Funding Strategy

Your nonprofit's funding strategy is its road map for its flow of funds. It defines where the money will come from and when it comes from a specific source, the use it will serve.

A typical question that arises is, "Why do I need a strategy? Can't I decide when the money arrives how to spend it?" That certainly works but other methods can work better.


Recently, when asked, one of our clients thought about their need for money over the next five years and listed the following items:

Capital Expenditures - acquiring more land, putting up several new buildings, and repairing the roof on an existing building (the roof was still sound but there are indications it will need attention in the next 2 or 3 years).

Technology - Upgrading the current communications systems, network, and computer infrastructure.

Startup Expenses - Develop new programming to serve the changing demographics of the nonprofit's neighbors.

Normal Operating Expenses - Staff raises and benefits, replace aging buses, pay rent, and other expenses necessary to serve the clients.

You may have different categories or want to divide the expenditures up in different ways.

The purpose of the categories is to make it easy to explain to donors how their funds will be used. As an example, a donor who provides capital funds usually understands that it will be months or years before the money is spent. Categories also make it easier to connect the donor to the parts of the organization that are important to the donor.

It is usually easy to solicit a small one-time gift from anyone. Large frequent gifts however usually require a special relationship with the organization. Part of making the relationship special is providing the donor with a giving opportunity that is tailor-made for their interests.

When you have a choice of categories, it is easy to start the discussion with the donor by asking, "Which of these general headings is more important to you?" From there you can quickly narrow the discussion to the most important part of the mission.

Having broad categories also makes it possible to target donor groups for specific interests. If the nonprofit serves youth, it is easy to assume that a group of family practice lawyers or doctors will be interested in it programming. Likewise, a group of realtors is more likely to be interested in capital expenditures such as buildings or land.

Knowing how much money is needed in each area helps you plan your time. If the capital portion of the budget is small this year, it is unnecessary to talk with dozens of capital donors. If the new programming budget is large, it may be time to concentrate on expanding the donor base rather than cultivating generosity in the current donors.

Next Step:

Create a funding strategy by dividing the budget into meaningful categories.

Identify the donor pool that is most likely to want to support each category.

Create a focused message for each donor pool and category.

Budget your time spent on each category based upon the size of the pool and the size of the need.

Report back to each donor pool about the effectiveness of their gifts and how the mission has benefited from their focused support.

The funding strategy will help to increase the effectiveness and efficiency of your fundraising. It will help to create a stronger connection between the donors and the mission even though they may only be connected to one part of the mission. It makes it easier to communicate with the donors in ways that are meaningful to them. It helps hone skills in various areas and sharpens the message to the donors. It provides guidance for the board and everyone's decision-making. The funding strategy increases sustainability.

Creating a funding strategy is relatively easy and well worth the effort. When will your funding strategy be ready?

Funding Strategy