Should Your Small Nonprofit Go After Grants?

Think About Diversity, Location and Proportion

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There are no hard and fast rules for any nonprofit’s fundraising program.

However, three elements seem to have outsize effects on fundraising, especially as it applies to grants. 

  1. Diversity of Sources counts for a lot. The idea is to have several baskets of income and several grants in the works so that the loss of any one funding source will not be fatal. 
  2. Thinking Local.  Local community sources of financing seem to work best for small nonprofits. Locally-based family and corporate foundations prove to be good hunting grounds when it comes to grants
  1. Proportion. All nonprofits, no matter their size need to be realistic about fundraising. Many new nonprofits think they can solve their funding problems just by finding grants That just is not true.  

In 2014, according to Giving USA, foundations contributed 15 percent to the overall philanthropic pie, corporations gave 5 percent, while individual giving accounted for 72 percent of it. 

It is wise for nonprofits to keep those proportions in mind when they are developing their annual fundraising plans.

Grants, while important, should be secondary to raising money from individuals.

However, most nonprofits do pursue grants. The question is where they should look for them, and how much time and energy they should pour into the grant seeking process.

Picking the Brains of Three Fundraising Experts

I asked three grants professionals for their opinions on two questions:

  1. Is there a recommended ratio of grants to other income for small nonprofits?
  1. Where should small nonprofits look for grants?

Here is what they said:

April A. Northstrom, Pathway Associates

"It is difficult to put an exact formula to the ratios that small, medium and large nonprofits 'should' depend on grant funding. My own belief, through experience and research, is that any organization should not be more than 25% dependent on any type of grant funding.

"Funding from foundations and corporations is usually responsive to the economy and thus, just like with any investment, you don’t want all of your eggs in one basket. Even foundations don’t want you to be too dependent on their funds and usually like to see multiple funders supporting one project or program.

"I usually like to say 10-15% of nonprofit revenue can come from foundations and 5-10% from corporations. The majority of charitable contributions still come from individuals. Foundations and corporations may be giving big gifts,  but individual donors account for approximately 72% of charitable revenue. (Giving USA Report, 2013).

"Where should a small nonprofit look first for grants? If your organization has never applied for a grant or doesn’t have a large number of donors, then local funding is the best place to start. You need to build credibility for your organization and build a group of supporters who will vouch for your success.

"If you are based in Oregon, have never received grant funding and apply to a foundation in Florida, where no one knows you, doesn’t see the value of your work, doesn’t know your Executive Director or doesn’t read about you in the local newspaper, your chances of winning funding are pretty slim. Why would they fund you when they can support a similar project closer to home?

"One of the biggest and most often overlooked factors in winning foundation funding is relationships. You need to build those first. After you have received support locally you can then move to regional and national funders.

"Databases are wonderful resources to help small organizations find funders who support a specific type of organization or field of interest. 

"However, don’t forget to look at annual reports and newspaper articles. Who is giving to organizations that are similar to yours? Put any likeminded funder on your mailing list and start sending them materials about your organization (not too many) and the importance of your mission. Don’t let your proposal application be the first time a foundation hears about your organization."

Jake Seliger, Seliger and Associates, Grant Writing Confidential

"How much should a small nonprofit depend on grants? As much it needs to. Some small nonprofits depend almost entirely on grants, while others don't. Most nonprofits of any size or stripe prefer more money to less money, so it's almost always in the organization's interest to get grants when they can. There are four basic ways to get money for nonprofits: grants/contracts, donations, charging for services, and investment income.

"A lot of nonprofits are basically limited to the first two, which means that, unless they're lucky enough to have a rich donor pouring money on their heads, they're stuck with grants if they're going to get beyond the shoestring phase.

"Where should a small nonprofit look first for grants? Depends on what they're doing. If they're eligible for a federal grant, there's no reason not to apply. Most foundations only fund locally.

"One common misconception is that small or new nonprofits can't get grants. But, really, when it comes to grants, size of the nonprofit is not always an issue."

Pamela Grow, Grow Consulting PA, Pamela Grow Blog

"How much should a small nonprofit depend on grants? A small nonprofit should never be too dependent upon grants - they should always be looking to build their individual giving.

"A number of small nonprofits in our region have closed their doors in the past few years because they were too reliant on foundation funding.

"Is there an ideal ratio of grants to other funding sources? It depends and is so contingent upon a variety of factors. Does the organization receive government support? Program revenue?

"The small nonprofit, particularly newer nonprofits, should look to small to mid-sized regional foundations to begin to build their grant funding.

"Small to mid-sized foundations can typically be less restrictive in their grantmaking, can be more open to funding general operating expenses (general operating grants are far less tedious to administer), and the small to mid-sized foundations have stepped up their grantmaking rather than decreasing it.

"Find out if your state publishes a foundation directory. Also look a regional grantmakers association. The Council on Foundations is a helpful resource."

How One Small Nonprofit Manages Its Grants Program

To provide an example, I researched TROT (Therapeutic Riding Of Tucson). TROT is a small nonprofit (about $500,000 budget) in Tucson, AZ. It provides therapeutic horseback riding for children with special needs and veterans.

During a recent year, TROT's revenue came from fees charged to clients, special events, annual giving, and grants. About 30% of its income came from grants. Those grants were from local private and corporate foundations. Those foundations included:

  • The PICOR Charitable Foundation
  • The Elizabeth Read Taylor Foundation
  • The Maurice & Meta Gross Foundation
  • Tucson Electric Power Company
  • The William Edwin Hall Foundation, a supporting organization of the Community Foundation for Southern Arizona
  • The Roger I. and Ruth B. MacFarlane Foundation

All of these grants were local and most were from rather small foundations. The largest grant was for $50,000.

There is no typical ratio of grants to other income for nonprofits. It depends on a myriad of factors. But if you keep in mind the three ideas of a variety of sources, local funding opportunities, and proportion, your small nonprofit can achieve a healthy and sustainable basket of income.

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