Why Grants Might Be Less Profitable Than You Think
Grants are often viewed as a cornerstone of nonprofit funding, a seemingly straightforward path to significant financial support without the risk of face-to-face rejection. However, a deeper dive into the mechanics of grant funding reveals a more complex picture. For nonprofit development teams, understanding the nuances of grant profitability is key to a balanced and effective fundraising strategy. Let’s explore the hidden costs and challenges of grant funding and look at some tips to optimize your grant-seeking efforts.
Reassessing the Time-for-Dollars Ratio: When it comes to raising funds, not all methods are created equal. Historically, grant writing has been viewed as a reliable source of substantial funding. However, it's essential to consider the time-for-dollars ratio – the amount of time spent versus the financial return. Surprisingly, grants rank as the third hardest fundraising method, following direct mail campaigns (second hardest) and fundraising events (hardest). This ratio is a crucial metric for development teams, and there are a few reasons for this.
The Evolving Nature of Grant Funding: Over the past several years, the grant funding environment has become increasingly segmented. Previously, a single application could secure a multi-year grant, providing a predictable funding stream. Consider this: a decade ago, a $100,000 grant might be awarded and distributed over five years.
Today, that same sum is often divided into five separate $20,000 grants, requiring annual applications. This shift significantly increases the workload for development staff, as they must continually apply and reapply for funding, consuming valuable time and resources that could be allocated elsewhere.
The Hidden Costs of Grant Management: Beyond the application process, grants come with their own set of challenges. Compliance and reporting requirements can be stringent, and the back-end work to ensure adherence to these stipulations is often underestimated. This administrative burden adds another layer to the already time-consuming process of grant management, further impacting the time-for-dollars efficiency.
Tips to Optimize Grant Efforts: If you DO decide to implement grants into your fundraising strategy, here are some tips to optimize your process.
Strategic Selection: Focus on grants that align closely with your organization’s mission and have a higher likelihood of success. This targeted approach reduces wasted effort on long-shot applications.
Efficient Application Process: Develop a template-based approach for common application components to streamline the writing process. Tailor each application for specificity, but reuse elements like organizational history and mission statements.
Robust Tracking System: Implement a system to track grant deadlines, reporting requirements, and compliance tasks. This can prevent last-minute rushes and ensure consistent follow-through.
Building Relationships with Funders: Engage with grant makers beyond the application. Understanding their priorities and receiving feedback can improve future applications and increase success rates.
Balancing Grants with Other Fundraising Efforts: While grants can certainly remain a part of a diversified fundraising strategy, development professionals should also consider more time-efficient methods. For instance, major gift fundraising through a pledge model can offer a higher return on time invested. Cultivating relationships with major donors and securing pledges allows for a more predictable and sustained revenue stream, with far less administrative overhead than managing multiple grant applications and compliance requirements.
The goal of this analysis is not to diminish the value of grants but to provide a realistic perspective on their role in a comprehensive fundraising strategy. By understanding the true cost, both in time and resources, of grant funding, development teams can make more informed decisions about where to allocate their efforts. Optimizing grant-seeking processes and balancing them with other fundraising methods can lead to a more efficient, sustainable, and successful fundraising program.
Feel like you are stuck in a grants and/or events heavy fundraising model? You’re not alone! And you might be missing out on substantial revenue for your organization. Schedule a call with one of our team members and we would love to discuss how we could drive more money to your nonprofit.
