Part 13: 🌳 Diversified Revenue Is a Leadership Strategy

Let's start by getting one misconception out of the way.

There is no perfect nonprofit revenue mix.

Your organization does not need to receive 20% of its revenue from individuals, 20% from foundations, 20% from government, 20% from corporations, and 20% from earned income to be financially healthy.

There is no one-size-fits-all formula.

Your revenue strategy should reflect your mission, your programs, your constituency, your relationships, and the opportunities available to your organization.

A membership organization with thousands of deeply engaged members may appropriately receive a significant portion of its revenue from individuals.

A human-services organization providing publicly funded services may rely heavily on government contracts.

A museum or performing arts organization may generate substantial earned revenue through admissions or ticket sales.

Another organization may have strong corporate partnerships or foundation support.

Those differences aren't necessarily problems.

The goal isn't equal percentages. The goal is a thoughtful mix.

🥧 Your Revenue Mix Should Look Like Your Organization

I sometimes think about revenue diversification like a pie.

Every organization will have different-sized slices.

And that's okay.

If you have a large, committed individual donor base, individual giving may—and probably should—represent a larger slice of your pie.

That can also offer something particularly valuable: Flexibility.

Individual contributions, particularly unrestricted gifts, may give an organization more flexibility in how resources are used than a restricted foundation grant or government contract.

That flexibility matters.

It can help pay for infrastructure.

Respond to an unexpected need.

Invest in something that isn't easily grant-funded.

Or allow leadership to direct resources where they're needed most.

The question isn't: “Do our percentages look like another nonprofit's?”

It's: “Does our revenue mix make sense for us?”

⚠️ Diversification Is Also About Risk

There's another question that's just as important: What happens if our largest revenue source disappears?

⚡ Because circumstances change.

⚡ Foundation leadership changes.

⚡ Funding priorities change.

⚡ Major donors change their giving.

⚡ Government administrations and policies change.

⚡ Contracts end.

⚡ Economic conditions affect individual giving and earned revenue.

And, as we saw during COVID, circumstances completely outside an organization's control can disrupt revenue almost overnight.

More recently, nonprofits have experienced significant government funding cancellations, freezes, delays, and stop-work orders. Urban Institute research on government funding disruptions found that organizations experiencing these disruptions relied more heavily on government funding than nonprofits overall and were more likely to reduce staffing and programming.

Don’t get me wrong – the lesson isn't that government funding is bad.

It isn't.

Government funding supports critical nonprofit services throughout the country.

The lesson is broader: Too much dependence on any single revenue source creates vulnerability.

🧱 One Strong Column Isn't a Strong Foundation

Imagine an organization with a $1 million budget.

One funder provides $600,000.

The organization has several other grants, some individual donors, and perhaps a small amount of earned revenue.

Technically, it has multiple revenue streams.

But is it diversified?

I'd argue that we need to look deeper.

Because if that $600,000 disappears, the question isn't simply how many other funders are on the list.

The question is: Can the organization continue operating?

This is why diversification isn't simply about counting revenue sources.

It's about concentration.

One foundation shouldn't have the ability to pull the rug out from under your organization.

Neither should one government contract.

One major donor.

One corporate partner.

Or one annual event.

You may not be able to eliminate that vulnerability immediately.

But you should know it exists.

🌱 Diversification Takes Time

Here's the part I don't want nonprofit leaders to miss:

You don't fix revenue concentration by suddenly chasing every kind of funding available.

Remember Part 12: Funding should support your strategy. It shouldn't become your strategy.

🛠️ Building individual giving takes relationships.

🛠️ Building corporate partnerships takes relationships.

🛠️ Government funding may require systems, compliance capacity, and cash flow.

🛠️ Earned revenue requires a viable market.

🛠️ Events require significant time and resources.

Each revenue stream has its own costs, opportunities, restrictions, and risks.

So diversification should be intentional.

Maybe your goal isn't to reduce government funding.

🌱 Maybe it's to grow individual giving alongside it.

🌱 Maybe you want to retain strong foundation partnerships while gradually building earned revenue.

🌱 Maybe you have hundreds of people who already care deeply about your mission

but have never been invited into a meaningful individual giving program.

Diversification doesn't necessarily mean replacing what's working.

It means building alongside it.

🌟 Why This Matters to Funders

Funders think about sustainability too.

When they're considering an investment, they may want to understand:

What happens after our grant ends?

Who else supports this work?

Is the organization building other relationships?

Can this program continue without us?

A diverse revenue strategy demonstrates that your organization isn't expecting one funder to carry the entire mission.

And perhaps more importantly, it gives your organization greater freedom to make decisions based on what your community needs—not simply what one revenue source will pay for.

Diversification creates options. Concentration creates vulnerability.

❤️ Heart Check

Look at your current budget.

What percentage comes from your largest revenue source?

Now imagine that source disappeared tomorrow.

Not gradually.

Tomorrow.

What happens?

Do you reduce programs?

Lay off staff?

Dip into reserves?

Immediately begin searching for another large grant?

Or do you have enough other revenue, relationships, and flexibility to make thoughtful decisions about what comes next?

This isn't about creating fear.

It's about understanding your exposure.

You can't manage a financial risk you haven't acknowledged.

✅ One Thing You Can Do This Week

Create a simple Revenue Mix Snapshot.

List each major revenue category and the percentage of your total budget it represents:

➜ Individual giving➜ Foundation grants➜ Government grants/contracts➜ Corporate support➜ Earned revenue➜ Events➜ Membership➜ Other sources

Then ask:

• Does this mix make sense for our organization and constituency?

• Which revenue source gives us the greatest flexibility?

• Where are we overly dependent?

• Which revenue stream could we realistically strengthen over the next three years?

  
  

Don't compare your percentages to another nonprofit.

And don't try to change everything at once.

Instead, identify your greatest vulnerability and one realistic opportunity to strengthen another source.

Because a financially healthy organization doesn't need every type of revenue.

It needs the right mix of revenue—and enough diversity that the loss of one source doesn't threaten the entire mission.

🌱 Join the Journey

Next Week – Part 14: 💡 The Budget You Wish You Had

We've spent a lot of time talking about the budget you have.

Next week, I want to try something different.

What would your budget look like if you stopped beginning with: “How much money do we have?”

And started with: “What would it actually take to do this work well?”

Not extravagantly.

Not irresponsibly.

But well.

Next week, we'll explore how imagining the budget your organization actually needs can reveal the investments, capacity, and resources you've learned to go without.

Join me next week as we continue building financially healthy nonprofits -- one conversation at a time.