In order to survive, nonprofits have to make money. I’ll take it a step further: In order to survive, nonprofits better make money and not be ashamed to earn a profit to support their activities. There are multiple ways nonprofits can earn money and I’d like to offer the main ways this happens.

It’s important to have a broad understanding of the different ways to raise money so you’re not over-reliant on one strategy. There are pros and cons to each strategy, so let’s walk through what that means for you as a startup nonprofit and which ones you should pay the most attention to in the beginning.

Let’s start with the basics, and make sure we all understand what fundraising is and how to do it the right way.

Fundraising is commonly defined as a very simple concept: it’s when you seek financial support for your nonprofit. This definition works, but let me elevate your understanding a little bit.

Real fundraising happens when you seek, develop and nurture relationships for the ongoing support of your nonprofit’s operations. It’s sooo much more than getting money - it’s most effective when you diligently build relationships with your donors for the long-term.

“Real fundraising happens when you seek, develop and nurture relationships for the ongoing support of your nonprofit’s operations.”

Fundraising is not about you. A big mistake I see nonprofit founders make is centering their fundraising appeals on themselves. They use the word “my” and “I” a lot. When you do that, it’s clear that you don’t understand why people give.

People give because they want to feel good about themselves. Think about how you feel when you perform a kind act for someone else. It can prompt feelings of joy, exhilaration, and butterflies. Sometimes people give because of a sense of duty, a sense of tradition, or because they have some kind of connection to your cause and they want to help.

People have different motivations for giving and rarely does it have much to do with you. So your job is to 1) help them draw a personal connection to your cause, and 2) convince them their help can make a difference. Center their needs and interests in your fundraising appeals - whether it be a foundation, a business, or your next door neighbor. Understand what would motivate them to give, tap into that motivation, and then ask.

“People have different motivations for giving and rarely does it have much to do with you.”

Now. Let’s talk about the ways you as a nonprofit can make money. I’m warning you now, this will be a LONG post, but it’s a good reference for you to understand how to fundraise. Keep in mind that there is a lot of crossover in these categories - and depending on where you are in your development, some strategies may be more appropriate than others.

Peer-to-peer fundraising happens when individuals reach out to other individuals in an effort to raise money for an organization. It is essentially network fundraising, where current supporters can tap into their family and community networks on behalf of the organization. Board members, volunteers, or other supporters can all fundraise on behalf of the organization. If you think about Facebook birthday fundraisers, it’s a perfect example of how people tap into their networks to fundraise for organizations.

Important things to know

This method is the foundation of all of your fundraising efforts
Develop materials like brochures and common language that others can use in fundraising efforts
One of the best ways to get your Board started with peer-to-peer fundraising is to do a letter writing campaign
It’s important to keep contact information of your donors so you can build your own direct connection with them
Design a welcome packet when people first give so you can start building a relationship with donors

Advantages

This can be the most powerful form of fundraising because of the potential to grow exponentially.
People give to what they know and trust so it’s easier to be successful

Disadvantages

Less sense of control because you have to rely on the energy and efforts of others

What this means for startups

This is the type of fundraising you cannot ignore. Invest most of your time in the beginning by getting a strong core group of supporters who are willing to tap their networks to build early funding support. Keep these early donors informed about your progress, invite them to see your work up close, and take them along your journey.

A membership campaign is a form of individual fundraising, but is based on the donor having a special status through membership or by virtue of the frequency of their giving. This can take two forms - one by having members who pay dues and have special involvement or input. Another form this can take is when you establish donor circles or monthly memberships, where donors are encouraged to commit to an ongoing donation instead of a one-time donation.

Important things to know

Donors don’t typically start giving regularly right way - you need to build up to this level of commitment
If you have a membership organization, make sure their involvement and authority is clear in your by laws
Be intentional about nurturing this group - give them special access or put them in an advisory capacity to increase their loyalty and their willingness to serve
Make sure you have a software that can accommodate automatic monthly giving - you do NOT want to do this manually every month
Don’t take this group for granted- make sure you stay in contact with them

Advantages

Can produce regular, stable income
Steady donor pool that you can encourage to make large gifts

Disadvantages

Members may be high maintenance and are a lot to maintain
Can require considerable staff effort

What this means for startups

Your power as a new nonprofit is making one-on-one connections. You create an advantage when you nurture and love on your donors. You can create lifetime donors this way. Pay close attention to these models and be creative about how you can engage people to invest early on in your story and follow your growth.

Direct mail fundraising is when you send out letters through snail mail/postal mail to potential supporters, asking them to give in response to your request. There are two ways this is typically done. You can send a written letter to a list of potential donors you’ve never contacted before; or you can send an appeal letter to a list of people who have donated in the past (often referred to as your housefile).

If you’re starting your first direct mail campaign, you can purchase a list of potential donors from another nonprofit or a broker firm, or you can use a list you’ve compiled yourself from prior events. Direct mail campaigns sent to previous donors have a giving rate around 6%, and about .5-2% for people who haven’t donated before. This may seem really low, but if you do this consistently with a big enough sample of homes, this can be a reliable source of income, especially for older donors.

Important things to know

Make sure your letter is well designed with beautiful pictures
Research has shown that it’s good to have long appeals letters- go for 2-3 pages
Make sure there’s a clear call to action and an easy way for someone to send money back to you (with a pre addressed envelope) or a direct link to give online
Have someone sign it personally and hand write the addresses on the envelope
Use the nonprofit postage rate at the post office for discounted postal rates

Advantages

You can have a personal touch
Limited direct access to donors, which is good for those intimidated by asking for money face to face

Disadvantages

Time-consuming and can get expensive
Requires strong databases and internal systems to keep track
People are relying less on postal mail to receive information

What this means for startups

This can be an easy, low-impact way to reach new donors. If you’ve had several awareness events and were diligent about gathering mailing addresses, it can be a nice way to reach out personally and keep them engaged throughout the year.

Digital or online fundraising is a strategy that produces endless ways of making money by computer or text. If you spend any time online, you’ve probably been approached by a nonprofit through one of these methods. This can range from website giving to social media to texting. Here’s a brief rundown of the many ways you can digitally fundraise:

Donate button on your website
Social Media campaigns: this may involve posting messages with a link to donate. Facebook allows anyone to set up a fundraiser to support a project
Crowdfunding: you can recieve donations from friends and family using their own peer-to-peer fundraising pages shared across social media, text message, and email. Popular crowdfunding platforms include Gofundme, Causes, and Indiegogo
Email fundraising appeals
Text or direct message campaigns: This may involve sending mass texts or mass direct messages on a social media platform

Important things to know

Make the process as simple and easy as possible - limit the number of clicks someone needs to go through to donate
Crowdfunding works best when you already have a large amount of supporters
Tailor your campaign for the target audience. A younger audience may respond more positively to a text campaign over an email campaign
This requires automation and investment in systems that accept payment and track donations
Use photos and videos to enhance your messaging
Use multiple mediums to solicit donations
Don’t be fooled and think this is a passive way to make income. People are not going to magically show up at your website and donate. It requires time and effort to get people to visit your website and social media pages
Don’t rely on other platforms to keep contact information of your donors - have your OWN database and track as much as you can

Advantages

We live in a digital world and more people access and experience the world via computer or their phones
Many nonprofits don’t have mobile-responsive websites that can accept payment - doing this makes you more competitive
Expands your reach beyond your local community

Disadvantages

Some digital campaigns do not capture contact information which limits your ability to follow up and provide personal thank yous
You have to be comfortable with managing multiple apps and software

What this means for startups

I love digital mediums because they destroy the disparities between small and large organizations. Anyone with a good camera phone can create great images and post compelling appeals on their website or social media pages. There are SO many apps and resources, many of them free, that allow you to create content that looks like a professional did it. This is where you can shine! You can put in the same amount of work as other nonprofits with bigger budgets and have an even bigger impact. You must absolutely invest in a website and have at least ONE social media page (I recommend Facebook). Have a regular presence that you update often and educate the community about your cause. Use it to inspire a conversation and get people talking about the issue you’re passionate about.

Earned income includes revenue made from product sales or services you charge for. Maybe you’re interested in opening a coffee shop or a thrift store. You could put on shows and collect ticket sales. This may include selling T-shirts, dinners, or calendars. You could also have a government contract for providing services in your community. This is one fundraising strategy that nonprofits often misunderstand. Many people think because you’re a nonprofit you can’t charge for services. Not true. It’s to your advantage to understand ways you can get someone to pay your organization to teach a skill, provide a service or sell them a product.

Important things to know

Think about the assets and skills that you and your board possess that align with your mission and offer for a fee to your community
If you earn money not directly tied to your mission, this qualifies as unrelated business income and you may be subject to tax on the income you earn

Advantages

Can be inexpensive and products are accessible to start
You don’t have to rely on a development director or fundraiser to do some of this work - someone completely inexperienced in fundraising can execute some of these fundraisers

Disadvantages

Creating a different revenue stream not related to your mission can take away time and resources from other important activities
These methods can be hard to scale because they require significant amounts of staff time

What this means for startups

Product sales can be the backbone of your fundraising. Think about the Girl Scouts. That is their signature income source. Every little fundraiser helps but make sure the fundraiser does not become more important than the mission. Use these strategies to build up capital and have unrestricted income to build up your organization’s infrastructure. Don’t be ashamed of fish frys or things that work in your community. Eventually you will evolve, but it’s important to get the small stuff right and progress to more complex fundraising.

Major giving involves courting donors to make significant contributions to your organization. I singled this one out because it requires a specific approach based on data and research. First, it requires you to take a look at your donor data - to see how much people give, how often, and to segment out who you should target to make large gifts to your organization. It also involves looking at public data to see which donors are likely to give based on certain factors - like how they got their wealth, and their history of giving to other organizations. Major gifts involve investing in a relationship with those who you believe are able and willing to give more to the organization. It requires checking in with them often, and providing an experience that encourages them to invest in the success of your organization.

Important things to know

Give yourself time to collect data before initiating a major gifts strategy
This takes a significant amount of time building up trust
Look for natural connections between your mission and your cause and the donor’s motivations
Do your homework and be ready to present evidence as to why you’re the best organization to give to
The board should be in agreement with this strategy and provide assistance with meetings

Advantages

Data suggest that around 88% of donations come from 12% of an organization’s donors, which implies that many gifts are from people who make the biggest donations. Major donors can a large source of income
It can provide sustainable income for your nonprofit
Investing in a major gift strategy can set you up for more sustainable funding like planned giving (see below)

Disadvantages

This requires a significant amount of effort and time
You need access to prospecting data which can be costly
May not be as effective with a Board that’s not engaged

What this means for startups

This should not be your fundraising strategy in the beginning-this is something you build up to. Learn how to do normal asks, and build up your contact database, before you start intentionally asking for major gifts. Learn how to design an experience for all your donors when they come to your organization by inviting them to see your work, or getting their advice. Once you have a strong system for nurturing your donors, you can build on your existing relationships to cultivate major donors.

Telemarketing or telephone fundraising involves you making requests via phone. You can do this on an individual basis where you do personal follow-ups with potential or current donors, or you can organize this as a group activity, where a group of volunteers come together and participate in a telethon-like environment where they get together and call a list of potential donors. This is a great way to make a personal connection with donors, either by following up on prior requests, or by doing cold calling and encouraging people to become a new supporter of your nonprofit. It can also be a great team-building exercise.

Important things to know

Create scripts, trainings and call sheets that volunteers can use to be prepared for donor questions
This method requires a well organized set of volunteers that must be trained to respond to callers
Try to maintain a personal touch- have volunteers write a personal note when they’re sending follow up pledges by mail
Have a group of volunteers who work with your organization cover the phones so they can have the opportunity to share their personal experiences

Advantages

Relatively low impact and can be the entry point for board members nervous about doing fundraising asks face-to-face
A good way to involve a group of volunteers in your organization

Disadvantages

Some may be discouraged by hearing no or having people hang up on them

What this means for startups

In your startup years, it’s important to show up in the community for presentations, or hold informational events to build up awareness of your organization. Focus on building a good list of supporters from these events. Of course you can always purchase a list of phone numbers but how great will it be if it included your own personal contacts? This is a low-impact strategy and good training ground for learning how to ask for support.

Grants are financial donations to your organization from another organization - whether that be a government agency, a foundation, corporation, or another public charity. Grant writing is one of the most recognizable fundraising strategies for nonprofits. With grants, your job is to write a compelling proposal that will encourage a funder who doesn’t know you to give . That means being clear on the need or problem you’re addressing in your community, the specific activities you want to carry out, information about partnerships to carry out those activities, how you plan to measure your impact and a detailed budget. Because grant amounts can be significant, funders need to be confident that you are equipped to implement the plan detailed in your proposal. There are different strategies for finding grants: you can search for free, or use a grant search service.

Important things to know

Grant writing looks very different depending on the type of funder. Your approach will shift based on the funders’ needs and expectations
Always attempt to reach out to the funder before you apply to see if you’re a good fit
Your community foundation should be your first stop to identify funding opportunities in your local area
It’s the wrong move to immediately go for federal grant opportunities. Start with smaller, community grants first
Funders do not typically give to new nonprofits, so it will take time for you to win a large grant
It's important to have financial statements and a clear budget in place
Don’t rush to get a grant writer which can be expensive

Advantages

Grant awards can be large and help support a major part of you budget
Grant writing is a good exercise to hone your message and be clear on what you need and what you’re asking for
There are grants for almost anything!

Disadvantages

Grants can be restrictive and less flexible than other funds - some funders will dictate what you can and can’t spend your money on
It can be expensive to hire a grant writer even though they can help you increase your odds of winning
It takes work to build a strong proposal - many nonprofits are intimidated by the process of developing a grant proposal

What this means for startups

I alway encourage startup nonprofits to start with small, local grants. Your community foundation can help you identify grant opportunities. The best way to look for your first couple of grants, is to do an inventory of where you shop personally and professionally and any other business connections in your community. Use my grants worksheet which helps you identify at least potential funders in a few hours. One of my followers found 102 (!!) potential funders using the worksheet - all for free.

Events can be public or virtual gatherings/experiences that your nonprofit creates to not only raise funds, but raise awareness, and recruit volunteers and donors. Events are the usual go-to for small nonprofits to make money, but be careful. You don’t want to get so caught up in doing the event that you lose sight and don’t actually make money. You may automatically assume that a gala or breakfast is an event you can hold, but there are plenty of options for events:

Festival
Walkathon or 5k run
Cookoff
Paint and sip
Concert
Tour
Tournament
Sporting event
Silent auction (which could be combined with other events)
Poker night

Important things to know

The key to events is keeping your costs down in order to maximize profits
Carefully track your expenses and have a clear goal
Don’t count only on ticket sales to make money - make your money through sponsorships and other sources (like charging vendors to participate at the event)
Use events as a way to gather contact information of potential supporters (with their permission, of course)
Use the opportunity to network with donors and potential supporters

Advantages

Gives you the opportunity to be up close and personal with donors
Can be easy to implement, depending on the type of event

Disadvantages

Can be very costly with a minimal return on your investment
Can be quite labor intensive to pull off

What this means for startups

Events are some of the best ways to gain visibility and raise money during your startup phase. Use them as opportunities to gather names and contact information for everyone that attends. Participate in community fairs, advocacy events, fairs, etc, or anything that gives you the opportunity to introduce like minded people to your work. Once you put on your own event, focus on getting organizations to donate and sponsor the majority of the work so you can maximize your profits.

Corporations can be a great source of grant funding, but I wanted to call this out because there are multiple types of support that corporations can provide. The primary ways you can get support from corporations is by direct grants, sponsorships, in kind donations, or employee contributions (through money or time). When approaching corporations, focus on whatever marketing or promotion goals they have. It’s your job to understand what they need in exchange for supporting your organization.

Important things to know

Make sure you understand the business’ motivation - ask them what they need from you rather than assuming that they want the traditional types of promotion (logo placement)
Sponsorships take time to build, so be sure to start early and maintain close connections with your partners
Follow-up after events or campaigns to let your corporate partner know the impact of their support
Do a mapping of your network to include corporations who may be invested in your case

Advantages

Often does not take too much effort to get started - cold calling is expected and many corporations are expecting nonprofits to ask for in kind or monetary donations
Untapped resource that many don't take advantage of
A good way of tapping into more local businesses and involving your larger community network

Disadvantages

I see few disadvantages in reaching out for corporate support. In my opinion, corporations have an obligation to support community and public organizations.

What this means for startups

Just as with any other fundraising method, it’s important you take the time and nurture relationships. Stop in your local stores, banks, and businesses to introduce yourself. Make yourself known and talk about the work you do. Money might not be an option but that doesn’t mean they can’t support in other ways by helping to do a fundraising campaign from sales, by encouraging their employees to volunteer or advertising for your organization. Also tap into small and local businesses who often want to have a social cause connected to their work who would be interested in working with you in exchange for help with marketing and promotion.

Planned giving programs are when your donors include your organization in their long term financial planning, which include wills and estates. It is also a way that donors can include the organization in its stock options.

Important things to know

This is a long-term strategy that will take years in order to build up trust
This is the natural end to an overall strategy that your organization should be taking to cultivate and nurture donors
An easy access point to encourage planned giving is to request that your organization be added to their wills

Advantages

It is the ultimate stability in fundraising, by having large gifts that can be unrestrictive to support your organization’s growth
Gifts tend to be large and substantial for nonprofits

Disadvantages

You need to hire a specialist do to this right, which might be cost prohibitive

What this means for startups

I like to say, “there’s levels to this”. This is 2.0 in your nonprofit’s development. I recommend you talk to a specialist to understand how to walk your donors through a path of be-questing their money or assets to your organization. But still keep this in mind as a long term fundraising goal so that you’re maximizing all the different ways people can support your organization.

We’ve come to the end. What fundraising strategies have you tried?