Ten Funding Models for Nonprofit Organizations

This article is original content from the Stanford Social Innovation Review published in the spring 2009 issue.

By understanding these ten financing models, nonprofit leaders can tap into the valuable experience of for-profit companies to engage in clear and concise conversations about long-term financial strategies.

Money is a constant topic of conversation among nonprofit leaders : How much money do we need? Where can we find it? Why don't we have more? During tough economic times, these types of questions become more frequent and pressing. Unfortunately, no answers are immediately available. This is because nonprofit leaders are focused on building programs rather than finding funding sources for their organizations, and philanthropists often don't fully understand the impact (and limitations) of their efforts. donations.

This financial confusion has consequences because when nonprofits and funding sources are not well coordinated with each other, money will not be directed to the areas where it can have the greatest impact. As a result, promising programs are suppressed, cut, or never started. Also, when there is a shortage of money, a chaotic fundraising scramble is more likely to ensue . 1

In contrast, in the for-profit business world there is a greater degree of clarity on financial matters, this is particularly true when understanding how different businesses operate. This understanding can be condensed into a set of principles known as business models. Although there is no definitive list of corporate business models, 2 there is a consensus on what they mean, so that investors and executives can engage in conversations that allow them to refine the strategy of any company. For example, when a person says that a company is a "low cost provider" or a fast follower (imitator) *, is making evident the profile through which said company operates. Similarly, by stating that a company is using the “bait and hook” model * it is describing a type of customer relationship which extends beyond the product in question.