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Think carefully before diversifying to access new charity funding sources

Before you decide to branch out in the face of competition for charity funding sources, here are some key points to consider.

With funding for charities – both charitable giving and government grants – dropping over recent years, you may feel under pressure to come up with alternative ways of driving revenue. However it is essential to do thorough groundwork beforehand.

Stay true to your constitution

Charities with a very specific focus can sometimes struggle to raise funds due to a limited supporter base. However you should take care when extending the remit of your charity beyond the founding objectives stated in your constitution in order to access additional funding. So if you are seriously considering broadening your remit, seek advice from a lawyer first.

Expertise and staffing

Once you have a promising idea for a commercial venture in mind, check whether you have:

● the resource availability and skillset within your management team to plan and implement it
● enough people within your staff and volunteer base to run it.

If not you might need to put money aside for recruitment and possibly wages. If that means diverting funds from other areas, is that a problem? Before taking on new paid staff, bear in mind the growing public pressure on charities to be open about their spending, following the publication of a report by the National Council for Voluntary Organisations (NCVO) on the pay of charity executives.

Start-up and running costs

You will need to make sure you have enough money available to set up your new venture and run it for long enough to build up momentum.

First of all, total up your expected capital and operational costs for the first six months to a year.

Next you will need to source the start-up financing. Do you have enough funding in place without dipping into your minimum reserves?

If not, you could:

● launch a fundraising campaign to raise the extra money – either through an event or crowdfunding online
● approach charity funding sources such as grant-making trusts or social enterprise funding organisations like UnLtd
● seek support from government bodies.

Another possibility is applying for a bank loan. Before you do that you will need to have a robust business plan demonstrating that your idea has a realistic chance of success. An ethical lender will also need evidence that you are going to be using the money they lend in a positive way in line with your charity’s original objectives.

Success story

World Education Berkshire (WEB) started in 1981 as a small charity dedicated to promoting understanding of the links between individuals and communities and the wider world.

Three decades later WEB is based across three three-storey buildings in central Reading, together known as Reading International Solidarity Centre (RISC). It currently has around 80 volunteers and 30 staff.

“When the coalition government came in we immediately lost the funding from DFID (the Department for International Development) that we’d relied upon to fund our education work,” comments centre co-ordinator Martin Mikhail. “So we’ve had to become more creative about our commercial activities in order to subsidise it. All our activities work together symbiotically to support each other.”

RISC - Reading International Solidarity Centre

Reading International Solidarity Centre

The charity, now better known as RISC, subsidises its expanded provision of educational resources with revenue from commercial activities. The centre has become a major ethical and social hub for the local area, and comprises:

● A café/bar featuring an Ethiopian food concession
● A fair trade goods and book shop
● Event space and meeting rooms for hire
● Office space let out to local ethical organisations
● Four flats for rent
● A permaculture forest roof garden

Takeaways

If you are considering trying to tap into new charity funding sources by diversifying, remember:

● Consult a lawyer to check whether it is necessary to amend your constitution, if that is possible and what the implications might be.
● Make sure you have the right people with the right skills to support any diversification plans.
● Check that you are able to cover any start-up costs before proceeding.

Choosing the right funding route for your charity

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