The dramatic loss of charity income prompted by the coronavirus crisis has brought the need for charities to have a range of income streams into sharp focus, something many fundraisers have warned about for years.
With a looming post-virus recession likely to make traditional fundraising channels even less effective, an increasing number of charities are looking to diversify their incomes.
Macmillan Cancer Support expects to lose about £95m in donations this year as a result of the crisis.
Claire Rowney, Macmillan’s executive director of fundraising, says the charity took some “small tactical changes” to adapt its existing fundraising offering, such as placing greater emphasis on its gaming fundraising, finding virtual equivalents of physical challenge events and expanding its Brave the Shave sponsored head-shaving event to appeal to teenagers who were already daring each other to lose their hair during lockdown.
However, she says she believes the lockdown has accelerated the need to vary the way charities interact with their donors in a more long-term and substantive way.
To kick this off, she says, the charity has contacted a number of its supporters, not with a financial ask, but just to “check in, say hi and thank you, and talk to them about what’s happening”.
The charity hopes to understand how interacting with supporters in this way can change the profile of whether, and how, they support it in the long run.
More fundamentally, Rowney argues, the sector needs to think about how to create a broader experience of “doing good” for supporters. It’s easy to take a narrow view of fundraising as delivering income in order to create impact for the beneficiaries, she says, but there is a growing desire among the public to be part of the impact, as demonstrated by community-led responses to the pandemic.
“People are feeling very committed to participating in solving the problem, and will look for ways to do that,” she says. “The charities that will win financially are the ones that will enable people to genuinely and authentically have impact on their causes.”
Some charities will find this freeing while others will struggle, Rowney says, but she firmly believes that the more action you allow someone to take for your organisation, the more committed they are to your success. She thinks of this approach as “meeting supporters where they are” and says it will become all the more important as coronavirus restrictions ease, because it’s hard to tell whether people will actually behave the way they think they will once lockdown is over.
Go big or go home
The fundraising consultant Leesa Harwood offers similar advice for charities looking to diversify their incomes. “If you really want to diversify, don’t talk to the people who already support you,” she says. “Talk to the people who don’t.”
For her, the first thing to recognise is that charities need to “go big or go home” on diversification: simply changing the balance of your current income streams might create incremental improvement, but won’t bring genuine diversity.
This also demands a wholesale evolution of the model of the entire organisation, not simply a tweak to the fundraising department. “It would be like putting a V8 engine in a Reliant Robin,” she says.
“A badly-fitted but high-performing income-generation engine would pull away from the organisation and create serious problems for the broader infrastructure. At best it’s frustrating; at worst it’s dangerous.”
But diversity building for the whole organisation would allow charities to explore and experiment with emerging income streams such as impact investment, venture philanthropy, virtual currencies, micro-financing and crowdfunding.
Often, Harwood says, opportunities for diversification are hiding in plain sight and can be disguised as costs or liabilities. “Think beyond altruistic giving and start sweating organisational assets,” she says.
Capital assets, such as buildings and equipment that can be rented out when not in use are an obvious place to start, she says, but data can also be used to generate income (and not in a way that is likely to upset the Information Commissioner’s Office).
The patient network organisation Patients Like Me, although not a charity, offers a good example of harnessing data to generate income, she says. The company gathers anonymised data from 750,000 people living with 2,900 different conditions, and sells it to medical companies, which helps them develop new solutions for patients.
The charity’s knowledge and expertise can also be put to good work, advancing the cause while bringing in money.
Lose the altruism mindset
Fellow fundraising consultant Reuben Turner cites the Dogs Trust as an example of leading with expertise, as the charity shares its dog training techniques with dog owners through behaviour classes.
To diversify, Turner says, charities need imagination and a fundamental change in mindset. “Start to think like a social enterprise or a start-up,” he says. “Take yourselves out of the mindset that is about altruism, and think about income.
“Charities need to ask what untapped audiences are out there, what their needs are and how we can fulfil them, and then think about how that can provide a source of income.”
Turner describes Shelterbox’s Book Club, whereby supporters are sent a book every month and get access to online forums to discuss it with other members in return for donations, as an excellent example of “true diversification”.
“It’s literally bringing a new stream of money and supporters into the organisation,” he says. “Attrition is low and it can be delivered on an ongoing basis, rather than for just three or six months.”
Ensuring the charity’s offering remains attractive and useful in people’s lives is a crucial consideration when developing a potential income stream, Turner says.
“During a recession, people think about discretionary spending, in the same way everyone obsessed about pasta and toilet roll in the early days of Covid-19 while sales of Kombucha probably went out of the window,” he says.
“If spending on charity is seen as discretionary, it’ll drop off. But if charities can start to create products and services that people see as essential, useful and valuable, then you’re not going to be in that ‘first thing to get cancelled’ box.”
Ultimately, he says: “Resilience and sustainability are the watchwords.
“If you don’t have diverse income streams, you’re not resilient. And in a volatile world, whether because of coronavirus, climate change or recession, you can’t rely on things to simply carry on as they were.”