Is your income too dependent on one source? A practical look at controlled diversification

It's all about risk management, really. I've seen too many organisations relying too much on a single source of income, a core grant, a large contract, or a single benefactor. It genuinely worries me how much risk VCSE organisations expose themselves to this way, especially when so many people, clients and staff, are so reliant on them staying open.

This isn't about being alarmist. It's about being honest with yourself about where your organisation actually stands.

What income concentration risk looks like

If one funder, one contract, or one donor makes up the majority of your income, your organisation's survival is effectively in someone else's hands. A funding round doesn't get renewed. A contract goes out to tender and you lose it. A benefactor's circumstances change. None of that is under your control, but the impact of it landing on your organisation absolutely is.

As a rule of thumb, no single income stream should make up more than 30% of your total income. It's not a hard rule, every organisation is different, but it's a useful benchmark to test yourself against.

What a more resilient mix looks like

Ideally, you want a blend across several types of income: grants, contracts, trading income, donations where possible, and loan finance too. Each behaves differently, moves on a different cycle, and depends on different relationships. That blend is what gives you stability, resilience and adaptability, rather than a single thread holding everything up.

Where to start

You don't need to overhaul your entire funding model overnight. Start by working out what percentage of your current income sits in each stream. If one number is uncomfortably large, that's your starting point, not a crisis to solve this month, but a direction to start moving in.

We're putting together an income diversification workbook later this year, with clear, practical steps for moving from income instability to income resilience. Keep an eye out for it by signing up to our mailing list.

In the meantime, if you'd like to talk through what your own income mix looks like and where the risk actually sits, there's a free 45-minute advice session in my diary.

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