Grants, whether government or privately funded, normally do not allow their funds to be used for ongoing administrative costs, i.e. overhead. While that may seem somewhat shortsighted on the part of the grantors, it is nonetheless a fact of nonprofit life. Grants usually support programs, not organizations. They are booked as restricted funding, meaning that you can't use it to pay the rent or fund the administrative staff salaries.
So, where does the money come from to keep the lights on and pay the staff?
From unrestricted donations, i.e. donors that designate their gifts as "general support" for your organization.
Some very few foundation grantors do say that their donations can be used at least in part for general support, but mostly, these donors originate from two sources.
Who gives unrestricted donations?
First, the ones that donate small amounts of money or support an event simply because they believe in your overall mission strategy. Secondly, from individual donors that commit large sums in the form of endowments or a single big donation or bequest.
When designing your fundraising plan, courting these donor categories is at least as important as mapping out a grant strategy. Nationally, over fifty per cent of all nonprofit funding not related to fee-based services comes from individuals. Less than fifteen percent comes from grants.
That should tell you that donor development at the individual level should be at the top of your fundraising priorities.
Tired of the grant rat race?
If I could recommend a few things that nonprofits can do to end the grant rat race, it would be to go out and shake hands, speak at applicable venues, and just generally actively recruit donors that will write "general support" on the memo line of their check.
Take the case of a community event. When you advertise it, be up front with the allocation of the funds received. Tell your donors that while you need money for program Y, that program will not exist, much less accomplish its goal, if your organization ceases to exist. If you feel that the program is the major draw for the event, you could say that funds generated will be used 70% for the program and 30% for overhead.
Relate general support to the donors everyday existence. If you equate your need for general support to the donor's need to keep your organization viable to accomplish your mission, they'll get it.
Honesty pays dividends
Honesty is definitely the best policy. Donors that think their ten dollar donation is going to buy ten meals for the hungry feel ripped off when they find out that three dollars went toward your rent or mortgage payment. If they understand in advance that you will have no place to put the food if you can't pay the rent on your warehouse, they are generally fine with that.
The same thing goes for your major gifts strategy (you do have one, right?). You have to educate the prospective donor so that person understands that while your mission may be rescuing animals, you can only accomplish that if you can pay your day-to-day operating costs, and that includes paying the receptionist that takes the initial call or keeping the lights on in the kennels.
Don't beg. Educate!
Educating the donor community regarding where nonprofit funding comes from is just as important as the feel-good stories about who or what got helped. Ask most ordinary citizens where nonprofits get the money to operate, and they are going to say grants or events as often as they will say "from people like me".
That's at least partially because nonprofits only get in the news when they get a huge donation from a foundation or a big government grant. If that's the only time the general public hears about your organization, who can blame them for thinking you don't need their money?
Tell the whole story, tell it well and tell it often.
Unrestricted funding is the key to your organization's survival. Learning how to develop it should be a top priority.