Diversification Reconsidered: The Risks and Rewards of Revenue Concentration
In their 2011 article from the Journal of Social Entrepreneurship, Peter Frumkin and Elizabeth Keating take another look at the wisdom of diversifying one’s revenue mix:
Against the dominant trend in the literature that focuses on the risks of revenue concentration, we find that nonprofit organizations that have highly concentrated and specialized forms of revenue actually experience some significant benefits, in the form of lower administrative and fund-raising expenses. However, these savings are associated with greater exposure to swings in an organization’s financial position. Based on our study of the broader world of nonprofit organizations, we conclude that social entrepreneurs likely face a more complex set of choices about the composition of their revenue than previous research has suggested.
