Nonprofit Network Blog

Reading Between The Lines With Funders

Thursday, December 03, 2020 1:19 PM | Tracey Wilson (Administrator)

Laura Fuller
Capacity Builder

One of the most critical skills in being a successful leader is the ability to read between the lines.  This is doubly true when it comes to conversations that nonprofits have with funders.  They say hindsight is 20/20, and I don’t think they’re wrong.  There have been several occasions that, looking back on conversations, I recognize that I was in fact given a subtle warning about whether there would be a change to a funding stream. If only I had recognized the hints that they dropped.

I feel it’s important that I share these types of hints with you, as we are all experiencing a lot of upheaval in our financial reports due to changes in programming, events, and general life during COVID.

First and foremost, it is important to realize that most funders do not intend to fund an organization forever.  This is especially true if they’re funding a specific program.  Often this is self-evident as funders often indicate at the proposal stage that funding is limited to a certain time frame.  But even when a nonprofit finds the golden opportunity of a funder that is willing to support operating costs, too often we become complacent, thinking that the support will continue over the long haul. 

Suggestion: Have a conversation with funders about their expectations for you to be supported by them, how long they usually fund organizations, and whether you are eligible to reapply at the end of your funding cycle.  Have it during the proposal stage.  Most funders prefer to have those frank conversations and set expectations at the beginning.

Another thing to be aware of is that funders do not want to prop up an organization that couldn’t exist without them.  In fact, if one funder provides your organization with more than 33% of its revenue, it puts you both in a very awkward position with the IRS, especially if it continues over a period of time.  If a funder finds out that other revenue streams are drying up, they are also much more likely to not fund you.  That does NOT mean hide the reality from them.  That means you need to find a way to diversify your funding and ask the hard questions about WHY you are currently struggling to find support.  Sometimes it is something outside of your control (Covid, anyone???), but often it’s because of mission drift or failing to connect with a real need in the community.

Suggestion: Don’t wait until you’re in crisis to develop a diverse funding plan that is a combination of grants, gifts, and income for services.  If you wait until you’re in crisis, you’ll have a much harder time of it!  So put this on your To Do list today.

Funding priorities change.  Even the most stable stream of revenue from a funder can end when the board shifts priorities.  Don’t be caught unaware.  The best way to avoid this is to have a good relationship with your funders.  The more they know you and feel like your organization is working hard at achieving its mission, the more lead time you will have when this sort of thing happens. 

Still, this lead time often comes by reading between the lines. 

For example, I worked for an organization that had received stable funding for a program for 6 years before I started in my position.  When I came on, I was told by my board and long term staff that the grant application was a mere formality because the funder LOVED the program.  When I went to meet with the program officer (along with one of those long term staff), we were told to be sure we got the application in as soon as possible because money was tight this year.  We did as instructed and three months later were SHOCKED when we were not renewed for the grant.

The big hint I was given was the subtle comment that money was tight. 

Had I not been new, had I been more embedded in the political climate, I would have known that priorities had shifted from supporting educational programs to safety programs.  I also would have realized that we had already been funded for 6 years for this program, and I would have put priority into finding ways to diversify the funding stream.  Alas, this was a horrible shock that meant I had to lay off staff and scramble to keep this program alive as the community thought it was important.

The moral of this story is to be proactive.  Ask the tough questions, diversify your funding streams, and be ready to shift your programs.  Don’t get stuck in the rut of thinking nothing will change, because change is constant. And right now, things are changing a lot.  Funding is changing to meet new priorities. Tax dollars have dried up meaning that government support may no longer be available to our programs. 

Get ahead of this potential concern, work on creating your strategic funding and communications plans now!  If you need help, guidance or ideas, please know we’re here for you!

You may also be interested in our Recorded Workshop: *Crisis Fundraising: Donor Conversations During Coronavirus 

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