What is donor dependency - and how can your charity avoid it?

At its simplest, donor dependency is when a charity relies heavily on one or a few income sources. That might be:

• A single grant from a trust or foundation
• One corporate partnership making up a third of your income
• A local authority contract that covers most of your core costs
• A major donor whose giving outweighs all other supporters combined

On the surface, this might look like stability. You know where the money’s coming from, you can budget around it, and you may even enjoy a long-standing relationship with that funder.

But here’s the risk: when one source becomes too dominant, you’re left exposed if they change their mind, shift priorities, or simply move on.

The implications of donor dependency

The implications of donor dependency go beyond finances. Here are some of the most common risks charities face:

• Financial vulnerability

If a single donor provides 30% of your income and suddenly pulls out, you’re left scrambling to plug the gap. Few charities have that kind of spare cash to cushion the blow.

• Reduced independence

When you rely heavily on one funder, there’s a temptation to shape your work around their agenda. Over time, this can cause “mission drift” — pulling you away from your core purpose.

• Cashflow issues

Even if the donor doesn’t withdraw entirely, delays in payments or changes in grant cycles can create serious cashflow problems.

• Staff pressure and uncertainty

Fundraisers and programme teams may feel extra pressure to “keep the donor happy,” which can create stress and limit creativity.

• Reputational risks

If your donor is involved in a scandal or receives negative press, your charity may be linked by association.

In short, the implications aren’t just financial. Donor dependency can ripple out into strategy, culture, and even public perception.

Did you know? According to the NCVO Civil Society Almanac, around 35% of small charities rely on a single income source for more than half of their funding. That makes them particularly vulnerable if that funding changes.

You might be wondering: if it’s risky, why do so many charities fall into this pattern? The reality is that donor dependency often develops gradually, and sometimes it’s hard to spot until you’re already deep in it.

Here are the most common reasons:

• Big wins are hard to resist

When a major donor or grant opportunity comes along, it can feel like a huge success. And it is! But over time, that one win can overshadow everything else.

• Small teams, limited time

Most fundraising teams are stretched thin. If you already have a reliable donor, it’s easier to keep focusing on them than to invest time in diversifying.

• Short-term survival mode

Charities often prioritise the immediate year’s budget over long-term planning. Dependency creeps in when survival today takes precedence over resilience tomorrow.

• Lack of confidence or skills

New income streams, such as legacies, corporate partnerships, or community fundraising, can feel daunting without the right experience or resources.

• Structural barriers

Not every charity has access to the same networks or opportunities. Smaller organisations in particular may find it harder to tap into trusts, corporates or wealthy individuals.

• External factors

Changes in policy, funding priorities, or the economy can push charities to lean more heavily on whichever donor or contract still feels “safe.”

So, what can you do if you’re worried about donor dependency in your organisation? Here’s a practical roadmap to follow.

• Map your current income

Take a clear look at your income mix over the past three years. Plot out where the money is coming from and what proportion each source represents. You may be surprised by how concentrated it is.

Quick tip: Create a simple pie chart to visualise this, it’s often the fastest way to spot dependency.

• Identify your risk points

Which donors or funders make up more than 20–30% of your income? These are your “single points of failure.” They’re the areas you’ll want to address first.

• Set safe limits

Decide what feels like a healthy maximum for any one source — maybe 15 - 20% of your annual income. This gives you a benchmark to measure against as you diversify.

• Build your regular giving base

Regular givers may not provide headline-grabbing figures, but they’re the backbone of stability. Do what you can to nurture and grow this base: campaigns, stewardship, and easy sign-up options all help.

• Develop your mid-level donors

Mid-value donors (say, those giving £500–£5,000 a year) are often overlooked, but they provide resilience. They’re more engaged than small givers but less risky than relying on one or two major donors.

• Explore new income streams

You don’t need to reinvent the wheel, just test one or two new areas. Ideas could include:

- Corporate partnerships

- Challenge events

- Trading or social enterprise ventures

- Legacy fundraising campaigns

- Peer-to-peer or community-led giving

• Run “what if” scenarios

Ask yourself: “What would happen if our biggest donor halved their contribution tomorrow?” Modelling different scenarios helps you prepare, rather than panic.

• Strengthen donor relationships

Diversifying doesn’t mean neglecting your big donors. Keep them engaged with good stewardship, impact reporting, and opportunities to connect with your mission. Strong relationships buy you time if funding changes.

• Review regularly

Set an annual review of your income mix. Dependency has a way of creeping back in, so regular check-ins keep you alert.

A simple scenario

Let's bring this to life.

Imagine a charity with a £1 million annual budget. One corporate partner funds £300,000 of that - 30%.

At first, this feels fantastic. But then the corporate goes through restructuring and cuts its giving in half. Overnight, the charity faces a £150,000 shortfall. Staff posts are at risk, projects are paused and leadership has to scramble to fundraise in new ways.

Now imagine the same charity had spent the past few years growing its regular giving programme, adding two smaller corporate partners, and building a base of mid-level donors. The original donor now represents only 15% of income. Losing half of their gift still hurts, but it’s more manageable.

That’s the power of planning for donor dependency.

ETO is a charity that uses Donorfy not just for events and donor management, but specifically for trusts and grants too.

Olivia Collins, their Development Manager, shares:

“I’m using Donorfy for grant applications now. The opportunities feature is particularly useful for monitoring the different stages of our applications once they’re in the pipeline, from submission to outcome.”

She also describes how they’ve built custom processes:

“We've composed a specific activity for trust and foundation applications … This allows us to input all necessary information, such as the amount applied for, the amount received and the success rate.”

And flexibility matters:

"We really like the opportunities and campaign features, which get used a lot. We have various types of activities that need to be added to constituent timelines, given the diverse nature of our interactions."

This shows a real charity using tech to manage complexity, track multiple funding paths, and avoid leaning too heavily on any one contributor. It’s not just theory - it’s working in practice.

Read their story

• Don’t demonise major donors - they’re still vital. The problem is imbalance, not the donor.
• Avoid mission drift - don’t change your core work just to win funding.
• Invest in your team and tools - diversifying often requires new skills or systems.
• Be patient - change doesn’t happen overnight.
• Monitor external factors - shifts in funding trends, policy, or economy can suddenly change which income streams are “safe.”

Donor dependency is a real risk, but it is manageable. The key to avoiding the implications of donor dependency is to spot warning signs early, diversify deliberately and use tools, like a charity CRM, strategically. That way, instead of teetering on one leg, your income “table” has several legs - all helping you stand firm.

Use real data, use real voices (like Olivia’s at ETO) and build momentum year by year. That’s how you turn vulnerability into resilience.

Next steps

If donor dependency is something on your mind, talk to us! A CRM like Donorfy can help you:

• Analyse your income mix
• Track risk and dependencies
• Segment donors and funders intelligently
• Automate stewardship and reporting