Estimated reading time: 3 minutes, 31 seconds

Can Nonprofits Use Tech to Better Diversify Income Streams?

donationIt’s almost never fun when the times come to crunch the numbers and look at your fundraising results. Did you raise enough last year? (maybe not). How is your donation income diversified, and what are the largest/riskiest income sources? (you’re not sure).

A one-dimensional approach of putting all your fundraising ‘eggs’ in one ‘basket’ might see you through a year or two but will never position you to thrive. For long-term success, you’ll need to identify your biggest risks and diversify your fundraising.

And this is where the right technologies can guide you to make smart decisions.

Patterns of the Past

First, gather your full donation history for the past five years and review the data. The data should include the channel of each gift (event, online, grant, etc.) and a giving tier for each gift (under $500, $500-$2500, etc.). If you’re using a modern CRM software, this will be much easier, but otherwise you can pull the information from your accounting software.

● Average funds raised annually
● Total funds raised, by fundraising channel and giving tier, over the last five years
● Funds raised per year, by fundraising channel and giving tier

From this you might find, for example, that 50 percent of your income in recent years has come from individual donors, 30 percent from grants, 10 percent from event sponsorships and 10 percent from businesses.

Double Down and Venture Out

If individual donors under $10,000 have been your fundraising bread and butter, that’s good news (this type of donor is highly reliable). Double down on them. If you use a software system that has predictive analytics built into it, you’ll have an idea of suggested gifts to ask for, based on donors’ giving history, income level and more. This can help increase average gift size AND identify monthly recurring donors from this already generous (and loyal) group.

If this type of donor wasn’t your highest performing, you have two options. You can either: 1) Grow a sustainable small and mid-tier base through aggressive donor acquisition/retention, OR 2) Make sure you have at least three high-performing buckets to mitigate risks (e.g. large donors, corporate giving and grants).

Even if you do have a healthy donor base, you should also work to grow at least one other large ‘bucket’ (e.g. grants, if they’ve served you well). You can also see which areas need to be scrapped - or deprioritized. For instance, cutting non-performing channels like events can be a fast path to fundraising efficiency.

Forecast the Future

If you have good data, you can clearly see what the future might look like - and prepare for it. With software that collect donors’ financial data, you can create projections of future expected giving based on historical trends. This will help you gauge whether it will be enough to sustain you or if you need to ramp up other income streams.

Once you’ve identified your highest potential channels, try designing a small test to try on your top two. Determine a Minimum Viable Product (the smallest amount of money and time) that you can spend to validate whether a new channel works for you. Test your “MVP” for a few months to determine ROI against your other channels. If you find a new channel that works, then double down.

Every nonprofit needs to figure out the best mix of income streams for their unique organization. And by using the data from your CRM and accounting systems, and working to more evenly diversify your income sources, you’ll have the best odds of long-term success for you.

Gabe Cooper is the Founder of Virtuous Software, a CRM and Marketing platform helping charities increase their impact. He is also the founder of Brushfire Interactive and co-founder of Shotzoom Software. Gabe has a true passion for creating market-defining software and helping charities re-imagine generosity. 

After serving in a leadership role at a large nonprofit in the early 2000s, Gabe went on to help build a series of successful products in the nonprofit and for-profit sectors. His team's work has also been featured on CNN, Apple's WWDC, the New York Times, Mashable, USA Today, and Wired Magazine. Gabe, his wife Farrah, and their five kids live in Gilbert, AZ.

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