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10 steps to diversify your income and win the fundraising game

financial stability fundraising sustainability Oct 18, 2022

Everyday 100's of not-for-profits and charitable organisations are spending time and effort on fundraising: individual giving, workplace giving, high net worth individuals, philanthropic trusts and corporate sponsorship. It is now a highly professionalised activity and competition is tough: both for the attention of potential donors and for the talented, committed individuals that can deliver the goods.

Government policy (and common sense) dictates that you diversify your income streams, encouraging you to develop new strategic partnerships and relationships. Each of which takes time and resources to manage.

However, without the capacity and skills in house, most small arts organisations (or even a mid-size operations) are often knocked out of the party before you even get started.

In the middle of this are dedicated, highly-skilled and hard-working arts managers trying to hold it together, and wondering why there is a culture of burnout in the arts.

Now I encourage arts and not-for-profit organisations to be entrepreneurial, but I wonder if the business development model most arts companies use is fundamentally flawed. 

Current situation, funding the gap.

Each arts company develops a fantastic program, costs it, and then looks to the potential sources of income to fund the program. Much attention is put into creating programs that are excellent, innovative, collaborative and creative. That is all great and needs to be applauded. 

If you have secured multi-year or annual organisational funding, you then look for extra sources of funding to meet the gap hoping that you can deliver sufficient surplus to bring the reserves up to a point that the organisation is financially sustainable.

If that does not work, either the program is cut or the organisation runs a deficit, drawing down on reserves, becoming less sustainable each year.

The experience within the organisations seems to be a scramble of activity, sometimes planned but often ad hoc and reactive, trying all options to meet the elusive gap. The management reports focus on that one element, without giving a full picture of financial performance.

It is no wonder that development staff have the highest rates of turnover and burnout across the arts (and charitable sector). Constantly being in a sales mode, often working in isolation from the rest of the organisation, with over ambitious targets and often without sufficient leadership, marketing and strategic support to be successful.

That is the curse of fundraising. 

New approach create revenue strategies.

I suggest that we flip this situation on its head, and take out the myth of the gap from our financial and strategic planning in arts organisations. Instead, we need to think more commercially and strategically (within our missions). We can then create sustainable revenue streams, which have real potential for growth.

Take as the starting point your artistic program.

Unpack all of your component parts into what services or products you produce: productions, tours, exhibitions, workshops, training, licensable material etc.

Based on actual figures, calculate the full cost of each part (not just direct costs but all staff time, administrative support and all overheads).

Based on realistic assumptions, estimate all potential revenue sources (which may include philanthropic, private or corporate support) for that particular activity.

Analyse the risks associated with the activity, and adjust your costs or revenue as necessary.

That will give you the net return on that component of the program. Remember - net return is the only return that matters.

Once you have that information in front of you, then you can make some choices about what has potential for growth, and where you may want to invest some resources to grow.

You will also clearly see the elements that have limited financial return to the organisation. It is then responsibility of management and board to decide if the organisation can sustain continuing that part of the program.

Then set realistic budget and revenue targets for the components of the program you are continuing, and make it clear who has accountability for managing and delivering these outcomes.

Finally, set up a clear set of reports that provide, in a snapshot, how these programs are tracking (in terms of net return) at each board and management meeting.

If you follow these steps you can free yourself from the curse of fundraising in a vacuum and constantly reacting to what is on offer from the increasingly competitive philanthropic, private and government markets.

Creating a holistic revenue strategy, embedded in your artistic program, with shared responsibility across the organisation, allows you to be entrepreneurial and pro-active. You are able to respond strategically to opportunities, forward plan, and make better choices.

You will be able to have a clearer and distinct point of view, be able to target those really interested in what you are doing, and become a known provider in your chosen "market".

It takes discipline and rigour, rather than hope and wishful thinking, but it puts you back in the driver seat. You need energy, confidence and a committed team approach. You need to be honest, be able to review your performance, take on constructive criticism and feedback. It takes maturity.

It also takes you beyond the goal of financial stability to actual profit.With profit comes the opportunity to re-invest funds in developing new programs, services and markets.

That is the only way to grow your organisation.

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