Funding sources for non-profit organizations

One of the most discussed methods of entrepreneurship in non-profit organizations. Some think that because it does not directly benefit the entrepreneur, where applicable, it does not qualify to be a business venture. However, there are many more, with proof, who feel that non-profits are just an excellent entrepreneurial venture as any other. 

The confusions come in with the definition of the term entrepreneurship. There has been no specific definition that is definite. Going by the closest, one that describes entrepreneurship as an innovative practice of seeing an opportunity and following different measures to exploit and gain from the venture, we can say non-profits are indeed entrepreneurial. Thus, entrepreneurship does not only benefit participants in terms of money by how they relate and interact too.

Non-profit and for-profit; the differences

Among the biggest headaches for non-profit managers is the resources needed for the project, how to find it, and why there is never more of it. In these tough economic times, answering such questions can prove very difficult. One side, leaders of such organizations, are quite sophisticated about how they fund the projects, and on the other, are philanthropists who are in a constant struggle to understand the effects of the sources of the donations.

There will be problems in areas where the finances don’t account well. At the very least, the money will flow effectively to the areas it is much needed where funding sources are not matched accurately. The result of such confusion is an abrupt end. Some of them are never even launched because their future is dark. Without proper funding, chances of a chaotic fundraising scramble are very high.

In for-profit organizations, a higher degree of clarity on money matters is needed, which contrasts the situation non-profit scenario. It is true more so when you consider the operation module of a business and the principals known as business modes. It may not be clear about the number of business models, but we can all agree about how investors and executives engage in strategic organizations for their companies. Terms such as “low-cost provider” and “fast follower” are used to outlines how the company operates. The “razor and razor blade” represents a particular customer relation that far greater than shaving the products.

In a non-profit organization, any engagement about funding strategies has to be long-term. This is because non-profit organizations cannot rely on only one funder to run business. There are different sources that mist all work together, creating a cohesive environment for the success of the company. Leaders have the greatest task of identifying the means and models that will work with a specific model to produce desirable results.

One thing we must understand clearly is that beneficiaries are not customers. Since there is no lexicon of funding models in non-profit models, running one is more complicated than running a for-profit business model. In for-profit businesses, customers are generally the greatest source of revenue as they pay for value. This is not true for non-profit organizations, except in very rare cases. And if a non-profit organization has discovered a way to have customers pay for value, that becomes its most considerable economic fuel.

As stated above, it is quite challenging devising a framework for non-profit funding. Some models, for instance, can be too specific. For example, a clinic based in a particular community and service customers funded by Medicaid and an organization supported by say, the U. S Agency for International Development, both receive funding from the government. However, those involved in decision making and controlling the flow of funds are different.

Three parameters define the funding models for a no-profit organization: the source of funds, the type of decision-makers, and what motivates decision-makers. Based on this, there are several funding sources we can mention. Consider the following.

Heartfelt connector

In some nonprofits, like Make-a-Wish foundation, the focus in place on causes that echo existing concerns among a specific group of people. They create a structured way for these individuals to relate in ways that did not previously exist. Such a funding model is called Heartfelt Connector. They include causes like environmental, international, and medical research institutions. Many people confuse them with nonprofits that leverage religious beliefs, political leanings, and sporting interests. While these are people who join hands in a course to express their interests, the Heartfelt Connector tries to construct explicit connections between volunteers, by use of special fundraising events.

Beneficiary builder

The Cleveland Clinic and similar nonprofits rely on former beneficiaries of their services in the past to fund their projects. Though they are reimbursed for the services they provided to individuals, they still need sources of funds to offer services. These additional donations help them sustain their operations and expand their roots. Such an organization uses a funding model called Beneficiary Builder. The beneficiaries pay a certain amount of fees, which is then channeled to specific areas of the organization. Although they are small, these funding sources are critical to the sustenance of the organization. Princeton University is another good example of an organization that uses this approach.

Member Motivator

The model Member Motivator uses goodwill donations from members of the organization. These individuals put together something for the collective benefit of the organization, and they form a crucial aspect of the organization. Such nonprofits do not create the rationale for group activities; instead, they offer support and for the activities different member seek, and in the process, connecting them.

Public Provider

Government agencies are among the largest providers of funds for nonprofits. For instance, Success for All Foundation works with government agencies to offer essential social services. The government may have allotted funds for services such as housing, human services, and education, which these nonprofit organizations are mandated to implement. Such and model is called Public Provider. In many instances, however, they will find other sources to supplement their funding as they grow.

There are many other funding sources for nonprofits. Besides the ones described above, others include Policy Innovator, Beneficiary Broker, Resource Recycler, Market Maker, and Local Nationalizer. Whatever model and organization take, success depends on cash-flow coordination.

Author: James Hamilton