Nonprofit leaders today are navigating a financial landscape unlike any we’ve seen before. The Nonprofit Finance Fund’s 2025 Survey found that 86% of nonprofit respondents are affected by inflation and rising operating costs, 84% are expecting funding cuts, and 85% are managing increased demand for services. These “colliding crises” are putting new pressures on organizations that have historically been managed sustainably. The reality is clear: what got us here may not get us there.
To sustain your impact, your operating model may need to be reimagined – and revenue diversification is one strong option. Revenue diversification isn’t necessarily about “adding more streams” – it’s about building a balanced, resilient portfolio that matches your organization’s capacity, mitigates risks, and creates room for growth.
What Is Revenue Diversification?
At its core, revenue diversification is a strategy that uses multiple, complementary income streams to reduce your reliance on any single funder or source. Done well, it helps nonprofits:
- Spread risk across multiple streams
- Increase flexibility in how dollars are used
- Strengthen long-term stability and resilience
Research shows that 7 in 10 nonprofit leaders believe they need more revenue streams to protect against financial pressures. But diversification is also a balancing act. Too few streams, and you’re overexposed to risk. Too many streams, and your team is fragmented, stretched thin, and unable to operate effectively. That’s why I recommend smart diversification – carefully selected revenue streams that support both stability and mission.
Three Criteria for Smart Diversification
To achieve “smart diversification”, you can evaluate potential revenue streams against three core criteria:
- Impact – Does this income stream have real potential to impact your mission and your bottom line? Prioritize revenue that supports your mission while demonstrating a positive trajectory, healthy profit margins, and a solid return on investment. To avoid over-fragmentation, think about whether the income stream has the potential to grow into a meaningful portion of your budget over time.
- Effort – Does your organization have (or can it reasonably build) the capacity to deliver? Assess whether your team has the time and relevant skillsets to pursue this income stream. Also, think about the systems and processes you may need – for example, CRM, donor management, and grant tracking tools. If some of these are not yet in place, do you have the resources to build them before moving forward?
- Risk – Is this income stream relatively stable and predictable? A thorough and honest risk assessment is vital to protect your organization. Consider whether the revenue source may be volatile, especially if you are considering it as a recurring income stream. Also consider funding restrictions, and whether further restricted funding may hinder your organization’s liquidity.
These three criteria can keep you from spreading your organization too thin and ensure your diversification efforts support true sustainability.
Are You Ready to Diversify?
If you’ve run your ideas through the smart diversification criteria, you may feel confident in taking the next step. But before you do so, it’s worth pausing to ask: is your organization truly ready? Diversification only works if your organization is well-positioned to support it. Building a revenue stream requires upfront investment, staff time, and board alignment – without these, even the best idea can become a costly distraction.
Here is a readiness checklist to consider before you begin. Your organization should have:
- At least three years of reliable financial data
- Two or more stable, existing revenue streams
- Systems to track income and expenses by stream or program
- Board and leadership buy-in to test new ideas
- Dedicated staff member to “champion” revenue development
- Resources (time, money, tools) for upfront investment
If most of these boxes are checked, your organization is well-positioned to explore revenue diversification. If not, your best investment right now may be strengthening your foundation – so that when you do diversify, your organization is set up for success.
Key Takeaways
Revenue diversification isn’t always about having more income streams – it’s about having the right mix of streams to balance capacity and stability.
By grounding your decisions in smart diversification principles and assessing your organization’s readiness before diving in, you can confidently build sustainability and resilience.
Interested in exploring revenue diversification? Reach out to Brynn at brynn@brynnelcocksmart.com.
Brynn Elcock Smart is a management consultant helping mission-driven organizations operate sustainably through business planning & strategy. She has advised leaders across education, child welfare, workforce development, aging, food security, arts & culture, and more.
