How to diversify income

How secure is your organisation’s income? If you are dependent on one source for more than 30% of your income, you are at risk. Right now it might look as though that source will keep producing the goods indefinitely – but nothing is for ever!

Wise Boards, Chief Executives and Fundraising Directors make sure they have diverse income streams, so that if one starts to dry up, it’s not the end of the world.

Diversification is the name of the game – but where to start? And how can we make sure it doesn’t all go horribly wrong? Here are some practical and pragmatic steps you can take.

1. Set some criteria, or benchmarks. What does ‘diversification’ look like to our organisation? Is it 3, 5, 8, 10 or more significant income streams? What’s the maximum proportion of net income we want to be getting from any one stream? How will we decide what to try, and how will we know it’s working and whether to keep it going?
2. Look at what is already going quite well – build on success. With a bit more investment of time and/or money, can existing income streams be built up to deliver better results – perhaps particularly those smaller income streams that don’t get so much attention at present?
3. Look at what worked well in the past – is there anything that can be revived or refreshed?
4. Look at what works well for organisations similar to your own. It won’t necessarily work well for you, but it’s worth investigating.
5. Consider each of the five primary sources of funding – are you getting your fair share from each:
           a.   Statutory bodies (any entity funded by taxation)
           b.   Trusts
           c.   Companies
           d.   Community organisations (schools, churches, Rotary….)
           e.   Individuals (including major donors, and legacies)
6. Consider the two ways of generating income from each of these sources. Are you maximising the potential of both (remembering that the first one is much better, because there is no ‘cost of sale’):
           a.   ‘Something for nothing’ – donations, gifts, grants….
           b.   ‘Something for something’ – selling goods and services
7. Brainstorm a SWOT analysis (Strengths, Weaknesses, Opportunities and Threats), but with a specific focus on fundraising issues. Then carry out a ‘So What Analysis’ – what can we learn from the factors we have identified, perhaps to help us explore fundraising sources or techniques that will be new to us?
8. Consider some of the newer forms of income generation, such as social investment, and social enterprise. Are there opportunities here?

What not to do?

1. Don’t go chasing after every new idea. It’s quality not quantity that counts.
2. Don’t try too many things at once. If you spread your resources too thinly they will probably all fail.
3. Don’t assume that what works (or at least seems to) for another organisation will work for you.
4. Don’t over-invest (time or money) until you have researched and tested the concept
5. Don’t under-invest once you know something is working. Keep up the momentum.
6. Don’t beat yourself (or your colleagues!) up if something doesn’t work. We learn from experimentation, and from our mistakes.