Our funding services
New revenue exploration
Business case development
Grant model reviews
Corporate sponsorships and partnerships
Introduction
Not-for-profit funding is a fascinating and sometimes fraught piece of the impact puzzle. How and how much not-for-profits are funded is a game-changer. Funding can be tied to specific projects, which provides a clear focus but limits flexibility. Untied revenue, on the other hand, gives not-for-profits the ability to use their funding as they see fit. Equally, the duration of funding contracts can seriously impact not-for-profit culture and level of aspiration. Just think about how short-term contracts often result in short-term employee contracts and constrain ambition. How much funding shapes whether you can operate at scale, invest in technology, innovate with substance and more. In this article, we outline a series of key considerations and trends when it comes to not-for-profit funding as well as our approach and services.
Answering your key not-for-profit funding questions
Below, we share our perspective on some common questions about not-for-profit revenue and financial sustainability. Unfortunately, in our experience, there’s no magic wand to grow and diversify income. There are, however, lots of different approaches and tactics to consider and experiment with. If you’ve come across a not-for-profit funding magic wand or would like us to answer different questions, please get in touch here or by emailing hello@ensemblestrategy.com.
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We’ve outlined the usual suspects when it comes to not-for-profit revenue below and included specific examples for each.
Government
The public sector is a critical source of not-for-profit revenue for many organisations in Australia. It includes money provided by federal, state and territory, and local government entities and agencies, and spans core funding and project/program-specific funding.
General public
The Australian community support the not-for-profit sector in many ways, including financial and non-financial contributions. Not-for-profit revenue from the general public includes monthly donations (otherwise known as regular giving), bequests, events, peer-to-peer fundraising and one-off or ad hoc giving.
Philanthropic trusts and foundations
Trusts and foundations provide grant funding to not-for-profits and social enterprises. They often have a focus on innovation, which generally means funding and catalysing early-stage ideas and initiatives. This means that, despite being a small component of overall not-for-profit revenue, philanthropy has a really important role to play.
Private sector
Large corporates and small business alike assist and partner with charities through a mix of financial and in-kind support. This is often referred to as corporate social responsibility or CSR, charity-corporate sponsorships or charity-corporate partnerships. Some private sector organisations have long-term charity partners who they’ve funded over years if not decades. Many big corporate firms have their own trust or foundation, which they use as a charitable vehicle to do good and/or boost their brand.
Commercial or earned revenue
While not a stakeholder group like the paragraphs above, earned revenue or commercial income is increasingly important to the Australian not-for-profit sector. This includes fee-for-service offerings, IP licensing, renting rooms and facilities, commission payments and more. While traditionally techniques of the private sector, this approach is increasingly being adopted by not-for-profits as well as by social enterprises and social business, including B Corps.
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There are lots of changes and developments underway when it comes to not-for-profit funding. Even so, funding models are still a tough space for the vast majority of not-for-profits. Traditional funding, such as government grants and public donations, is an incredibly competitive space. Then there’s new and emerging opportunities, such as earned revenue and social enterprise models. These are also challenging and not the panacea they were once touted to be.
Some other trends to keep in mind include:
• The growth of impact investing in Australia and around the world.
• The influence of Royal Commissions in determining government priorities, including how not-for-profit funding is allocated.
• The upcoming largest intergenerational transfer of wealth, which will support a younger cohort of philanthropists and social entrepreneurs.
• The evolution of charity-corporate partnerships, including the continued growth of shared value.
• The rollout of relatively new mechanisms such as giving circles and crowdfunding, which can work well for discrete initiatives but haven’t yet achieved scale.
• The move away from face-to-face fundraising during COVID-19 lockdowns and questions about what will happen from here.
• The continued debate about how much to fund not-for-profit overheads and indirect costs.
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We believe three components are at the heart of not-for-profit funding models:
The who
This is about understanding who you are currently benefitting and could benefit into the future. This may include customers, service users, community members, the environment/planet, government, other not-for-profits etc. It’s also critical here to consider existing and potential partners.
The what
When you’ve got clarity around ‘the who’, it’s time to think about what they are seeking (or needing) and what you have to offer. This is all about your value propositions for each stakeholder group.
The how
Once you have a sense of ‘the who’ and ‘the what’, you need to get stuck into how your value translates into services and products, with associated income streams and cost structures. It’s important here not to limit yourself to your existing products and services.
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Unsurprisingly, great partnerships catalyse and sustain funding whereas weak ones pose a financial risk. This includes not-for-profits partnering with funding bodies and grant-makers to build capability, define the challenges, co-design strategies and implement the solutions. We’re increasingly seeing these more collaborative approaches when it comes to corporate partnerships.
Other ways partnerships contribute to funding benefit are joint funding submissions between two or more not-for-profits, group advocacy to raise awareness, operational partnerships to drive efficiencies, collective impact approaches to secure place-based funding, and more.
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A business case typically outlines an opportunity for an organisation to grow. It can be about introducing a new service, entering a new market or diversifying revenue streams. A business case is generally presented when the opportunity requires some up-front investment to get off the ground. The audience of the business case, which can be your own board or an external funder, will then make a decision about whether this up-front investment is warranted.
We suggest the following structure as a starting point when developing a business case:
1) Executive Summary
2) Context and Background
Introduction
Organisation overview
3) The Opportunity
Opportunity overview
Market overview - customers and competitors
4) Business Model
Business model overview
Detail about the components of the business model
5) Financial Model
Financial overview, which may include high level P&L, up-front investment requirements etc.
Commentary relating to the financials
6) Operating Model and Other Considerations
Operating model
Risk assessment
Legal structure (if required)
Approach to managing funding/investment (if required)
Action roadmap (if required)
Performance framework i.e. KPIs or OKRs
7) References
8) Appendices
Acronyms and abbreviations
Alignment to strategic plan
Other as required
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There are pros and cons of engaging a consultant to help with not-for-profit funding. Your experience working with an external facilitator or consultant will also vary wildly depending on which firm or individual you go with. We’ve outlined some of the key points to consider below.
Pros
• Bring in not-for-profit revenue and funding model ideas from other sectors and organisations
• Connect you to other relevant organisations, including grant-makers
• Enable everyone in your board and team to participate fully in workshops and meetings, rather than someone needing to be the facilitator
• Alleviate internal capacity challenges
• Independent third party facilitation may elicit new or different perspectives on not-for-profit funding opportunities from internal and external stakeholders
• Speak to and potentially leverage new developments in not-for-profit funding, fundraising and funding models
Cons
• Will incur a cost
• Some consultants don’t understand funding models and opportunities in your organisation and/or sector (or will take a very long time to!)
• Risk of losing internal ownership of the new funding model or other solution/strategy
Our approach to not-for-profit funding models, revenue growth and income diversification
We think of our work as SENSE-making. When it comes to funding models and financial sustainability, this is fundamentally about understanding who you are benefiting, what you are providing and how this translates into revenue and expenditure. It’s also essential to prioritise income opportunities to avoid spreading your team too thin and ensure you are focussing on where there’s potential for significant return. Our Ensemble process for not-for-profit funding projects is as follows:
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Scope
The first cab off the ranks is to build a collaborative and connected project team through developing clear project outcomes, deliverables, timeframes and roles. Establishing this foundation upfront, not only supports a strong partnership but also provides accountability and focus for the project.
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Engage
Meaningful engagement is central to positive experiences and achieving outcomes. It’s the activity that will enable creative solutions and ensure buy-in. When it comes to not-for-profit funding projects, it’s critical to listen to both internal and external stakeholders. This is because your board, team and volunteer understand your organisation’s strengths and assets, while your customers, users, community members and partners can shed light on need, demand and market gaps. This phase ultimately leads to the gathering of insights to feed into solution development.
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Navigate
With the project scoped and a wealth of insights gathered through engagement, it’s time to figure out where to from here. In this stage, we focus on really nailing the big picture funding model, solutions and options. At heart, the navigate phase is about identifying if major change is required and what form this is likely to take.
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Shape
Shaping is a combination of digesting insights, facilitating deep conversations, bringing stakeholders along on the journey and building out additional detail. This phase is the practical crafting, refining and development of the new funding model. It is the facilitation of robust debate and the bringing together of different perspectives that will strengthen the thinking, identify opportunities and, ultimately, deliver something practical that will improve financial sustainability and performance.
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Execute
Execution is focused on where to from here. Depending on the project itself, the execute phase can take different forms, including a roadmap to transition to a new funding model, a final business case to share with a funder or an action plan to rollout a new grant model.
A little about the different not-for-profit funding services we provide
We provide a range of services that full under the funding bucket including:
New revenue exploration to grow and diversify not-for-profit revenue;
Business case development to identify and pitch significant opportunities for greater impact;
Grants reviews to review and enhance how grant-makers allocate funds; and
Corporate sponsorships and partnerships that drive mutual benefit for not-for-profits and private sector organisations.
Our favourite tools and resources to grow and diversify revenue
We regularly post our reflections and insights to our Ensemble Strategy blog, which you can access here. This includes a recent article we wrote for grant-makers and funders about rethinking grant models, available here.
There are a whole range of great resources on not-for-profit funding out there. You can find a few of our favourites below:
The Australian Charities and Not-for-profit Commission (ACNC) provide overview information on charities and fundraising here and corporate partnerships here.
NFP Law have put together helpful summary information on not-for-profit grant funding here.
The Stanford Social Innovation Review outline 10 common not-for-profit funding models here.
Philanthropy Australia, the Centre for Social Impact and Social Ventures Australia recently collaborated to write Paying what it takes: Funding indirect costs to create long-term impact. You can read the full report here.
Not-for-profit and social enterprise grant opportunities can be found through The Funding Centre (see here), Australian Tenders (see here), Social Change Central (see here), Pro Bono Australia (see here) and various government websites (see here), to name a few.
