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How to make a start evaluating your funding mix

Getting started with anything is tricky – the classic intimidating piece of white paper. However, getting started with evaluating an organisation’s funding, when it may be an extremely complex picture, interwoven with history and delicate relationships can be particularly daunting. This guide advises on how you can go about evaluating your organisation's funding mix.

1

Establish where an organisation sees itself

Organisations often fall into one of two camps:

1) The organisation thinks their funding is fine – they have enough money for the time being and are busy delivering work. This is typical of those who are in the middle of a large grant, or who have historical funding. These days I see less of this type of organisation, but often organisations know that their funding has reduced, but think that they are probably ok for the time being and find delivering their work easier than tackling the funding question.

2) The organisation is worried about not having enough money. But aren’t sure where the problem is – and tend to assume that they just need to make more funding applications, or find a magic three-year grant or major donor. These organisations often have very shallow strategies based on assumptions and headlines – such as ‘It has been said that corporates will recover from the recession first, so we are going to invest in pursuing corporate support’.

Maybe one of these sounds like your organisation? They are the hallmarks of an organisation that is not particularly financially sustainable. Or maybe you know full well that you need to look at your funding afresh, but need some pointers. Examining these attitudes helps to think about the cultural obstacles you may face – and whether you need to do some groundwork there.

2

Work out how urgent the need for funding is

If the need is critical – you have less than six month or a year’s running funds and have no clear picture of where this income could come from, then the evaluation you need to do is simple…

1) Look at your existing income and talk to all your warm contacts and existing funders about emergency funding. If you are lucky enough to have a database of contacts, then you could launch an emergency appeal. If you have a few major donors or large trusts or other funders on board, then you could ask for a transitional amount to enable you to develop a more sustainable funding approach. Who do you know? Who do your contacts know? What favours can you call in?

2) If those conversations aren’t fruitful, you will need to cut your budget

3

Interrogate your figures

If you have a slightly more robust financial picture, then we can start to look at interrogating your figures a little more. NCVO have a tool called the Income Spectrum which helps you to do this.

1) Split your income into the four broad categories – gifts/donations, grants, contracts and traded income. If you have any social investment or loan finance, keep this separate as it is a financial enabler, not income as such. Some organisations may also have income from investments.

2) Broadly analyse these income streams – how many separate funders/donors do you have within them? How much of your total income do they account for? If you plug this data into a spreadsheet you can easily generate a pie chart that can show you quickly how risky your portfolio is. Does the majority of your income come from just a few sources or have you got a broad portfolio?

3) Now you can delve deeper. Start thinking about the risk factors that may underlie your funding. Are there any risks that could impact on a large proportion of your income? For instance, which areas of your income are impacted by government policy? Which are impacted by the stock market? What about your ability to deliver outcomes? This should be a team activity – or at least get opinions and ideas from a range of people. You are unlikely to identify all the relevant risks on your own.

4

Take action

Once you’ve had a go at the three steps above, you are faced with two actions to improve your financial sustainability.

a) Try to reduce the likely impact of the risks you’ve identified

b) Diversify your income to reduce your exposure to risks.

Both need quite a bit of involved work – research, analysis, problem solving and probably innovation too. But by tackling them – and continuing to tackle them, you should be able to take appropriate steps for your organisation to become more financially secure in future years.

There is also a further step…

c) Evaluate the other aspects of your organisation that may be holding back your success. Our Sustainable Sun Tool can help you to do this.

Further information

Ros Jenkins contributed to this guide - Ros was a consultant specialising in sustainable funding at NCVO. Find out more about NCVO consultancy or more about Sustainable Funding.

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Page last edited Jul 10, 2017 History

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