A nonprofit may receive funding from several organizations yet face serious disruption if just one withdraws its support. It may also collect donations from thousands of individuals while relying on a single platform to process most of them.
Counting funders or donation channels is therefore not enough. Your organization needs to understand where its dependence is concentrated, what would be affected by a disruption, and how much time it has to respond.
This article provides practical steps that begin with measuring dependence, move on to assessing its impact, and end with a response plan to protect essential services and commitments.
1. Identify the Type of Dependence You Want to Measure
Concentration can occur at different levels, each requiring a separate question:
| Level of Dependence | Question |
|---|---|
| A specific funder | What share of the organization’s revenue comes from its largest funder? |
| A group of funders | What share comes from its five largest funders? |
| A funding category | How much do we rely on institutional grants or individual donations? |
| A program | How much funding is tied to a particular program? |
| A season | How much cash is collected during a single season? |
| A collection channel | How much of our donations comes through one platform or payment method? |
These percentages examine resources from different perspectives and must not be added together. The same donation may come from an individual, arrive during Ramadan, pass through an online platform, and be restricted to an educational program.
Specializing in a funding category also differs from relying on a single funder. An organization may receive grants from several institutions, reducing its dependence on any one of them while retaining grants as its main funding category.
2. Prepare Comparable Data
Before calculating any percentage, define the period and measurement basis. Are you analyzing revenue recognized during the year, cash actually collected, or projections for the coming year?
Use the same basis throughout each calculation, and distinguish between:
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Recognized revenue and cash receipts.
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Confirmed funding and unconfirmed applications or pledges.
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Cash and in-kind contributions.
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Restricted resources and resources available for broader purposes.
To measure dependence on a particular funder, consolidate its contributions under a single identifier, even if they arrive through several campaigns or agreements.
Clear data comes before a precise indicator: a mathematically correct percentage can still mislead if it combines amounts from different periods or measurement bases.
3. Calculate the Basic Dependence Ratios
Start with three indicators:
Largest funder’s share = Revenue from that funder ÷ Total organizational revenue for the same period × 100.
Top five funders’ share = Combined revenue from those funders ÷ Total organizational revenue for the same period × 100.
Funding category’s share = Revenue from that category ÷ Total organizational revenue for the same period × 100.
To assess a collection channel, use the cash receipts relevant to your question:
Platform’s share of collected donations = Donations collected through that platform ÷ Total donations collected during the same period × 100.
Name the indicator so that its denominator is clear. A platform’s share of digital donations differs from its share of all donations.
No single percentage determines whether dependence is acceptable for every nonprofit. Use the ratio to identify an exposure that deserves further assessment, then examine it alongside funding conditions, commitments, liquidity, and alternatives.
4. Test the Impact With a Complete Example
Suppose a nonprofit is planning for the coming year using the following figures. This is a hypothetical educational example:
| Item | Amount |
|---|---|
| Total projected revenue | SAR 8 million |
| Grant from the largest funder, included in the total | SAR 2 million |
| Total planned expenditure | SAR 7 million |
| Planned surplus before any grant disruption | SAR 1 million |
The grant represents 25% of projected revenue. That percentage alone, however, does not determine the scale of the problem.
Management tests a scenario in which the grant does not arrive. It finds that some program activities have not yet started, allowing the organization to avoid SAR 600,000 in costs. Other expenditure remains necessary because of ongoing services, contracts, and existing commitments.
| After Applying the Scenario | Amount |
|---|---|
| Revenue after losing the grant | SAR 6 million |
| Expenditure after avoiding the identified costs | SAR 6.4 million |
| Projected deficit | SAR 400,000 |
Losing SAR 2 million in revenue therefore does not mean a deficit of the same amount. The impact is calculated after accounting for the planned surplus and avoidable costs.
The decision does not end with the calculation. Management must identify which services will not be delivered, which beneficiaries will be affected, and any costs of canceling contracts or reorganizing operations, then incorporate those factors into the scenario.
5. Assess Liquidity Separately
An annual deficit differs from a cash shortage when payments fall due. An organization may have sufficient funding for the year overall yet face a shortage in a particular month because a payment is delayed.
Continuing the example, suppose the organization has SAR 300,000 in cash available to cover the gap, consistent with the funds’ permitted purposes and the organization’s policies. After accounting for other receipts and payments, its cash flow forecast shows a monthly shortfall of SAR 150,000.
Approximate gap coverage period = SAR 300,000 ÷ SAR 150,000 = Two months.
This estimate applies to the stated scenario. It does not represent how long the organization could operate without any revenue. Review it using a monthly cash flow forecast showing payment dates, expected receipts, and their level of certainty.
Do not treat the entire bank balance as available cash: it may include funds restricted to other purposes. Drawing on reserves can bridge a temporary gap, but it does not create recurring revenue.
6. Turn the Findings Into a Response Plan
Once the organization identifies its dependence and the potential impact of disruption, it can select actions that address the specific risk:
| Risk | Response to Consider |
|---|---|
| A delayed payment | Negotiate the disbursement schedule, update the cash flow forecast, and use approved reserves if needed. |
| Funding is not renewed | Begin renewal discussions early and develop an alternative before the agreement ends. |
| A collection platform becomes unavailable | Prepare and test an alternative collection channel. |
| Seasonal donations fall | Review expenditure timing and develop regular support. |
| A program loses funding | Protect existing commitments and prepare a service transition plan. |
For each action, assign an owner, a deadline, and a condition that triggers it. In the example, response measures should begin before the two months of coverage run out, allowing for the time an alternative needs to become available.
A grant application under review or a list of prospective funders is not a ready replacement. Make clear what is confirmed and what remains a possibility.
Conclusion: Use the Ratio to Start the Decision
Measuring concentration helps a nonprofit when it connects the scale of dependence with the timing of its impact, existing commitments, services, and resources available for a response.
The review is complete when management can answer:
Where are we dependent? What happens if funding is disrupted? And when must we act?
At that point, funding ratios become more than figures in a report. They inform decisions that help protect the organization’s services and commitments.
