The Importance of Grants in Your Fundraising Strategy
Each year, development departments everywhere set out to answer the question: How can we better diversify our funding streams?
The gold standard in nonprofit fundraising is building a diversified funding base. This often includes a combination of small-dollar donors, major individual donors, fundraising galas and events, business sponsorships, and government, corporate, and foundation grants. It can also include earned income, like membership fees and fee-for-service work.
Unfortunately, not every funding stream gets the level of attention commensurate with its importance for an organization. One area worth taking a deeper look at is your organization’s grant funding.
Are You Underinvesting in Grant Funding?
As organizations grow, some funding streams tend to receive more resources, even if they’re not a nonprofit’s main funding source.
It’s common to see organizations that have a good base of grant funding decide to forego hiring a grant professional or building a grants database. Leaders may not invest in their grant funding and figure they’re getting by with spreadsheets and late-night proposal deadline scrambles. Instead, they put precious resources into recruiting a high-level individual donor staff member, hoping this person will uncover illusive major donors eager to write checks. It’s like skipping lunch and wondering why you’re suddenly hungry mid-afternoon.
As successful organizations across the country prove, grants play a critical role in nonprofit sustainability. And they can also play an important role in your organization’s fundraising strategy.
Role of Grants in Sustainable Fundraising
For many nonprofits, grants are a significant revenue source. This is for good reason.
Grants can provide long-term, sustainable funding that enables organizations to grow both programming and infrastructure. This is even more true as funders increasingly strive to better understand and meet the needs of grantees. For example, for 2023, the Ford Foundation announced that project grants will now allow indirect cost rates of 20 to 25 percent—or more in some circumstances.
When it comes to sustainability, however, some grants are better than others:
- Multi-year grants: Multi-year grants provide funding for two or more consecutive years. The benefit of multi-year grants is that they provide an up-front commitment documented in writing. With a multi-year grant, you can plan programming and spending several years into the future without having to prepare for an annual ask and grant proposal. Of course, multi-year grants still generally require grant reporting. You’ll also want to provide regular updates to your grantmaker as you would for any donor.
- Renewable grants: While multi-year grants are ideal, some funders make it clear that annual grants are renewable. A funder that renews a grant every year for 10 years can become a pillar of your organization’s funding strategy. In this case, it’s critical to maintain open communication (including frequent impact reports) with your program officer or other funder organization staff.
- Unrestricted grants: Also called “general support” or “core support grants,” unrestricted grants are made to an organization as a whole rather than a specific project. When a funder makes an unrestricted grant, it’s a vote of confidence in the grantee’s organization. Unlike project grants, unrestricted grants allow nonprofits to spend funds where they are most needed, including in less flashy areas like operations and infrastructure. Luckily, grants can be both unrestricted and multi-year, which is every nonprofit’s dream scenario.
- Capacity-building grants: Some funders are increasingly exploring how they can help grantees build capacity. Because donors want to hear about impact, not operations, too many nonprofits end up growing beyond their own infrastructure, whether that’s management training or human resources personnel. Dedicated support for capacity building enables organizations to ensure their internal capacity keeps up with their external impact. Perhaps the most well-known example of this is Ford Foundation’s BUILD Program. BUILD provides grantees with significant multi-year grants split between unrestricted support and funding dedicated to capacity building, such as undertaking a strategic planning process or investing in a better fundraising database and system.
- Seed funding for new projects: While the examples above are about longer-term investments, funders can also be one of the best sources of seed funding for new projects. If an organization has been funding your organization for years, they might jump at the opportunity to help you pilot a new project, program, or strategy.
Pros and Cons of the Grant Funding Process
We often hear how nonprofit leaders are frustrated by the grant application process—letters of inquiry, proposals, financials, application forms, and a long list of attachments. But there are some distinct benefits to the process itself.
- Clear guidelines and priorities: Funders often provide potential grantees with a treasure trove of information. Websites detail funding strategies, program officer bios, annual plans, and the latest news and announcements. This makes it easier to prepare before you go into a program officer meeting or start writing a proposal.
- Transparency: Some funders include lists or databases of grantees on their websites. Even those who don’t are required to file annual 990s that include lists of grantees and amounts. This type of transparency means you can find out what type of grants they make and align your ask within those parameters.
- Program officers: Many program officers are former practitioners, which means they may know first-hand the challenges of running an organization. Though there’s still a power dynamic between funders and grantees, program officers can be valuable partners, offering more than just money.
- Long-term relationships: Funders often have the same intention as grantees: building long-term funding relationships that support impact in their communities or on specific issues. It’s common for an initial project support grant to eventually grow into long-term, multi-year general support funding.
Grants aren’t a panacea, of course. As your organization increases its grant support, you’ll want to make sure you have grant management policies and processes while you keep an eye on a few things:
- Giving strategy changes: Funders have been known to significantly change strategies or priorities. Often this is telegraphed a year or more in advance as funders undertake planning processes designed to assess and rethink their grantmaking approach. Coupled with tie-off grants, this long lead time can enable grantees to find replacement income. Sometimes, however, shifts are more sudden. For example, in 2020, NoVo Fund made headlines for abruptly laying off half of its staff and informing many grantees that they’d receive final tie-off grants.
- Program officer changes: Program officers are staff. This means that sometimes they change roles or seek new opportunities. To navigate these transitions, be sure to regularly keep your program officer(s) and other funder contacts up to date about your nonprofit’s accomplishments.
- Leadership changes: A funding organization’s president or CEO can’t lead their organization forever. And sometimes, incoming leaders may want to use the transition period to evaluate current giving strategies. Luckily, such changes often come with significant advance notice and strategies to give long-time grantees a “soft landing.”
- Timelines: Receiving a grant is generally not a fast process. On average, it takes around six to 12 months—or more—from the first meeting to the grant agreement. That’s why grants are generally more suited to long-term planning than immediate, short-term needs.
While strategy changes at one of your major funders can be a setback, they don’t have to be a crisis. A grant professional on your team can monitor these changes and ensure you maintain strong funder-grantee relationships—just two of the many reasons you need grant professionals in your corner.
Role of a Grant Professional
Grant professionals have skills far beyond writing and assembling grant proposals. As demonstrated by the nine competencies required to earn Grant Professionals Certification Institute’s (GPCI) certification, a grant professional can help your organization manage the entire grant lifecycle—from finding funding through project closeout. Grant professionals:
- Research and identify funders: Grant professionals are familiar with the different sources of funder information and know how to find the funding that best fits their organization’s mission, goals, and priorities.
- Track and manage grant deadlines: While funders may sometimes ask for proposals with a quick turnaround, you should never be surprised by reporting deadlines. Grant professionals set up grant deadline and tracking systems and make sure everyone on your team knows what they need to do and when.
- Write grant proposals and reports: When you think of grant professionals, what often comes to mind is a grant writer. In addition to writing compelling and powerful narratives, a grant professional can coordinate every aspect of what is submitted to funders. That includes writing proposals and reports, completing online application forms, and ensuring all attachments and supplemental materials are ready and up to date.
- Understand and support programs: Powerful funding requests require a solid understanding of the organization’s mission and programs. Grant professionals have this knowledge and make sure to connect to the underlying theory of change or logic model for each program. This helps demonstrate how critical funding and other resources can lead to the outcomes and impact the nonprofit and funder seek.
- Build and cultivate funder relationships: Just like with individual donors, grantmaker relationships need cultivating. A grant professional makes sure program officers and staff are receiving regular updates about an organization’s work, whether by forwarding a recent newsletter, sending invites to upcoming events, drafting personal outreach for the CEO or program lead to send, or helping prep for upcoming program officer meetings and grant asks.
- Monitor funder strategies: It’s a grant professional’s business to know your institutional funders. That means keeping an eye on major announcements, leadership changes, and strategy shifts.
- Manage post-award activities: A grant professional’s work does not end with the grant award. Grant professionals play a critical role in post-award grant management, including tracking grant revenue and expenses, adhering to any restrictions outlined in the grant agreement, and submitting required updates and reports on program outcomes. A grant professional will need to collaborate with their financial and program colleagues. This work can be made significantly easier with a post-award grant management system that helps track revenue and expenses, manage tasks and deadlines, and create required reports.
Most importantly, perhaps, grant professionals enable program and organizational leads to focus on doing what they do best: creating change.
Great Grant Professionals are Gold
We want to get one misconception about grant professionals out of the way first: Grant professionals do more than fill out forms and copy and paste text. Great grant professionals must have excellent writing skills, attention to detail, and the ability to juggle and meet multiple deadlines. They must understand how programs and organizations work and what funders are seeking. And those are only the basics.
A great grant professional:
- Turns your program ideas into compelling narratives. Imagine hopping on the phone with someone for 10 minutes, rattling off your ideas for a new project, and a few days later, your grant professional delivers the first draft of a letter of inquiry. Even better, the draft includes thoughtful questions about your project strategies, activities, and benchmarks that help you design an even stronger initiative. That’s what a great grant professional can do for you.
- Learns your organization’s voice. Every organization has a voice. Your nonprofit’s worldview and values come through even in the details of word choice and sentence structure. A great grant professional knows this and studies how your organization talks about itself, its work, and the challenges addressed. And then they channel that voice into every piece of content they prepare for you.
- Adapts your nonprofit’s work to funder and donor interests without compromising programming. Too often, organizations think the way to get a grant is to tell the funder what they want to hear. This can reshape programs so drastically that they barely resemble original plans. But a great grant professional knows how to show funders why your work—just as it is—will help them accomplish their own impact goals.
- Structures content so that it tells a compelling story. Grant writing isn’t just about putting facts on paper. It’s about telling a story. A great grant professional knows that a letter of inquiry or a proposal should take a grantmaker on a journey to understanding why your nonprofit’s work is powerful and important. A grant professional also ensures that journey is accessible to someone who is familiar with your organization and someone who isn’t.
- Follows guidelines. All grantmakers have guidelines. Even for those funders that allow you to submit materials in whatever format works best, there are still core questions that every letter of inquiry and proposal should answer. A great grant professional knows these questions and ensures grantmakers receive the information they need to make a decision.
- Loves feedback. Grant professionals aren’t merely open to feedback; they thrive on it. Feedback helps grant professionals better understand how organizations and staff think and talk about their work. If you make a margin note to a great grant professional about word choice or framing, you better believe they’ll keep that in mind in all documents going forward.
In short, a grant professional is there to make nonprofit leaders’ jobs easier. This frees up more time for CEOs, executive directors, and development directors to work on building a diversified funding strategy.
Making Grants Part of Your Fundraising Strategy
While we’ve focused on grants in this article, a diversified funding strategy is indeed critical. It provides your organization with flexibility and sustainability. But grants can make up an important and valuable part of that mix.
A strong grant strategy can lift and complement your total fundraising efforts.
Much like individual donor fundraising, grant fundraising relies on both demonstrating impact and building relationships. Program officers need to understand your organization’s vision and accomplishments—in meetings, through regular updates, and in written materials. Investing in your grant strategy can yield incredible results—multi-year grants, unrestricted grants, capacity-building grants—that can help your organization grow for the long term.
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