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sense of certainty |
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| Having
a source, or sources, of reliable, predictable funding is
of obvious benefit to any organisation. Sandra Haurant examines
how sustainable funding streams can be established, and some
potential pitfalls of which to beware |
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The
charitable sector means business these days. It has to. A
growing number of organisations have to fight for grants,
donations and support, often from the same sources and at
the same time.
The result is that organisations find themselves pulling in
several directions. All of a sudden, from the outside world
it begins to look as though the charity exists to raise funds,
and not to pursue its chosen goals and serve its beneficiaries.
As more and more charities are discovering the only way to
survive is to move toward a method of funding that is efficient,
reliable and above all sustainable. It sounds very straightforward,
but how does a charity move smoothly from hunting for money
wherever it can to having a sustainable funding stream?
“Sustainability starts with planning, not with chasing
funding,” says Graham Collins, project manager for the
NCVO’s specialist Sustainable Funding team. “It
needs a lot of work and organisation.”
To begin with, a firm understanding of how your charity works
is vital. You need to have a very clear picture of your mission,
what your beneficiaries need, and how you will go about providing
that, on top of doing the sums. Victoria Anderson, head of
grantmaking at the Charities Aid Foundation, says: “You
must know exactly what you need, what it will cost and what
your organisation costs to run.”
These initial stages are also the best time to engage with
trustees. After all, any plans to change the way an organisation
is funded could be vetoed by the board. And besides, they
could be very useful. “With any change of income source,
you need to get the whole organisation involved,” says
Collins. “The trustees are often overlooked. In fact,
you often have a good mixed group of people with an untapped
wealth of expertise.”
Perhaps members of the board of trustees have experience in
finance or legal matters, and can help in the initial stages
of planning a new funding regime. “Run it past them,
make sure you have the sums right, tap into their expertise.
Bring them on board from day one and work with them,”
urges Collins.
With the trustees’ help, evaluate the most appropriate
sources of income available to the organisation. The main
forms of funding fit in to one of two categories: asking and
earning; with grants and donations falling into the former
and the sale of goods and services the latter.
For some organisations, grants and donations remain the most
suitable form of funding. And they can be sustainable. Indeed,
argues Anderson, they do not even need to come from diverse
sources to be so. “They just need to be solid,”
she says. The trouble is, there are a lot of organisations
out there chasing the same funds, and this sort of competition
quickly erodes the reliability of grants and donations.
For other charities, operating purely through trading is the
most appropriate approach. Collins cites the example of the
Ealing Community Transport group, which runs huge contracts
and deals in a range of services from buses to recycling,
and relies on these for its income.
For many organisations, though, avoiding having all those
golden eggs in one basket is key. Grants can dry up, or come
with too many strings attached, donors may be drawn to other
charities, and a contract can come up against commercial competition
and be lost.
Balancing those risks may be a question of obtaining grants
and donations from diverse sources, or, in the case of trading,
building up a portfolio of contracts rather than relying on
just one.
Or it may mean using a combination of asking and earning to
bring about the most sustainable income. “Many charities
use a mixed funding approach,” explains Chris Harris,
director of finance and resources at Action for Blind People.
“This means a variety of funders and a variety of different
types of income.”
That might include regular givers recruited on the street
or door to door, which does provide a predictable income but
is expensive to recruit and maintain, as well as legacies,
which are cheap but unpredictable. There are also then trusts
and major donors and income from trading contracts. “Some
charities achieve full cost recovery and more through their
contracts, which is sustainable, while others intentionally
subsidise from general fundraising, which can be sustainable
too,” says Harris.
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For some charities, trading, in the form of charity shops
for example, provides a solid financial base combined with
donations and grants. For others, a supplementary income from
trading can be invaluable in creating a reliable income.
“Very often, it’s about finding a hidden asset,”
says Collins. For example, a Scout group with a hut full of
marquees could decide to hire them out for events. A charity
with property could rent rooms out to local groups. An organisation
with specific skills could offer training in conjunction with
a local college, and charge a fee.
Collins explains how one small charity that had long been
sending out a newsletter to the community realised the publication
was getting a bit tired and decided it was time for a revamp.
To fund the changes and give itself a regular income at the
same time, the group decided to sell advertising space to
local businesses on the pages of the magazine.
In these cases, the assets were already in the hands of the
organisations, it was just a question of thinking laterally
and getting financial value out of them. The potential cash
cows are related to, even bourne out of, the charity’s
mission. It just takes the imagination, and in some cases
the confidence, to charge for those assets, which are of value
and which can improve sustainability.
Other charities embark on enterprises that take them outside
of their current comfort zone and into a realm that has very
little, or even nothing, to do with their ultimate goal. This
might come in the form of selling items such as Christmas
cards. The product or service is unrelated to the charity’s
mission, but it nonetheless increases profile and brings in
income.
Another popular strategy currently is to open up a community
café. It sounds simple enough. Making tea, coffee and
cakes is hardly rocket science, and if there is a suitable
venue and equipment available what could possible go wrong?
Unfortunately, it seems, quite a lot. “A lot of charities
underestimate the costs involved. In the end, the very thing
that was supposed to be earning an income starts costing them
money,” says Anderson. And before you know it, a serious
case of mission drift sets in, and the organisation spends
more time and energy chasing money to keep what was once its
brilliant sustainable funding idea alive than it does fulfilling
its charitable aims.
A scheme called Only Connect, sponsored by Triodos Bank and
managed by NCVO can help to prevent such disasters. The initiative
puts people planning to set up enterprises in touch with other
groups who have done something similar. It then offers bursaries
to cover the travel expenses for the visitors and a fee for
the organisation receiving them.
Sue Cooper, loan manager at Triodos, says: “People find
that they are asking questions that they didn’t even
know were there. They are benefiting from the experience of
someone who has been there, and learning from their mistakes.”
The visitors may walk away with a clear idea of how the project
could work for them, and how to avoid the pitfalls they had
not yet thought of. On the other hand, it may be that they
decide the scheme is not for them and dismiss the whole thing
out of hand. And that might be the best result they could
have had, saving a lot of time and money for all concerned.
After all, if the plan for sustainable funding, whether that
comes from grants, donations, enterprise or a mixture of those
things, is not right for your organisation, the chances are
it will not work. The NVCO’s Sustainable Funding Team
says organisations need to think of the “three Ss.”
The strategy needs to be stable (so from a solid source) –
suitable (in other words in line with the charity’s
ethos) – and sufficient (so big enough to cover costs,
and more if need be).
Whatever style, or combination of styles, of funding makes
up a sustainable funding strategy, it must always be a good
fit for the charity. In short, says CAF’s Anderson:
“You need a robust funding strategy that is in line
with your ethos.”
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