Few charity managers or trustees can't have failed to notice how much the funding environment has altered in the past few years. Whether it is diminishing trust and foundation grants, less frequent and smaller legacies, or simply the impact of the cost-of-living crisis on community fundraising, charities are having to work harder than ever to secure the cash they need to provide their services.
On top of this, many charities are in a position where they are dependent on a small number of income streams – or even, in extreme cases, just a single one. This is particularly the case with organisations which have traditionally received the bulk of their funding through grants, legacies or substantial one-off donations.
Sometimes a large injection of cash (perhaps through an unforeseen legacy) can hide a structural funding deficit. That may buy some time, but if thought isn’t given during that period to finding new income streams, that structural issue will simply re-emerge later on.
Relying on a single income source is a risky strategy. Increasingly, diversifying income streams is the way to mitigate that risk and ensure that a charity can continue to operate and provide its services even if one funding stream reduces or disappears.
On top of this, exploring new sources of income can open up new opportunities, both to increase the charity’s supporter base and to expand the services it provides.
There are three areas in particular where many charities could look to develop new income streams.
Asset Income
Making the most of the assets a charity already owns should be the first place to look. Are reserves invested in a way which maximises income? Could material assets (such as buildings) be used to generate extra income, perhaps through letting out unused accommodation to other organisations?
Earned Income
Many charities shy away from this opportunity, mistakenly believing that charities shouldn’t act commercially. But charging for training and consultancy, for example, can both boost income and expand the reach of the organisation’s charitable objectives. Perhaps you can create a social enterprise which aligns with your charity’s mission, or sell products related to what your charity’s work.
This doesn’t necessarily mean setting up a trading subsidiary, although this might be the best way of keeping the charity’s core activity and its income earning capacity separate. It is important to take expert advice on this.
Corporate Partnerships
Many businesses are thinking more about their corporate social responsibility, and developing partnerships with charitable organisations which share their values can be an attractive prospect. This could simply be about becoming the focus of a company’s charitable fundraising efforts, but it could also be a longer-lasting, deeper partnership where the business’s leadership and staff develop genuine, close links with the charity which go beyond money.
All charities are currently thinking about how they ensure their long-term sustainability. Developing diverse income streams is an important part of this process, providing a more predictable and sustainable financial foundation which will enable the charity to fulfil its mission in the years to come.