Things To Know Before You Head Down the Revenue Road
Foreign aid is contracting. So is government funding. Grant competition is intensifying. Yet for many NGOs, the demand for their services is only expanding, amplifying their need for financial resources. As a result, NGOs are exploring how to generate revenues that can make them more financially sustainable.
The transition from grant dependence, however, can be a resource intensive process in which success is partial and often reversible. In this article, Chris Walker and Jerome Tagger look at why diversification journeys are rarely linear, when the most strategic choice is not to diversify at all, and how boards can make more realistic decisions about revenue generation.
It’s a long and winding road
Many years ago, we worked with a grant‑funded social enterprise that sold basic health products to low‑income communities in Latin America. For many good reasons, its leaders were eager to graduate from grants: they wanted to swap in loans, scale more quickly, and prove they could cover their own costs. They drew up a business plan, raised capital, and started rolling out a network of small storefronts, expecting sales from those shops to pay for rent, staff, and logistics.
That's when the real costs showed up: operations ran high, margins ran thin, and prices had to rise. Their poorest customers were priced out, forcing a hard choice: chase financial self-reliance through loans and higher prices, or hold the line on serving the poorest and accept that grants would remain part of the picture.
This NGO’s story, unfortunately, is all-too-common, as are the questions it raises: Which NGOs should diversify? Under what conditions? At what cost to mission, time, and capacity?
For some, earned income will never be a meaningful funding source. For others, it can expand impact and resilience. Distinguishing between these paths early is critical. The wrong transition consumes scarce leadership attention and weakens core programs.
Revenue diversification that stays mission-aligned doesn't follow a neat formula. It's iterative, shaped by market feedback, internal tradeoffs, ecosystem constraints, and organizational capacity. Founders and leaders will do well to adopt an experimental approach: sketch a model that seems reasonable for their context, test it with partners and funders, learn where it collides with reality, adjust, rinse, repeat.
One Acre Fund offers a good example of such a deliberate approach. Early on, the organization set itself a clear target: make its field operations fully financially self‑sustaining so that donor dollars could be freed up for other priorities.
As it pushed toward that goal, it ran into a by now familiar tension: the closer it got to full cost recovery, the harder it became to stay focused on the very poorest smallholder farmers. Over time, One Acre Fund reframed what it meant by sustainability, putting more weight on cost efficiency and on using revenue from better‑off customers or programs to subsidize harder‑to‑serve markets.
More recently, One Acre Fund has gone a step further and moved away from pursuing financial sustainability across the board. Instead, it has invested in developing "revenue engines," impact initiatives that can also generate earned revenue and that have the potential to become fully self-sustaining. This represents a shift from viewing sustainability as an organization-wide goal to embedding it within specific, scalable program models, a reflection of the learning curve that One Acre Fund followed on its path to diversification.
When the less traveled road is less traveled for a reason
Focusing on such success stories (which are few and far between) risks missing how things play out for many organizations. In our work, a lot of the real learning has come from decisions not to move ahead.
We have worked with NGOs that explored fee-for-service models, training products, membership or subscription models or standalone commercial ventures – and a range of combinations – with real seriousness.
Many then chose to stop. In some cases, the conclusion was straightforward: the revenue that might be generated was too small or too uncertain to justify the investment of leadership time, staff energy, and political capital. In others, the concern was mission drift: the new activity would have pulled the organization toward a different audience or a different theory of change. Often, management bandwidth was the binding constraint: there was no realistic way to build and run a new revenue line while also delivering on existing commitments to communities and funders.
These largely invisible choices reflect boards and leadership teams treating diversification as high stakes strategic transformation, with all its implications, rather than as an assumed next step. Across cases, similar tensions show up: Business model change is layered on top of full plates, with program leaders asked to think about pricing and customer segments while still delivering outcomes for donors. Finance teams are asked to model new instruments using systems built for grants. The closer a revenue model comes to reshaping who pays and who benefits, the sharper the mission questions become: are we asking our primary constituents to pay for something that used to be subsidized, or privileging those who can pay over those who most need the service? Government partners, local NGOs, and communities notice when an organization changes how it talks about money; some welcome it, others read it as a shift toward something more transactional.
Choosing the route with eyes wide open
The first conversation should be about whether a business model shift makes sense at all, given mission, context, and organizational capacity. In some situations, the most strategic move may be to focus on improving the quality and predictability of grant funding, building reserves, or deepening alliances, rather than launching a new business line.
From there, fit must sit at the center. In this context, with this mission, this team, what types of revenue are plausible? To guide that discussion, NGO leadership might consider questions such as:
● Market fit: Are there for-profit or nonprofit competitors already serving this market, and how might their presence influence success?
● Customer behavior: Would selling rather than giving away a service strengthen engagement, loyalty, or customer feedback loops?
● Organizational readiness: Do key staff have the necessary business or financial management expertise or the right commercial mindset? If not, is the organization willing to hire or train to fill those gaps?
● Costs vs. benefits: Does the organization have a reasonable path to making money? Do the profits exceed the cost of transformation? Are there ways to cut costs that would reduce the need for revenues?
● Mission alignment: How would this new activity support or dilute the organization’s purpose and impact goals?
● Implications for governance and relationships: How might a new line of earned revenue change how impact is measured, how decisions are made, or how the organization relates to its partners and communities? For instance, can you answer the critique of “Why are you trying to make money off the backs of the poor”?
● Risk appetite: Can you reverse course easily if your revenue-generating approach fails, and how will you manage the consequences?
Boards and leadership teams that approach these questions systematically are better positioned to distinguish between feasible diversification pathways and those that may distract or overextend. Crucially, they can avoid magical thinking.
And while we noted earlier that these journeys are rarely linear, it bears repeating transitions like this are rarely tidy. They ask organizations to learn as they go—about markets, about internal capacity, and about how far a mission can stretch without losing its center. The real work is about making thoughtful choices and staying anchored in purpose even as the organization’s shape begins to change.
The social enterprise we began with demonstrates this learning journey. Drawing on its own experience, it opted to pursue its mission of serving the poorest over its goal of financial sustainability. It did not, however, revert to the status quo. Instead, it turned those lessons into a new guiding metric for the organization - the cost per product delivered - and pushed itself to lower this cost over time. By showing donors it was intentionally stretching every grant dollar further, it became a more attractive funding opportunity and clearer about its primary mission.