In 2012, according to Giving USA, foundations contributed 15% to the overall philanthropic pie, while individual giving accounted for 72% of it. It is wise for nonprofits to keep those proportions in mind when they are developing their annual fundraising plans.
Although foundation grants are a small chunk of philanthropic giving, it is an important one, and most nonprofits do or will pursue those grants. The question is where they should look for grants, and how much time and energy they should pour into the grant seeking process.
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, and 2) 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, so nonprofits cannot assume that the opposite would be true for revenue streams. Foundations and corporations may be giving big gifts at one time, 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."
More from April:
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 an issue."
More from Jake:
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 typically be more open to funding general operating support (general operating grants are far less tedious to administer), and the small to mid-sized foundations have stepped up their grantmaking rather than decreasing. Look to see if your state publishes a foundation directory. Also look to see if your state has a regional grantmakers association. The Council on Foundations is a helpful resource."
More from Pamela:
- How Much Should You Request in Your Grant Proposal? How Much Do You Need?!
- 8 Grant Writing Myths Busted
How One Small Nonprofit Manages Its Grants Program
TROT (Therapeutic Riding Of Tucson) is a small nonprofit (about $5001,000 budget) in Tucson, AZ. It provides therapeutic horseback riding to children with special needs and veterans.
TROT's income is from fees charged to clients, special events, annual giving, and grants. About 30% of its income is from grants. Those grants come from local entities. Here are some of the recent sources of those grants:
- The PICOR Charitable Foundation
- The Elizabeth Read Taylor Foundation
- The Maurice & Meta Gross Foundation
- Tucson Electric Power Company (grants program)
- 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 are from local, rather small foundations. The largest grant was for $50,000.
There are no hard and fast rules for any nonprofit’s fundraising program, but diversity seems to be important so that the loss of any one source would not be fatal. Also, and especially for small nonprofits, a grants program is entirely possible and is likely to be built on a base of strong local support.