In today’s challenging financial landscape, it’s more important than ever for charities and social enterprises in Somerset to ensure their sustainability through diverse income streams.

With the cost-of-living crisis continuing to impact traditional sources of funding, such as trusts and foundations, many organisations are facing unprecedented challenges. To safeguard against such uncertainties, diversifying income sources is a crucial strategy – by spreading risk across a portfolio of income streams, organisations can maintain financial stability even when one funding source is diminished.  

In this blog post, our Funding and Enterprise Consultant, Miranda, describes why it’s important for charities to diversify their funding sources, and shares eight income streams you may not have previously considered.

The importance of income diversification 

Relying heavily on a single source of income, whether it’s government grants or fundraising events, can leave organisations vulnerable. When one funding stream dries up or is impacted by external factors, the whole organisation can be thrown into crisis mode. Instead, having a broad range of income streams can provide the flexibility and resilience needed to navigate uncertain times. 

By diversifying, charities and social enterprises can reduce the risk of financial instability and ensure they have multiple ways to sustain their critical work in the community. This approach allows organisations to adapt quickly to changing financial conditions and avoid the pitfalls of dependency on any single source. 

Key income streams for the third sector  

There are a number of key income streams available to charities and social enterprises, each with its own strengths and potential: 

1. Statutory Funding: This includes grants, service level agreements, and contracts from local and national governments. While these can provide significant and consistent funding, they are often competitive and tied to specific outcomes.
2. Grant-Making Trusts/Foundations: Foundations and trusts provide vital grants, particularly for charities focused on specific causes or regions. However, as we’ve seen recently, the cost-of-living crisis and global geopolitics has also impacted the availability of these funds, meaning diversification is more important than ever. 
3. National Lottery Funders: Programmes like Awards For All, the Reaching Communities Fund, and the Heritage Lottery Fund offer significant opportunities for funding. These grants often align with specific community goals and projects but can be increasingly competitive.
4. Corporate Giving: Corporate support can range from local businesses contributing to community projects, to larger regional, national, and international companies offering funding through corporate social responsibility (CSR) programs. Corporate partnerships can provide both funding and in-kind support, such as volunteer time or resources.
5. Individual Giving: Fundraising from individuals remains one of the most reliable sources of income. Regular donations, one-off gifts, and fundraising campaigns allow charities to connect with their supporters directly. Whether through traditional campaigns or digital platforms, individual donations provide essential unrestricted funds that can be used for core costs.
6. Income Generation (Internet-Based and In-Person): Income generation is evolving, with more charities exploring new methods such as e-commerce, online fundraising platforms, and crowdfunding. Traditional in-person fundraising events are still a significant part of income generation, but exploring digital opportunities can open new doors for funding.
7. Legacy Donations: A growing but often overlooked source of income is legacy donations. These are gifts left in wills by supporters who want to make a lasting impact on their community. Promoting legacy donations is a powerful way to ensure long-term sustainability. Although legacy gifts require long-term planning and patience, they can provide substantial financial support for future generations.
8. Trading Activities: Many social enterprises and charities are exploring trading as a way to generate income. This could be in the form of selling products, offering paid services, or running charity shops. Not only does trading provide a new revenue stream, but it can also enhance the charity’s profile and connection with the community. 

Join us to develop your fundraising strategy

At Spark Somerset, we understand that every charity and social enterprise is unique, with different missions and capabilities. We also know this is not a short-term fix, but a longer-term strategy to diversify fundraising will help to reduce the impact of fundraising shocks in the future.  

That’s why we encourage organisations in Somerset to explore all possible avenues of income generation and not to rely on one stream alone. To support you to think about income diversification we are running a free fundraising strategy training session on Thursday 10 October, designed to help organisations like yours explore these opportunities, develop a diversified fundraising plan, and ensure financial sustainability. This training covers the fundamentals of writing your fundraising strategy and will include a free template to use in your setting.

Are you a board member or director of a voluntary group in Somerset?

Why not join us for our Somerset Trustees’ Forum on Tuesday 8 October.

Led by myself and Louise Treacher, a consultant for the Profit for Purpose sector since 2008, we will explore the topic of income diversification. 

You will also have the chance to network with people from different organisations, share best practice, exchange peer support and discuss opportunities for collaborative working and learning. 

This forum is open to anyone who volunteers their time as a trustee or director for a voluntary, community, faith and social enterprise (VCFSE) organisation or community space in Somerset. You can find out more about this session here.

Finally, if you have any ideas for Lunch & Learn sessions or training topics you’d like us to cover, please get in touch! We’re here to support you and ensure Somerset’s charities and social enterprises continue to thrive in these challenging times.

About the author: Dr Miranda Millan is Funding and Enterprise Consultant for Spark Somerset and has raised millions of pounds for third sector organisations. With over a decade of experience as a Company Director, Governor and Chair of Trustees, Miranda has successfully designed and delivered training, led campaigns, and been responsible for charity management and governance.