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I once worked for an organization that operated a program with a $4.3 million annual budget. Let's call it the XYZ Foundation. XYZ's primary program had a budget in which revenues were received almost entirely from a single source: a local county contract. The organization had this contract for more than 10 years and never considered the possibility of the contract being snatched or scaled down. Then ... it happened! What was once a $4.3 million annual program was cut to less than $1 million annually in what seemed to be overnight. Now, it didn't actually occur so swiftly but the point is, IT HAPPENED!

I recall thinking, "Why would we never plan to have more money coming in besides a government contract?" In hindsight, there are several questions:

  • "Was the organization not thinking long-term?" 
  • "Was the organization arrogant enough to think the county would never snatch the contract?"
  • "Did the organization have such low regard for other service providers that it felt it could monopolize the contract?"
  • "Was the organization not savvy enough to pursue and secure other revenues?"

Regardless of the questions and the corresponding answers, the reality is having the contract scaled down caused a near catastrophic ripple effect on XYZ. It lost funding for one of its staple programs, it would no longer be able to provide services to hundreds of young people, and tens of people lost their jobs with the organization. This lived experience taught me more than any other experience, training, or advice I've ever received about the importance of diversifying revenues. 

Revenue diversification allows an organization to withstand the possibility (and in many cases, eventuality) of losing income. Besides allowing more program and operational flexibility, diverse funding streams help make an organization fiscally stronger. Although some organizations don't have programs and services that are conducive to securing different types of revenues, those that do, often miss prime opportunities to fund their organizations. The traditional revenue types such as grants and government contracts can be integrated with other types such as fee for service, investment income, ongoing sponsorships, membership fees, individual donors, special events, and others. 

I'm still baffled with the number of people in the nonprofit sector I come across who still don't realize nor leverage chances to secure all the possible funding at their disposal. Whether it's "innocent ignorance" or "willful disregard," nonprofits have to begin making revenue diversity (backed up by strategic revenue development plans) an operational priority. Otherwise, stories like mine about the XYZ organizations of our community will remain too familiar.  

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Revenue Diversity is Not Optional