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Difficult economic times in 2008-2010 were an important wake-up call for community foundations—a reminder that diversifying revenue sources is an essential component of a strong business model. A number of leading community foundations have made innovative changes to their business models to achieve both differentiation and sustainability; their experiences offer lessons to forward-thinking community foundations across the country.

Top Takeaways

  1. Community foundations’ traditional asset-based fee structure has a number of limitations: it does not cover foundation activities unrelated to fund management, it magnifies the impact of market volatility on foundation sustainability, and it implicitly fails to communicate the full value that community foundations offer.
  2. The best community foundation business models strengthen an organization's differentiation (its distinct value proposition tailored to constituents’ needs and the community context) and sustainability (its ability to achieve its mission today while enhancing its ability to do so in the future) in mutually reinforcing ways.
  3. When shifting to new business models, community foundations should also consider securing bridge capital to enable a proper investment in their transition, and seeking the input and collaboration of their constituents.
A foundation’s revenue should be aligned with the value it delivers to its range of constituents, to meet their distinct needs.

This report was created by CF Insights, an initiative of FSG from 2007-2014. In 2015, CF Insights became part of Foundation Center.