There’s lots of interesting writing currently emerging from the ‘non-profit’ sector in the US. One piece I enjoyed this week was an article by Clara Miller at The Chronicle of Philanthropy called Shattering the Myth About Diverse Revenue.
In the article, Sister Rose, an everyperson successful non-profit leader whose $30 million income comes from over 150 grants and contracts, plus public fundraising, is congratulated by a funder on the diversity of her revenue sources and replies:
“I don’t know if I can do diverse revenue anymore. Please, no more rubber-chicken dinners, no more negotiations about contract conflicts, no more truckloads of donated crew socks, no more ramshackle “free” buildings, no more long conversations about small grants, no more “loaned” executives with no housing experience, no more tap dancing around use of funds and overhead restrictions, and no more bingo. Please, no more bingo.”
There are, of course, strong arguments in favour of diverse income streams – the biggest one being that having more than one source of funding or trading income means that if once source is no longer available you don’t go bust (immediately) – but I agree entirely with Clara Miller that generating diverse revenue streams shouldn’t be viewed as a best practice in itself.
If I ran an agency providing funding for voluntary sector groups, I definitely would be keen for the organisations I funded not to be entirely dependent on my funding but part of the reason for that would be that I’d be keen to avoid playing the role of ‘the Council’ in the news headline ‘Hostel closes after the Council withdraws funding’. That’s a legitimate concern but not one that necessarily has anything to do with the social value of the work that was being funded and has now stopped being funded.
The underlying issues for UK social enterprises (including socially enterprising charities) – most of which turnover far less than $30 million per year – are even more serious than burn out for the boss. For charities or social enterprises that run projects or ongoing services – as opposed to selling specific goods or services direct to individuals – having diverse income streams means undertaking an ongoing plate-spinning act to preserve the income you have and generate more income by doing more stuff.
As mentioned here, I’m not a fan of organisations who think they should be recognised for the intrinsic goodness by the council paying the bill, indefinitely and unquestioningly, for them turning up and doing what they do but I’m equally concerned that impending cuts in public funding could see things lurch to the other extreme.
My company, Social Spider CIC, is lucky enough to have some ‘core funding’ from non-state grant funders towards delivering specific projects, along with target-based project grants and contracts, but we don’t have any funding to support the existence of our organisation in itself. I think that’s fine in terms of the kind of work we do but – at the turnover levels of most UK social enterprises – stitching together your entire annual budget from a diverse range of sources is not a situation I’d wish on anyone with expensive tastes or a family to support.
The reality for a lots of the most successful social enterprises and socially enterprising charities currently turning over under £500,000 per year is that they do access lots of different sources of funding but are able to do so because they have a base of an ongoing grant- often from their local council – or single big contract covering the costs of their office and a small staff team, with a diverse range of funding supporting extra work and new projects.
The problem for Sister Rose at the $30 million level was that generate diverse income left her worn out, the problem for many relatively small social organisations in the UK will be that without some core funding they won’t be able to survive to make choices about diversifying and innovating. It won’t be possible to match up diverse funding streams in a way that pays the rent and basis staffing costs (and many funders – the worst offenders often being government-backed grant streams – continue to be squeamish about funding the infrastructure that enables project work to be delivered).
Too much funding security for local organisations leads to complacency and poor services but no security means organisations won’t have the longevity and capacity to deliver positive social change.