Building Financial Resilience
Non-profit organisations and social enterprises often rely on grant-funding as a main source of income. Grants are usually competitive, involve a length application process and have processing times of between 3 and 6 months. They are also unsustainable — when you receive a grant you aren’t building a source of revenue, you’re replacing what you’re spending.
In contrast, building revenue streams mean that as your revenue grows, so can your impact. You can plan for the future, employ more people and grow your business.
Many foundations, non-profits and social enterprises could benefit from sustainable revenue streams, but don’t have the capacity or time to develop new business. This article will list some useful tools if you’re thinking about starting to build financial resilience.
How to Build Financial Resilience
Building financial resilience is about creating more than one revenue stream. When you are reliant on grant funding for all expenses you are prevented from planning ahead and are unable to scale your business and your impact. You are also tied to programme costs and instead of being able to innovate, you can only focus on delivering what the grant application has included.
In contrast, developing multiple revenue streams that are connected to delivering better services that have a positive impact on your customers mean you’re building financial resilience while also helping more people.
The following are some of the most popular social enterprise revenue models:
1. Buy 1 — give 1
Like Tom’s shoes, if you are selling products or services, you can sell one at full-cost that offsets the cost of the product for a user who is unable to pay. This could also be donation-based with more affluent users paying what they can, in turn, enabling more services to be delivered at a lower cost.
2. Subsidised services
Like above, subsidised services mean that you are still generating revenue but at a lower cost. Sometimes this might mean that you are only covering costs and not making any profit, but this would still enable you to grow and scale that offering.
3. Government contracts
Local governments will commission for services they need to provide, often tapping into the social enterprise and non-profit sector for assistance. Finding your local VCSO umbrella organisation can help you with the skills you need to submit applications for government contracts. Engaging in local tenders can be time-consuming, intensive and competitive. Smaller organisations coming together to form a strong partnership can make bidding for government contracts more manageable, and a consortium of organisations may be more attractive for complex service delivery contracts.
4. Consultancy work
Once you’ve established how to run a successful business, with or without grant funding, there will be other people who are keen to learn. Ask yourself: can you teach others what you already know? Is what you’re doing applicable to a wider variety of settings?
Grants and philanthropic funding can still help!
While we are trying to direct organisations away from grants and towards more sustainable funding sources, grants can give you the breathing room to develop a new funding source without having to take any risk. The most useful grants are those attached to further investment so that once you’ve developed the new revenue stream you can get investment to help scale the business.
In the UK, look to The Reach Fund. Grants are administered by ACCESS, an organisation that provides investment readiness grants to charities and social enterprises, and by working with one of the partner investors you can submit an application for a grant followed by investment.
In Canada, the Investment Readiness Program provides grants of between 10,000 and 100,000 CAD to organisations to launch, design, measure and scale their social enterprise.
In the US, there aren’t any nationwide blended finance programmes like in other parts of the world. There is an increasing awareness that blended capital can enable more investment and philanthropic organisations are allowing for their grants to be used as a starting point for further investment later on.
Building a resource of organisations that have multiple revenue streams. I hope that by building a resource of other organisations that have been through this process, you might be inspired to try for yourself. As well as a database of organisations, I’ve included a case study below.
Rivers to Ridges is an environmental education organisation, based in Whitehorse, Yukon, Canada.
I spoke to Erin about what she’d like the future funding of the organisation to look like, she asked for more of the same. That’s because Erin and Emily have spent four years building an organisation that has multiple revenue streams all of which support their core business and improve their impact. They’ve tapped into summer work grants to employ seasonal staff; built up a strong consultancy offer and secured contracts with the Canadian government; developed a great summer programme for kids that allows them to deliver services at a range of prices, and currently rely on a small number of grants to allow the organisation to innovate and take more risks.
I’ve always found it helps to follow examples of organisations that are similar to your own and have developed new revenue streams. I’ve put together a list of organisations and the revenue streams they’ve created, and it will continue to be updated. Please get in touch if you’d like me to add your organisation! Email me at hannahbarkan@gmail.com for free access to the list (and any ideas or comments).
Building Financial Resilience is difficult, risky, and might require investment, but it's worth it in the long-term. Being able to grow your business, and therefore your impact without focusing on raising money through grants it an incredibly gratifying feeling. Grant funding and philanthropy may still be appropriate for part of the work you are doing, but having several revenue streams means you will be prepared whenever a crisis threatens to cut off one of your funding supplies.
