Advancing Philanthropy - Summer 2013 - (Page 23)
A Grant Maker’s Perspective on Diversified Funding
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Founded in 1915, The Chicago Community Trust (www.cct.org) is one of the
nation’s oldest community foundations.
It is also one of the largest, with more
than $1.9 billion in consolidated assets. In
2012, its more than 1,000 funds disbursed
more than $150 million to Chicago-area
nonprofits in the arts, human services,
healthcare, education and more.
The Trust is also a firm believer in the
need for healthy diversification of funding
sources. “Whenever we see that a nonprofit has support from a wide range of sources, we can immediately tell that this is an
organization that has a wide number of
investors,” says Ngoan le, the Trust’s vice
president of programs. “We see that as a
sign of strength, that this nonprofit has a
low probability of going out of business.” le
adds that, when the Trust considers funding a nonprofit, it looks at the applicant’s
program and administrative budgets to see
if they are funded from a mix of sources.
“We never want to be the only source of
revenue for a budget,” she says.
Jamie Phillippe, vice president of
development and donor servies at The
Chicago Community Trust, explains that
funding diversity can be broken down into
three interrelated categories:
• Diversity of sources, which includes
earned and unearned income, as well
as competitive government grants
• Diversity of methods for securing
sources, which includes direct-mail
appeals, face-to-face fundraising,
special events, grant proposals, etc.
• Diversity of purpose, which encompasses restricted funds, such as facilities, programs and endowment as well
as unrestricted funds
The key, Phillippe says, is to find the
right balance of these three elements for
a particular organization. For example,
a membership drive is typically a fairly
modest source of revenue, but its method
is labor-intensive. However, membership
funds are typically unrestricted. special events are also labor-intensive, but
the revenue is potentially greater, even
though the funds raised may be restricted
to a particular program.
The Trust encourages nonprofits to explore alternative revenue sources due to
bridgespan.org), believes that an organization should first
identify the most promising revenue streams. “Nonprofits
should focus disproportionately in the areas where they’re
most likely to have success in fundraising,” he says. “It
sounds intuitive, but too often funding is treated less like a
strategy than a collection of unrelated tactics.”
Kim, the co-author of several influential articles on successful fundraising models that have appeared in the Stanford
Social Innovation Review, explains that, while nonprofits
with revenues of $50 million or more tend to concentrate
their fundraising efforts on a single type of revenue, most
organizations with annual revenues of less than $3 million
likely cannot afford to limit their options that way. Even so,
they may find some of the key fundraising concepts employed
by their larger cousins to be valuable. As outlined in the article “Finding Your Funding Model,” which Kim wrote with
Bridgespan colleagues Gail Perreault and William Foster,
www. a fp n e t. o rg
the economy, such as social enterprises
and counseling services, but notes that
these ventures can require fundamentally
different approaches, a shift in the organizational culture, new staff and possibly
changes to the mission. It even encourages nonprofits with similar missions or
constituencies to consider mergers. “If
merging helps you do your mission better and get a better base of support, then
you are doing your mission well,” le says.
However, mergers should not be sought
when in a position of weakness. “a merger
can still work then, but it’s not a strategy
for growth,” she says.
The Chicago Community Trust’s belief in diversified funding isn’t simply
“Diversification is very relevant to us,”
Phillippe explains. “Community foundations are one of the few types of foundations that have to proactively raise money.” The Trust is currently in the middle of
an endowment campaign and is seeking a
broad range of funds to continue serving
an equally diverse spectrum of community nonprofits. “If it’s done well, we don’t
think there’s such a thing as too much diversification,” she adds.
those concepts include “focusing on types of funding that are natural matches for the nonprofit’s work,
clarifying who the main decision makers are behind
those types of funding and understanding why those
decision makers choose to support the organizations
“Successful fundraising is not random,” Kim emphasizes.
“If organizations are putting a lot of effort into pursuing one
type of funding but getting very little payoff, they should
ask themselves if pursuing that source is the best use of their
Nonprofit income specialist Karen Eber Davis, principal
at Karen Eber Davis Consulting (www.kedconsult.com)
in Sarasota, Fla., agrees. She suggests allocating resources
along a two-tiered strategy that focuses on developing many
smaller, easily cultivated gifts and fewer large, more timeintensive ones.
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