When we hear that nonprofits should diversify their revenue streams, it sounds like common sense advice. For organizations that are heavily grant funded, growing a community of donors can help weather the ups and downs of grant funding. And, for organizations that rely solely on individual donor support trickling in throughout the year, getting grant support can be a catalyst for launching new programs or expanding current ones.
We hear about the upside of revenue diversification so often that it can be easy to believe there is no downside to the strategy.
But is it the right strategy for every organization?
Here’s what you can expect to take away from this episode…
⦿ An understanding of what ‘revenue diversification’ means and its history in the nonprofit sector
⦿ An understanding of why revenue diversification might make it harder for nonprofits to fundraise
⦿ How to approach revenue diversification for your nonprofit
SNEAK PEEK AT THE EPISODE…
⦿ [3:08] When we envision our income in this way, it’s evident that when the dominant revenue stream dries up, the organization could be in big trouble.
⦿ [4:16] It’s not just the number of revenue streams that plays a role, but it’s also the risk associated with each revenue stream.
⦿ [7:45] However, with a diversified portfolio, we find that there is reduced volatility associated with an expected return, particularly over the long-term.
⦿ [10:20] And what they found is that revenue diversification did reduce revenue volatility over time. Interestingly, higher operating margins and financial flexibility was not associated with revenue stability.
⦿ [15:30] Age is an interesting moderator because we think of older organizations as being more established and having access to more resources.
⦿ [19:55] This is great because it calls on nonprofits to leverage the strengths we have and use those to determine our diversification strategy if we need one.
⦿ [23:30] Revenue diversification is a much more complicated strategy than it seems. On the surface it sounds like a simple idea, but there are many downstream effects- some are helpful and some are harmful.
RATE, REVIEW, AND FOLLOW
Are you subscribed to our podcast? If you’re not, I invite you to do that today. I’m adding a bunch of new, information-packed training episodes into the mix and I don’t want you to miss any of it! Click here to subscribe in Apple Podcasts!
And, if you got a lot of value out of this episode, I would be so grateful for a review on Apple Podcasts. Reviews help others find the Nonprofit Science Podcast and helps me support others just like you. Simply click here, open the show up in Apple Podcasts, select “Ratings and Reviews” and “Write a Review” to let me know what your favorite part of this podcast is. Thank you so much!
LINKS MENTIONED IN THIS EPISODE:
⦿ Article: Revenue Diversification in Nonprofit Organizations: Does it Lead to Financial Stability?
⦿ Article: Simmer Down Now! A Study of Revenue Volatility and Dissolution in Nonprofit Organizations
⦿ Article: Understanding the Dissolution of Nonprofit Organizations: A Financial Management Perspective
⦿ Article: Local Health Department Revenue Diversification and Revenue Volatility: Can One Be Used to Manage the Other?
⦿ Article: Resource Dependence in Non-Profit Organizations: Is It Harder to Fundraise If Your Diversify Your Revenue Structure?
⦿ Article: Benefit-Based Revenue Streams and Financial Health: The Case of Arts and Cultural Nonprofits
⦿ Download The SIGNALS Framework FREE e-book
