1. Main types of income
2. Attributes for successful business development
3. Should we pay someone to do it?  

Main types of income for a charity

The word “type” of income is used here deliberately.  This is an area where the source, the processyou use to get it, and the purposefor which it is intended all regularly get conflated or used interchangeably.  This list attempts to combine the three. 

• Fundraising– mainly from individual donors.  Typically, based on the general nature of the charity – appealing to someone’s affinity or belief in the cause.  Can be linked to a specific campaign or project.   Can be linked to a reciprocal benefit between donor and organisation – eg memberships and membership fees.  Can also be via an intermediary – for exampleCommunity Foundations.  Or an individual undertaking fundraising themselves – charity runs, etc. You may want to consider registration with the Fundraising Regulator to ensure best practice and give confidence to donors.

• Gifts/donations/legacies –often linked to fundraising andwith many sub-sets, for example local charities– Roundtable, Masonic lodges, Lions clubs, the many local trusts focused on local causes, etc.  It can also be local businessesor branches of national businesses – the green tokens in your local supermarket for example. There can be less specifics about the particular use of the income.  

• In-kind support– typically Corporate and Social Responsibility (CSR) activity fromcorporates/commercial/for profit organisations (for example staff volunteering), and other pro-bono work from individualswith a particular professional expertise (legal, finance, consultancy, etc).  CSR relationships in particular can be very resource heavy. Generally works best for specific pieces of work or activity or specialist skills input for beneficiaries. Can sometimes take longer where it has to sit alongside a firm’s paid work, but sometimes you get an amazing piece of work.  Can be an in-road into actual cash income.

• Corporate sponsorship – mainly from corporates and for-profit organisations– generally aiming for an association with a charity which aligns to the firm’s business, customer profile, etc.  Needs a robust approach to appraising potential sponsors which includes ethical, brand, and resourcing considerations.  

• Payment for delivery of services or products– typically public sector organisations (local and national), grant making trusts, other larger funding bodies – services which you are deliveringeither direct to beneficiaries or via a third party.  Depending on the type of funding, will have restrictions on the way the money is spent (performance, outcomes, etc.).  Very often classified as “restricted” – i.e. has to be used for the purpose it is awarded.  Can be a one-off or continuous (sometimes called “core”).  Can/should include a charge from the charity for overheads.  Some care needs to be given to potential VAT liabilities.  Some particularly complex funding models in this space – for example Payment by Results (PBR) which require specialist knowledge and particular organisational structures. 

• Income from investments – typically interest on an annuity or earned income from a fixed assetsuch as property.  Depending on the size of the investment, can require specialist advice and expertise.

• Trading income – different from delivering services – typically selling goods or services on a more commercial basis.  Training is a common example here.  Room hire is another.  And this is where charity shops sit,but it is also a grey area clouded with the language of [social] enterprise, using the term “voluntary donation” for a paid for service, and so on.  There are many complexities depending on the legal structure of the charity – but ultimately can be a lucrative source of income given the right conditions.  

• Social investment and venture philanthropy– could be a mixture of several of the sources above – typically to either pump prime an idea or service which will ultimately trade as its model of sustainability, or to encourage system changes, realignment of or attraction of other income streams.  Generally requires specialist expertise – particularly as this sort of funding can behave a bit like loan finance – but this often comes as a part of the funding – specialist advice so on.

Some points to consider

• Which income streams you choose to go for will depend on the type of charity you are, your charitable purpose and the specific type of activity or funding ask.  These are the tools of the trade – you need to choose the right one for the job.  
• Different funding streams even of a similar type come with different requirements – both about who is eligible and how the money is spent.  A public sector contract is a completely different animal from a donation from the local charity for example.  Careful scrutiny of any terms and conditions before you submit a proposal can avoid wasting time on ineligible bids, but also spending all your time on managing the grant rather than focusing on your beneficiaries if you ultimately win it.  
• Other than in very exceptional circumstances, usually related to gifts and donations, there is no such thing as “no strings attached” income or “free money”– there will almost always be some kind of cost attached to receiving and using it.  Even anonymous donations can create challenges.  Indeed, money for example for which you apparently don’t have to do much will likely have a very specific value for the funder – brand association or channels to sell their products to your beneficiaries for example – could cost the charity substantially in the longer term.  You will just need to understand what that is.  
• Labels such as “earned income”, “voluntary income”, “capital” and “revenue”, whilst having specific definitions for accounting purposes, often don’t give you much clue as to the source or type of income.

Attributes for successful not-for-profit business development

The bad news is that there aren’t many quick solutions to income generation and business development – opportunities only come up periodically and can take time to turn around, and there are lots of people trying to do it.  The good news is that it’s not nearly as mysterious as it may at first seem.  Being able to persuasively talk about your cause or work is the first important step. Then some good old fashioned preparation and process come next.  Persistence, resilience and a bit of luck come after that.  

Getting the following in place will get you a long way to your goals:

1. Get together data and information – about your beneficiary group, about the charity’s activity, about the market within which you operate, about the difference you make (its impact) – you’ll know more than you realise
2. Get together case studies – funders and stakeholders love a case study
3. Make sure you have a granular understanding of the cost to deliver things – both the direct and indirect costs
4. Develop a good understanding of perceived value of your work to the market or stakeholders – in effect the price you can charge.  If the price people will pay or the amount of equivalent resource you can muster is lower than the cost to deliver it, then it is generally a non-starter.  There are more stories than you can count about the mis-stated concept that charity is free – it isn’t
5. Have a clear strategy or plan and strong governance – otherwise there is a risk you end up chasing the money, over-reach, dilute your offer, fail to deliver, or end up beyond the objects of the charity
6. Capture good evidence that you have looked at the challenge from lots of perspectives and the approach you have chosen is the best one 
7. Have a spirit of generosity, curiosity and the will to co-design/collaborate
8. Have a credible and sensible balance sheet
9. Find someone with the time and skills to write
10. Keep it simple and proportionate. You could create detailed stakeholder maps, competitor analysis, heat maps, positioning strategies and so on. Indeed they’re sometimes fascinating to do.  But you can quickly become overwhelmed with data and complexity, and annoyingly, things around us just keep changing, so before you know it, you’ve created an industry. Knowing what you’re good at – some form of self-assessment is useful here – is really the key.  

One way of knowing when you have enough of all this is when you’re no longer tempted by the numbers game – the approach which says “if I submit enough applications, then at least some of them will be successful”.  Not only can this approach be inefficient, it can affect your reputation – a template appeal letter is generally obvious to a funder – so gets dismissed out of hand.  And many funders regularly talk to each other so word can quickly get around.  A strong proposal describes to the funder how you can help them meet their objectives as well as your own.  This alignment comes from good research and understanding – something which will come across in your proposal and significantly increase the chances of success. 

Remember, all of this doesn’t have to be in place before you start asking for money. In some cases, getting to these can be the basis of the ask for support.  

Should we pay someone to do it? 

There is lots of advice around on how to recruit a fundraising or business development consultant, but less on whether you need to do so in the first place. Depending on their skillset, they can:

• bring writing and bid development skills
• offer you the time you don’t have even when you do have those skills
• give you insight into the markets you’re exploring
• carry out the research you need to do to identify potential funding sources and opportunities
• give you some objectivity in your assessment of your strengths and weaknesses and the idea you’re considering, and help you decide the best course of action
• bring specialist expertise in particular income streams

As with most things, added value can come with a longer term relationship as they get to understand both you and the work that are involved in. 

Any good consultant should help you decide whether you need them or not.  But you can spend a bit of time before hand thinking about just which bits of the list above do you need.  This will help to keep things focused and help you define the key attributes and skills you think you need.  And as with any relationship, there needs to be a good “fit” with the you and the organisation.  There are plenty of consultants around – take your time and keep going ‘til you find someone who feels right.