Accepted Nonprofit funding models give backbone to your projects
Nonprofit Funding Models
Stanford University Research
The main focus of my career is writing grants for nonprofit organizations. I do grant funding work that helps to raise money for organizations in the global health and environmental areas. Part of that work is identifying different organizations' funding strategies and business models.
Be sure to read my post on grant writing vs proposal writing. And my post on grant writing logic models.
This does not include selling t shirts or tote bags. Nor does it rely on your best friend or family members. A funding model is a business model
The goal of any funding model is to achieve sustainability for your organization. Each model below relies on a different type of revenue stream to gain financial stability for their group. All models in some way rely on strong relationships for some peer-to-peer fundraising. Each model has a unique approach to finding that key funding source.
There are many types of models and each has a unique approach to provide services, cover overhead costs, and have a different implementation plan. Writing grant proposals and grant applications for your nonprofit helps to understand promising funding sources and funding opportunities are out there beyond grant programs.
These models provide an additional reliable revenue base or revenue stream that is useful to note on your grant application. Funders want to see that your program is sustainable. In your grant proposal, several funders want to know how you are moving to maintain after the money from the grant runs out. How will you continue to survive? Research projects, capacity building, and even some federal grants expect you to note your continuing funding sources.
In kind donations are not really a source of funding. You can list that, but in kind donations are not considered funding sources. What funders are looking for is outside of grants what are your revenue streams and funding success stories?
The following is a summary of Stanford University's research as published in the Stanford Social Innovation Review of different budget models for nonprofits.
For a list of 2023 Grants
Heartfelt Connector -
This funding model is The Make a Wish Foundation and the Susan G. Komen Foundation for breast cancer research model. They differ from groups that rely on individuals with particular religious, political, or sporting interests to form positions to express those interests. Through special fundraising events Heartfelt Connectors attempt to develop explicit connections between volunteers.
Heartfelt Connectors often try to build explicit connections between volunteers through special fundraising events. This involves some social entrepreneurship to reach a large number for special events and key sources of income.
Beneficiary Builders -
This is the venue of health care institutions. Hospitals and universities are two of the best examples of Beneficiary Builders. The vast majority of these NGOs for developing countries income comes from fees collected from recipients in exchange for the services they provide. However, the fees do not cover the complete cost of providing the service. Generally, the vast majority of these organizations’ funding comes from fees that beneficiaries pay for the services the organizations provide. However, the total cost of delivering the benefit is not covered by the fees. As a result, the nonprofit tries to build long-term relationships with people who have benefited from the service to provide supplemental support, hence the name Beneficiary Builder.
Member Motivator -
Some nonprofits rely on individual donations and use what we term the Member Motivator funding model. Here individual donors (who are nonprofit members) pay money because the issue is relevant to their everyday lives and something from which they all benefit. Nonprofits using the Member Motivator funding model 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.
The National Wild Turkey Federation (NWTF), which protects and expands wild turkey habitats and promotes wild turkey hunting, is an example of a Member Motivator. It attracts turkey hunters, who collectively benefit from NWTF’s work and therefore become loyal members and fundraisers.
Big Bettor -
This funding model will rely on one or very few donors. Usually focused on medical research or environmental issues. This is common in international development circles. There are a few organizations, such as the Stanley Medical Research Institute, that rely on major grants from a few individuals or foundations to fund their operations.
Conservation International (CI), whose mission is to conserve the Earth’s biodiversity and to demonstrate that humans can live harmoniously with nature, is an example of a nonprofit that uses the Big Bettor funding model.
Public Provider -
Many groups collaborate with government agencies to deliver critical social services, such as housing, human services, and education, for which the government has set aside funds. As Public Providers grow, they often seek other funding sources to augment their funding base. In some cases, the government outsources the service delivery function but establishes specific requirements for nonprofits to receive funding, such as reimbursement formulae or a request for proposal (RFP) process.
TMC (formerly the Texas Migrant Council), which supports children and families in migrant and immigrant communities, is an example of an organization that uses the Public Provider funding model.
Policy Innovator -
These non profits have devised innovative approaches to addressing social challenges that are incompatible with current government funding systems. These are long-term projects. Such organizaions have developed novel methods to address social issues that are not compatible with existing government funding programs. They have convinced government funders to support these alternate methods, usually by presenting their solutions as more effective and less expensive than existing programs. Sometimes they are a for-profit group.
An example of this type is HELP USA. This organization provides transitional housing for the homeless and develops affordable permanent housing for low-income families.
Beneficiary Broker -
These groups compete with one another to provide government-funded or backed services to beneficiaries. What distinguishes these nonprofits from other government-funded programs is that the beneficiaries are free to choose the organization from which they will get the service. Among the areas where Beneficiary Brokers compete are homeless shelters, employment services, health care, and student loans.
Resource Recycler -
Sometimes Nonprofits have grown large by collecting in-kind gifts from businesses and individuals and then distributing these donated products to those who could not afford to buy them on the open market. In-kind donations typically account for the majority of revenues, but Resource Recyclers must raise additional funds to support their operating costs. The vast majority of Resource Recyclers are involved in food, agriculture, medical, and nutrition programs and often are internationally focused.
Market Makers -
Some groups provide a service that is motivated by both philanthropic donors and market factors. Even if money is available to pay for the service, a for-profit organization would be improper or illegal to do so. Market Makers operate as nonprofits and generate the majority of their revenues from fees or donations that are directly linked to their activities.
The American Kidney Fund (AKF) is an example of a nonprofit that uses the Market Maker funding model. AKF was founded in 1971 to help low-income people with kidney failure pay for dialysis and organ donation.
Local Nationalizer -
These organizations focus on issues which are important to local communities across the country, such as poor schools or youngsters in need of adult role models, where the government alone cannot fix the problem. Government grants and fees account for only a small source of revenue. The main funding sources for these groups come from social entrepreneurship and go to the organization’s care programs. These are very much locally based operations.
Teach for America (TFA) is an example of a nonprofit that uses this funding model.
There are other nonprofit business models not mentioned above. Those include nonprofit virtual fundraising, using social media, your nonprofit website, corporate sponsorships, and email newsletters all are sources for fundraising.
What are some lesser-known ways to raise nonprofit money?
Newsletters -