What is Nonprofit Development and Why Does It Matter in 2023?

Libby O'Malley

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What is Nonprofit Development and Why Does It Matter in 2023?

It can be confusing to differentiate between nonprofit development and nonprofit fundraising.

If you’re unclear on it, you’ll have a much better understanding after reading through this article. We will cover what nonprofit development is (and what it’s not), why it is important, and strategies to do it successfully.

If you’ve ever found yourself wondering, “What is nonprofit development?” you’ve come to the right place to find out!

Overview of Development in the Nonprofit Sector

Ideally, nonprofits drive change for good. Maybe they provide services to families with medical challenges. Maybe they fund research to address climate change. Maybe they provide before or after-school care for economically-disadvantaged children.

Whatever the cause, nonprofits have to raise money to continue advancing their important missions. Whether it be through individual donations, fundraising events, corporate sponsorships, grants, or more, nonprofits rely on generous giving to support their operations and programs.

You are likely familiar with nonprofit organizations that are household names, such as the United way, Habitat for Humanity, Feeding America and others. You may have even supported one of these organizations with your own donation.

So what do all of these nonprofits have in common? They excel at nonprofit development.

The amount and quality of service nonprofits can provide depends overwhelmingly on the success of their development strategies.

In the following sections, we will define what nonprofit development is, its essential components, and its importance for the success of your organization.

What Is Nonprofit Development?

Say “nonprofit development” and most people will say, “Yes, fundraising.”

While fundraising is a critical component, nonprofit development encompasses a much broader spectrum of activities and strategies. Let’s begin by explaining the basic concept of development and how it relates to nonprofit fundraising.

Basic Concept

In a nonprofit context, "development" refers to a multipronged effort to advance an organizations’ mission, impact, and longevity. It extends beyond just fundraising.

Nonprofit development includes donor cultivation, strategic planning, fostering partnerships, and more. In general, anything that has to do with advancing the capacity and ability of a nonprofit to operate and fulfill its mission falls under the umbrella of nonprofit development.

You can think of nonprofit development as relationship building. And it’s through the development of these relationships that nonprofits can achieve success and further their impact.

Components of Nonprofit Development

As we mentioned earlier, there is a common misconception that nonprofit development and fundraising are one and the same. However, making “the ask” for support or donations is only one aspect of development.

In fact, “the ask” can only occur successfully if a connection has already been established with the potential supporter, if the mission of the organization has been well communicated, and if the organization is credible and trustworthy—and this is where nonprofit development comes in.

Nonprofit development includes making connections, cultivating relationships, seeking out support, and ultimately stewarding gifts.

Without all these facets of development in place and in alignment, fundraising becomes much more difficult—if not impossible.

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Why Is Nonprofit Development Important?

Development is one of the most important things a nonprofit could invest in. Keep reading to learn how nonprofit development can help your organization sustain its mission, further its vision, and build a community of supporters.

Sustaining Mission and Vision

Unlike for profit companies, nonprofit organizations generally rely on the generous giving of donations, grants, and sponsorships to operate. It is through this support that nonprofits can run their programs, serve their communities, and ultimately advance their missions.

Development helps ensure that nonprofits aren’t limited or hindered by a lack of funding or support. The relationships and partnerships established through nonprofit development help to establish organizational sustainability and longevity.

Many nonprofits have been forced to shut their doors because they couldn’t afford to operate anymore. Investing in top development practices can help your nonprofit sustain its mission and vision for the long-term.

Building Community and Stakeholder Relationships

Nonprofit development is also essential for building up community and stakeholder relationships.

Nonprofits thrive when they can foster strong relationships with:

Board members

Donors

Volunteers

Community partners

Grant funders

Local government officials

And more.

The ongoing stewardship of these relationships can only happen through intentional and strategic nonprofit development. Cultivating these stakeholder relationships is key to fostering a community of support and bringing people together around a shared mission.

5 Strategies for Nonprofit Development

Now that we know what nonprofit development is and why it’s so important, it’s time to get into the practicals.

Keep reading to learn about five different nonprofit development strategies you can use at your own organization to drive growth. From diversifying funding sources to harnessing technology, these strategies can help your nonprofit mature and evolve in today's dynamic environment.

Diversifying Funding Sources

You’ve probably heard the saying, “don’t put all your eggs in one basket,” and the same could be said for nonprofit fundraising!

One of the biggest mistakes some nonprofits make is relying on only one type of funding. Whether it’s grants, online donations, or proceeds from an annual gala, if for some reason that funding is no longer available, those nonprofits could find themselves in deep water.

Instead, one of the best nonprofit development strategies is to focus on diversifying funding sources. Having diverse revenue streams makes it much easier for nonprofits to establish financial sustainability and longevity.

Here are a few different funding sources a nonprofit development team can pursue:

Grants

Corporate sponsorships

Fundraising events

Individual gifts

Giving societies

Matching programs

Legacy gifts

Merchandise sales

These are just a few ways a nonprofit can source different kinds of revenue. Overall, an increase in funding diversity means a decrease on sole-stream dependency.

Enhancing Donor Engagement and Retention

While one-time donations are great, a nonprofit can really benefit from cultivating a community of long-term, recurring donors.

Nonprofits can engage and retain donors through development strategies like consistent donor communication, appreciation, and sharing about the impact that their support makes.

For example, making sure to thank donors after every gift is a simple way to show them how much you appreciate their support.

Donors also want to feel connected to the nonprofits they give to, and a great way to foster this connection is to show donors the direct impact of their gift.

Check out this great example from Feeding America’s 2022 Impact Report. Including this participant story helps connect donors to the life-changing impact of their support and inspires them to continue giving. ‍

Utilizing Technology and Digital Platforms

Used adeptly, technology can be a great way to help nonprofits build a bigger audience, secure more funding, and land more opportunities to share their mission and vision.

Here are just a few different technologies and digital platforms that can be used for nonprofit development:

Donation platforms can help streamline fundraising by serving as a one-stop-shop for all things donations. (Check out this list of the best donation platforms to choose from.)

Donor management software makes it easy to segment donors, track their giving, and personalize your communications with them.

‍Email marketing platforms allow you to automate, test, and segment emails to different audiences for different campaigns.

Grant databases like Instrumentl make it easy to search for grants that align with your specific project, location, and mission.

‍

Each of these technology-based resources can assist in growing your nonprofit’s audience and advancing its mission.

Check out this guide that includes five expert tips on choosing the right technology for your nonprofit.

Capacity Building and Training

Nonprofit organizations should invest in educational opportunities and training so that staff (and key volunteers) become development savvy.

Building capacity in this regard provides the development team with leadership skills and an open mind to emerging industry practices.

Here are a few ways you can invest in capacity building and training at your nonprofit:

Attend nonprofit and fundraising-focused conferences

Participate in webinars led by industry leaders

Subscribe to top nonprofit blogs

Listen to podcasts on nonprofit fundraising best practices

Read books authored by development pros

As you can see, there are tons of resources at all different price points to help you hone your nonprofit development skills. And don’t forget, you can also apply for capacity building grants as a way to fund these training efforts!

Grant Writing as a Storytelling Tool

Finally, one of the best fundraising strategies that’s often overlooked in the development world is applying for grants.

It’s true that grants can be competitive, but with the right tools and resources, you can boost your chances of securing significant funding.

For example, Instrumentl makes it easy to find good-fit funders that align with your nonprofit’s mission and funding needs. Once you identify a good-fit grant, you can use storytelling techniques in your proposal to make it stand out and resonate with the funders. ‍

Grantors want to hear how their support transforms lives. Real data is important, but storytelling is a great way to humanize that data and make funders want to invest in your cause.

For more grant writing tips, best practices, and guides, check out Instrumentl’s blog that’s full of fundraising resources.

2 Key Challenges in Nonprofit Development

Regulatory issues and donor fatigue are two common challenges nonprofit developers often face. However, we are going to explain how you can prepare for and overcome these obstacles at your own organization.

Navigating Regulatory and Compliance Issues

Compliance is incredibly important for nonprofit organizations.

In fact, it’s not uncommon for nonprofits to lose their 501(c)(3) status for lack of compliance. The regulatory requirements are not for the faint of heart.

For example, every year nonprofits are required to file Form 990 with the IRS to report on their financials.

The good news is that there are plenty of savvy tax experts and lawyers who specialize in the nonprofit industry who can help guide you through these processes. When in doubt, seeking the help of a professional expert is always the best route to follow.

Addressing Donor Fatigue

With so many nonprofits all vying for the same donors’ attention, donor fatigue is inevitable.

However, your organization can minimize this fatigue by avoiding sending repetitive and uninspired communications to your audience.

Donors want to be treated as individuals, not as a number in a data sheet. To help your donors feel more connected to your cause, make sure to show them how their support is making an impact. You should also thank them frequently and communicate with them in the manner they prefer (for example, direct mail or through email).

Remember treating donors as individuals keeps donor fatigue at bay.

Wrapping Up: The Next Steps

Development, when done strategically, can cultivate relationships and build support for your nonprofit for years to come. Nonprofit development provides organizations stability and longevity, allowing them to advance their critical missions.

Be it a newly organized 501(c)(3) or one that was established decades ago, the future of any nonprofit relies overwhelmingly on a thoughtfully executed nonprofit development program.

For more nonprofit insights, strategies, and guides, don’t forget to check out Instrumentl’s library of resources.

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Posted Oct 2, 2023

Unsure about the nuances of nonprofit development versus fundraising? This article provides a clear definition of nonprofit development, explains its significa…

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