Finding great projects making a real difference, meeting inspiring leaders and seeing the difference a service has made to its beneficiaries: starting relationships with charities is the fun bit of being a funder. Things are a bit trickier when it comes to withdrawing funding, particularly if you know the charity relies on your grant to run vital services.
Whatever your reason, once you have decided to end a funding relationship, the key to extracting yourself gracefully is early communication of your intentions. This will help the charity minimise the effect of your decision on its operations. If it plans to find replacement funding, early warning gives the charity time to get alternative arrangements in place. Whichever way the charity hopes to replace funding—whether through grant applications, attracting new donors, or running fundraising events—there is always a lag between initiating fundraising and receiving income. If the charity needs to scale back operations to remain solvent, it needs plenty of time to communicate these changes to beneficiaries and help them plan accordingly.
If you remain supportive of the charity, you could consider other ways to ease this transition. One method is to gradually reduce your support to the organisation over a specified time period, meaning that the charity does not need to replace your full donation at once. Another possibility is to help the charity to identify other funders with similar interests, perhaps by introducing them to other organisations or individuals from your own networks.
Early warning and additional support may help a charity adjust to loss of funding, but the best exit strategies are planned upfront with the involvement of your grantee. From the outset, it’s best to think about how long you expect to support the charity for, and how it will continue its work after you are gone. Being open and honest with your grantee about these issues will allow them to plan accordingly. Even if you operate a rolling funding relationship, make time regularly to discuss the needs and expectations of both sides, and the results of the project. This way, you can evaluate on an ongoing basis whether and when the funding relationship might need to change.
It’s also really valuable for donors to think about their grant in the context of the charity’s size and overall income before committing to funding. Generally we advise funders not to provide more than 10-20% of the total funding needed for any project. This ensures that if you withdraw support, the charity still has a strong base from which to fundraise for the income they have lost.
Some funders want to help charities scale up their operations. This is great news for the charity, but should be done with some caution to avoid making the organisation and its beneficiaries unduly dependent on a single funder. It may be more appropriate to provide ‘seed money’ to help the organisation grow more sustainably, for example investing in the charity’s capacity to fundraise and setting targets for the organisation to secure match funding. Seed money is intended to see the organisation through a specific phase of its development and should leave it in a strong position when this funding ceases, rather than in a position of dependence.
Whatever length of funding you decide is appropriate, you may be so pleased with the impact your charity is making that you decide to continue your support. But being clear about your intentions from the outset will help you build a good relationship, avoid unexpected surprises and help you and the charity make the difference you both want.
If you want to read more about this subject, Grantctaft have recently published The Effective Exit, a guide to managing the end of a funding relationship.
This is the fourth in a series of Q and As for donors written by NPC’s Funder Effectiveness team, based on their experiences of working with funders of all kinds. You can read more about their work with individuals and families.