Diversify or Risk Collapse: The Stark Reality Facing Nonprofits

Securing a major donor or funding from a reputable organisation often feels like a turning point for nonprofits. It’s exciting, transformative, and full of promise. Multi-year, unrestricted funding is the dream. It allows for growth, reaching more beneficiaries, and achieving greater impact.

No donor supports an organisation forever.

Too many nonprofits become overly reliant on one or two key donors. This creates a false sense of security that can quickly crumble when a donor shifts priorities, reduces funding, or faces their own financial difficulties. When that happens—and it does—organisations are left scrambling. The fallout can be devastating: sudden restructuring, abrupt programme cuts or even permanent closure.

Recent murmurs about potential cuts to foreign aid and nonprofit funding in the United States should serve as a wake-up call. The funding landscape is shifting, and nonprofits must prepare for an uncertain future. Income diversification isn’t a luxury—it’s survival. What would happen if your biggest donor withdrew their support tomorrow? How long would your organisation survive? How would it affect the people and communities you serve?

The truth is, diversification takes time—years, in fact. But waiting isn’t an option. The sooner you start, the more prepared you’ll be to weather the storms that will inevitably come.

Here’s how you can begin:

1. Stop Relying on One or Two Donors Start by mapping your income sources. If more than 50% of your funding comes from a single donor, you’re at high risk. Identify other funding opportunities and start building relationships now.

2. Tap Into Corporate Partnerships Businesses are increasingly seeking meaningful ways to give back. Approach companies that align with your mission and explore partnerships and multi-year collaborations.

3. Build a Philanthropy Base High-net-worth individuals (HNWIs) can provide transformative, unrestricted funding. Focus on engaging them with compelling narratives, building trust, and fostering long-term relationships.

4. Advocate for Unrestricted Funding Restricted funding may tick donor boxes, but it often limits your organisation’s flexibility. Advocate for funding that allows you to invest in infrastructure, innovation, and resilience.

5. Diversify with Earned Income Social enterprises, fee-for-service models, or selling mission-aligned products can provide sustainable, unrestricted income while advancing your mission.

A Call to Action

At NGM Consulting, we’ve worked with nonprofits navigating this exact challenge. We’ve seen how income diversification can transform organisations, giving them the financial stability and independence they need to fulfil their missions. Let’s start the conversation and work together to build a sustainable future for your organisation. Happy to hear from you.