Private Grants: Are They for Your Nonprofit?

Here’s a tale of two real nonprofits. Let’s call the first one “Amazing Youth” and the second “The Real Deal Healthcare.”

Amazing Youth operates a transitional shelter for homeless youth limited by law to a modest number of residents — fewer than 10.

The Real Deal Healthcare operates a community health center serving thousands of low-income patients.

For many years, both neglected private grant revenue. Eventually, each came to understand the value of outsourcing their grants program. They realized their best option was to depend on an experienced consultant to research and identify funding prospects, then compose and submit proposals, applications, letters of intent and grant reports required to secure renewal funding. The outsourcing increased revenues. It also allowed their respective executive staffs to concentrate on their respective core competencies.

Amazing Youth is approaching $2 million in grants secured.

The Real Deal Healthcare, operating on a larger scale, has exceeded $1 million in grants secured within only 2.5 years.

Many nonprofits like Amazing Youth depend on a government contract and sputtering special events, with limited individual donor support. Others, like The Real Deal Healthcare, sustain themselves on fees; federal, state, and municipal money; and well-done galas. In previous times, they both were lackadaisical about private grants.

Yet, if they have the program-impact metrics, private and corporate grant awards can increase their revenue by hundreds of thousands of dollars annually. Over time, these awards can mount into eye-popping sums.

How Can You Tell if It’s Worth It for You?

The short answer is that you must conduct an assessment right from the start; some fundraisers call them “desk studies.”

The assessment aims to answer one core question: What is this revenue stream worth to us, if done well?

Such a study is centered on upfront research. Here are the steps:

1. Do a Reverse Search

Go to the Foundation Directory and do a reverse search on your nonprofit. The information that surfaces may go back more than 10 years. You’re therefore likely to find foundations that have made grants to your organization in the past but have not been contacted recently. The amount of the prior award(s) may be low because no one has asked the grant-maker(s) to give at a higher rate. You now have a list of lapsed funders. Check their websites for current deadlines and geographic and funding priorities. Note those that have remained aligned with your organization and its mission.

2. Search Under Multiple Categories

Let’s say your agency is a faith-based organization that operates shelter and addiction treatment services in Yonkers, NY. This gives you five categories to search for more prospective foundation supporters: grant-makers giving to your particular faith; shelter and housing funders; funders interested in substance abuse; funders based in Yonkers or giving to nonprofits that serve Yonkers; and, of course, human services. Search under all these categories.

3. Secure Essential Information

A spreadsheet will prove useful for storing the information you bring up. 

• Capture the name of each foundation.
• Note the suggested ask amount.
• Check the funder’s 990 and/or website.
• Make your best guesstimate of the amount it may realistically award your nonprofit.
• Assess the probability of securing that grant. We rate foundations on a scale ranging from high probability of securing a grant to medium, low and speculative. “Speculative” means least likely. 
• Note any deadlines. 
• Record peculiarities of the grant-making process (“Call first to discuss,” “Send LOI,” “Gives for human services in areas of company operations”); whether they make awards for general support or equipment; or any other pertinent tidbit (“Primarily interested in alcoholism,” “Committed until 2022”). 
• Be sure to note how you found the prospect, so you can fish it up again later (“Roman Catholic funder,” “Based in Yonkers”).

4. Assess Competitors

The final research step involves a reverse search of one of your keenest competitors. Select a thriving agency that provides similar services and see what turns up. Some new funding prospects for your organization will likely emerge.

5. Estimate the Ask

Now add your lapsed funders to the spreadsheet and the foundations that have supported your competitor and are new to you. Carefully label them in the notes section as “lapsed” or “XYZ funder.” The analytical process is purely a matter of common sense. List the prospects that you’ve rated as highly likely to give or medium likely and, next to each one, the suggested ask. Add up the amount of money you estimate receiving.

6. Check Funding Location

Consider also where you’re located. More than a third of states have fewer than 40 nonprofits for every 10,000 residents. Local fundraising is consequently more competitive for nonprofits in these states. Knowledge of out-of-state funders is imperative to score more awards, but only if they fund in your area.

7. Make the Cost-Benefit Analysis

Naturally, you’re not going to score with every potential funder. But what would 30% of the total look like? What amount of revenue would you secure if only 25% of the grant-makers on the final list made an award?

If you would come away with, say, $200,000 if only a quarter of the funders on the final list approved a grant, can you really afford to pass up this revenue?