I found this article on funding models for Not for Profits by Standford Social Innovation Review 2009 very useful when developing our charity business plan.
In summary the ten funding models are:
- Heartfelt Connector – causes that resonate with the existing concerns of large numbers of people at all income levels, and by creating a structured way for these people to connect where none had previously existed.
- Beneficiary Builder – rely on people who have benefited in the past from their services for additional donations.
- Member Motivator – do not create the rationale for group activity, but instead connect with members (and donors) by offering or supporting the activities that they already seek.
- Big Bettor – rely on major grants from a few individuals or foundations to fund their operations.
- Public Provider: work with government agencies to provide essential social services, such as housing, human services, and education, for which the government has previously defined and allocated funding.
- Policy Innovator: convinced government funders to support methods to address social issues that are not compatible with existing gov. Funding programs and find alternate methods, usually by presenting their solutions as more effective and less expensive than existing programs.
- Beneficiary Brokers: compete with one another to provide government-funded or backed services to beneficiaries e.g. housing, employment services, health care and student loans. Beneficiaries are free to choose the nonprofit from which they will get the service.
- Resource Recycler: collecting in-kind donations from corporations and individuals, and then distributing these donated goods to needy recipients who could not have purchased them on the market.
- Market Maker: service that straddles an altruistic donor and a pay or motivated by market forces e.g. organ donation – there is a demand for organs but it is illegal to sell them. NFP generate revenue from fees or donations that are linked to their activities.
- Local Nationaliser: focus on local communities across the country with issues such as poor schools or children in need of adult role models. Money is raised locally, often from individual or corporate donations and special events.
Below is the key message, directly taken from their website, that I need to keep in mind when developing mine in the coming weeks:
In the current economic climate it is tempting for nonprofit leaders to seek money wherever they can find it, causing some nonprofits to veer off course. That would be a mistake. During tough times it is more important than ever for nonprofit leaders to examine their funding strategy closely and to be disciplined about the way that they raise money. We hope that this article provides a framework for nonprofit leaders to do just that.
The funding paths that nonprofits take will vary, and not all will find models that support large-scale programs. The good news is that all nonprofits can benefit from greater clarity about their most effective funding model, and it is possible for some nonprofits to develop models that raise large amounts of money. As mentioned earlier, almost 150 new nonprofits (not counting universities and hospitals), surpassed $50 million in annual revenues between 1970 and 2003.
On the other side of the equation, philanthropists are becoming more disciplined about their nonprofit investing. A growing number of foundations, such as the Edna McConnell Clark Foundation and New Profit Inc., are investing in their grantees to improve both program and funding models. We hope that this article helps philanthropists become clearer about their funding strategy so that they can support their programs more effectively.
As society looks to the nonprofit sector and philanthropy to solve important problems, a realistic understanding of funding models is increasingly important to realizing those aspirations.
If anyone reading this has any experience with developing business plans and strategies for not for profits, please share your thoughts and advice.
Vi Nguyen 