What happens when the most used and profitable revenue streams are no longer viable for an association? Holly Patrick talks to Kai Troll, ASSOCIATIONWOLRD president and head of development at the International Sport and Culture Association, about developing new revenue streams to keep your association thriving.
Typically, associations have two or three sources of funding with one being particularly dominant. These are usually membership fees, a major congress, and other events. Therefore, associations rely heavily on the funds generated by its members and their participation in events.
But when disaster strikes, such as the global coronavirus pandemic that continues to wreak havoc 17 months on from the first reported cases, associations run the risk of losing both members and money. With international travel at a trickle and meeting restrictions in place, the absence of live, in-person events means the secondary revenue stream has been cut off.
Associations must develop new revenue streams to build resilience for the future and stay up to date with their members’ needs. But as Troll points out, diversifying revenue streams is not as easy as hatching a plan and watching it grow. It begins with understanding different revenue streams and assessing what funding is viable for you as an association.
Start with skilling up
“It's silly to say,” begins Troll, “but if you don't have the expertise in an association to implement new revenue streams, you need to bring that in.”
Implementing new revenue streams is one thing and making them successful is another. This is a specific skill set and not something an association meetings planner, office manager or communications director would be overtly au fait with.
If the association can bring new talent on board, Troll suggests bringing in an experienced person who works in that field.
“If you think about WWF or UNICEF, they bring in people from corporate worlds to run their marketing philanthropic donor departments, sponsor partnerships and corporate partnerships departments. They are not newcomers from within the NGO or non-profit world. They are professionals who can develop these specific sources of funding.”
Here Troll recommends utilising corporate partnerships to access the best person for the job. “You can ask them to invest in a project, or you can ask them to invest in a position.”
Understanding corporate support
Corporate support comes from outside the association in the form of funding from:
- Philanthropic – funds supplied by a private donor.
- Corporate partnerships– working with a corporation that has an aligned mission with the association.
- Foundations – enterprises with a similar mission that can provide or secure an association with funds to further research or community outreach.
- Cause-related marketing – a thematic approach to fundraising.
Getting to grips with new funding streams and how to access them can seem like a minefield but Troll explains that it starts with understanding the association’s mission, communicating, and demonstrating its impact to the funder and being as transparent as possible to ensure each party understands what the money is being used for.
“A lot of smaller organisations don't move forward because they're not clear on the type of money they need to raise.”
Restricted Vs unrestricted funding
The top line of funding falls into two categories: restricted and unrestricted. Restricted funding must be used for specific purposes, such as project management, funding campaigns, advocacy, education, or training. Unrestricted funding refers to funds received that can be uselead for any purpose.
Troll explains that one reason smaller associations struggle to get funding is that they don’t know what type they need. “A lot of smaller organisations don't move forward because they're not clear on the type of money they need to raise. If they keep raising restricted funding, they will never be able to be a distraction so they need to put the focus more on sourcing unrestricted funding that they can spend in helping to build the structure.”
However, the risk with unrestricted funding is that the donor may not know how the money is being spent and therefore doesn’t know where best to divide the funds or how it will make an impact.
The key here is transparency. “Transparency is a big issue. For example, I was in a project with one of the non-communicable disease types of organisations and where we implemented more funding streams. Afterwards, a pharmaceutical company, who was the funder, said, ‘Kai, can you come to us and explain how medical associations work these days?’”
“Transparency is a big issue.”
A lack of communication and transparency of how the funds are being spent often means funders don’t increase their budgets for projects or initiatives and can even result in funders dividing up the money to different associations.
“Transparency is an issue and associations really need to be much more straightforward,” Troll adds.
Demonstrating your impact
Before the funder commits to handing over the cash, you must demonstrate why you’re the right association to invest in. In a time of crisis, such as during a pandemic, when many associations are seeking funding, it’s imperative to remember that actions speak louder than words, as Troll explains.
“Show funders transparency in what you have done already. This could be in documentation that you provided to previous funders and remember they do speak to each other, and you want them speak about a good experience that they had with your association.”
While demonstrating your impact as an association, refer to your mission and the problem you are trying to solve. Justify why your organisation exists and the impact you have on the community you serve. This will make it clear for funders looking to support you through corporate partnerships and for foundations willing to fund associations with an aligned mission.
Regardless of where the money goes in the organisation, it is essential that the money makes an impact. “Let’s look at a typical research organisation, regardless of the field, most of the money would be spent on HR, because they do the research and research is the main activity and the funder needs to understand why that is. So, I think it is always better to hear a no from a funder, instead of being untransparent, underdelivering or risk missing out on the funding.”
The goal should be to establish long term funding, creating multi-partnerships and collaboration – all three will ensure resilience.
Keep on collaborating
The more you can demonstrate the association’s impact, the more chance you stand of attracting the correct funders. Building a strong and transparent relationship with funders can enhance collaboration and extend funding. “It is very time consuming for the association to create that relationship and, for the funder, it's as much of a journey. It's a learning curve, and the first year is more of a pilot to understand where the real impact is that you can create in year two and three.”
A clear and aligned mission will create mutually beneficial corporate partnerships. An example of this is the cause-related marketing project between P&G Pampers and UNICEF that saw a donation from every packet of diapers bought go towards fighting neonatal tetanus.
“It's a learning curve, and the first year is more of a pilot to understand where the real impact is that you can create in year two and three.”
What about public funding?
“It's important that associations understand what public funding is available for some of their projects. I think especially now, governments throughout Europe put out more grants to support different areas and sectors, and I'm not sure if associations always have that on their radars,” says Troll.
However, raising funds through government funding is always restricted and therefore the funding an association is applying for must be carefully considered.
“One mistake associations make is running after the money, rather than saying, ‘Okay we need to do X, Y and Z to be eligible for funding.’” Troll explains, this is often down to a need for constant funding, “it is that chicken and egg situation, which never allows you to move forward.”
So why don’t more associations apply for government funding? Troll explains a defeatist attitude is to blame for many associations not even attempting to secure government funding.
“An association thinks it can be a lot of work to apply and believes that there will be so many applications, that they won’t get anything anyway. And for that reason, they don't even start applying.”
However, if a government funding application is done correctly and the association meets these criteria, the odds really are on their side. “If the EU receives 180,000 grant applications a year, 60 per cent already don't qualify because they don't meet the minimum requirements.
“I'm involved with two corporate foundations and the requirements are pretty clear, clearly outlined online. And yet, we receive applications that do not meet those requirements.”
Ultimately, Troll explains, an association needs to research the funding that’s right for them. Whether it’s a partnership or sponsorship, government funding or a philanthropic organisation, every proposal needs to be individual and considered.
“You need to know who's making this decision, what's the process and how long does it take? If you need immediate funding there is no point applying to a foundation because that could be a six to eight months process.”
Putting it into practice
Implementing new revenue streams will not happen overnight, but there are efficient and practical methods to get the ball rolling.
Troll advises: “Get the minds together within the association, maybe get external expertise to help facilitate that. But it probably needs a concrete focus group that can help identify where the potential is for additional income streams.”
Associations are like rivers, the more streams that run into them, the stronger they will get.