What percentage of your nonprofit budget should be supported by grants? Unfortunately the answer is not as high as you likely thought it would be. According to the Foundation Center, one of the largest and most reliable resources regarding nonprofit data and information, the answer to this question is less than 20%!
According to this research, conducted by the Center on Philanthropy at Indiana University, foundation grants accounted for only 15% of total charitable giving in 2014. Thus, your nonprofit budget should reflect these proportions accordingly. Expecting 50% or more of your organization to be supported by grants in most cases is simply unrealistic and not sustainable.
You cannot rely on grants to support and maintain your nonprofit organization!
In my work at Greater Good Consultants, I receive daily requests from ambitious nonprofit start up founders. They have noble missions, a passionate heart, and dedication to their field. Yet many of them are mistaken in thinking they can use grants to support the entirety of their nonprofit start up. As evidenced above, this is simply not the case.
When starting a nonprofit, it is always my suggestion to clients to not count on any grants! If you can’t get it done out of your own pocket, then don’t do it. When planning for your budget, at a minimum 75% of your projected revenue should come from earned income streams such as contracts, merchandise purchases, fees for service, etc., as well as individual donors. Nonprofits that rely on grant funding, particularly those that are smaller, just starting out, and with no proven track record often fumble and struggle to make it through the first year. Sadly, many fail within the first few months. So what is a start-up nonprofit to do? Stay tuned for my next post, which will feature my top suggestions for funding small start up nonprofits.