hands-on role in the planning process, or engaging other stakeholders (including current or potential donors) along the way. It’s also useful to think about the potential tradeoffs between pursuing a new revenue category and doubling down on what the organization is already good at.  

For example, one nonprofit we spoke with got most of its revenue from government funding and wondered if it was too dependent on it. Should it put more effort into other categories like philanthropy or individual giving? But as its leaders thought more about the organization’s fundraising and programmatic strengths, they returned to the central role played by government revenue. Rather than going off in a completely new direction, it invested more in both people and systems to raise that revenue. It honed its processes to get program staff more involved in matching program needs with possible government funding sources. Over time, the organization succeeded in growing its government funding sources, both adding new government agency funders and expanding contracts with current funders. 

Offer support tailored to each revenue category 

Many nonprofit boards have a “give or get” policy requiring each member to donate or raise a certain dollar amount. But we’re talking about something different: a well-defined role in helping to implement and support the organization’s funding strategy. This role will differ depending on the strategy the nonprofit is pursuing. The organizational assets and capabilities required to pursue each revenue category effectively can vary greatly. 

For example, a strategy focused on high-dollar individual gifts may require board members to commit to fundraising and to make introductions among their personal or professional circles. Before fully committing to such a strategy, the executive director and board members should have candid discussions about the board’s role—whether the current board has the necessary capacity and willingness, whether its composition needs to change, and even whether that strategy is feasible given the type of board members the organization is in a position to attract.  

By contrast, a focus on government funding will require different kinds of assets and capabilities—and likely a different role for the board. Relying on government funding typically means an organization will need strong contract, compliance, and reporting capabilities. The board will need to help secure the investments needed to build and maintain those capabilities. The organization’s leaders may need to spend significant time engaging government and other stakeholders to make their case, perhaps even employing government relations staff or a lobbyist. If board members have connections to key government or other stakeholders, they can also participate in these activities. 

By helping an organization be strategic about its funding—focusing and building the capabilities to do one or two things really well—and by being clear about its own role in supporting that strategy, the board can help the nonprofit attract the dollars it needs to achieve its mission. 

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