With foundation grants accounting for only 10% – 15% of all charitable gifts in the United States, nonprofits should carefully assess if it makes sense to dedicate time and resources to compete for them.
Make no mistake, grants are extremely competitive. Foundations tend to prefer funding programs (55%) –especially new programs– to general operating (29%) or capital costs (21%). To get a sense of the total number of foundations, amounts given and the sectors to which they give, you can find statistics at the Foundation Center website. You will learn fun facts like only the top 1% of grant recipients captured half of all U.S. grant dollars, and the health sector received the most (28%) grant dollars.
In Massachusetts, there are 3,069 foundations (2012), which represent 4% of all U.S. Foundations. Those 3,000 foundations made total gifts of $1.4 Billion. Sounds good, right? But total giving has been roughly flat in the state since the 2008 recession while the numbers of nonprofits continue to grow.
So should you pursue grants, if you haven’t done so before? If any of the following conditions exist, then another form of development (e.g., direct mail appeals, major gift solicitations, special events) rather than a grants strategy may be a wiser path for your nonprofit to pursue.
1) You lack the capacity to monitor and administer grant funds and/or reporting.
If you can’t account for the money properly (e.g. in the correct fiscal year, show how it went to the proposed program/activity) at the end of a grant period, then chances of repeat funding are slim. Worse, you may be liable to return the money if it is not used for the purposes for which it was intended. The potential bad publicity, aggravation, and ill will are not worth it.
2) You cannot clearly measure or show the impact of your service(s).
Outcome measurements, or the ability to prove that you have made a significant difference in someone’s life for the better, are key to foundation gifts and reporting. If you have a one-time intervention to make someone’s quality of life better in that moment, but not for any significant length of time (or even if it is for a length of time, but you can’t measure/prove it), then your proposal will lack competitiveness against organizations that can measure and demonstrate changing lives. 
3) You lack basic information on the population that you serve, or the population numbers you serve are very small.
You could have a great program, but if it is very small (e.g. limited to a small locale or numbers served) it won’t be competitive per grant dollar spent. Caveat: you serve a very sick or needy (e.g. very low-income) population that is underserved or ignored by others, and could adversely affect others. Think of emergency preparedness for Ebola victims, for example.
4) You need cash immediately, not in three to twelve months.
The average grant process takes three to six months, and could take up to a year if there is only one grant cycle. To be successful, one should plan out a grants calendar with the various foundation deadlines a fiscal year in advance.
5) The grant requirements cost more than the actual grant you will receive.
If a small grant requires semi-annual reporting, an independent evaluation or new financial/administrative requirements that you would have to set up, then figure out the costs in terms of your staff time first. If the time spent on actual reporting and/or new systems equal or exceed the grant, then you have gained nothing. However, the first time you invest in preparing a good grant proposal may pay off over time, if you can obtain repeat funding and increase your development capacity.
6) The total number of good funders for your type of organization is less than five.
If there are too few funders for your geographical area or issue sector, then investing in the capacity to produce good proposals probably won’t make financial sense. This assumes that the few funders give average size grants ($5,000 in Massachusetts). Caveat: the math changes if you have a funder that makes very large grants, and is a good fit for your cause.
If you can’t speak with a funder prior to submission, then ask an expert consultant for honest feedback about the likelihood for success in approaching any particular funder. Proposal writing is just one component of a comprehensive development plan. Take the time to think through which strategies best suit your non-profit in terms of capacity and likelihood for success for this new year.
Republished with permission of massnonprofitnews. You can also find this article at: http://www.massnonprofit.org/expert.php?artid=4381&catid=19