It’s no secret that nonprofit’s significantly rely on a number of donations to keep their mission running productively. These donations come in the form of government grants, corporate donations, and individual contributions in addition to any investment that the board puts up by themselves.
Keeping this in mind, it comes as no surprise that one of the biggest goals for any nonprofit is financial sustainability. This means they have a sustainable source of funds to keep their operations running to achieve their long term goals.
What Happens if Funds Run Out?
Naturally, if you run out of funds, your organization will not have the funds it needs to continue its operations. This will most likely mean that it will have to be shut down.
The other alternative in such a case could be to seek out donors who could give enough funds to start the organization back up again. Of course, in a situation like this the chances are that you will be indebted to follow the terms laid out by whichever organization gives you their funds. This leaves you with little to no room to make decisions of your own accord. This is why nonprofit financial sustainability is extremely crucial.
What does Nonprofit Financial Sustainability Mean?
So what is this sought after sustainability mean?
It essentially means that your funds are not coming from one central authority like a single donor who has their own terms and conditions. Rather, you have multiple streams for gathering funds and ultimately, you get to decide on your own terms how you would like to allocate those funds.
Our Sustainability Formula
We’ve studied sustainability while working with many nonprofit clients and have come up with a near perfect sustainability formula;
(A large number of donors x small amounts from each) + monthly donations = financial sustainability
Now the way this formula works is by taking the burden of funds off any one organization/person. When you have a large number of donors contributing every month it will be much safer than having a few donors contributing large amounts but without any guarantee.
Think of it this way; if you have a pool of 200 donors contributing every month, there will be minimal impact on your finances when a small numbers of donors decide to drop out. On the other hand, if you had a small number of donors who were contributing large amounts on a quarterly basis – even one of them backing out will significantly impact you.
Nonprofit financial sustainability is not completely unattainable even though it may seem difficult. It just requires a strategic outlook and a fundraising platform that understands and helps you with your sustainability goals. So make sure, when you’re planning on how you’ll organize your fundraising, you need to choose something that is going to align with your long term goals.