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Breaking the Cycle: How Small Charities Can Diversify and Grow

Updated: Jun 26








Small charities are no strangers to tough times. Over the past few years, the third sector has faced some of its greatest challenges from the pandemic and the cost-of-living crisis to changes in National Insurance and lack of apt funding opportunities. Year after year, we celebrate the sector for its persistence in delivering positive change in our communities, for adapting to whatever comes its way, and for showing remarkable resilience.


But if we take a closer look, we start to see the bigger picture: the systemic issues that hold small charities back. Budget cuts from government, funders pivoting to new priorities, and rising demand for services, all while the cost of living continues to squeeze household budgets. These pressures only deepen the challenges small charities already face: funding gaps, stretched capacity, and limited time.


The situation is even tougher for the small organisations (those with annual revenues under £1 million). The stats paint a clear picture:


  • Service delivery remains a core focus. In 2020, over 82% of small charities reported delivering services or products to fulfil their mission ‘a great deal’ or ‘a fair amount’—up from 63% in 2017.

  • Partnerships are key. Nearly two-thirds (63%) of small charities partnered with other organisations in 2020 to support their mission, compared to just under half in 2017.

  • Policy influence and public sector contracts lag behind. Only 23% worked with government to influence policy, and just 25% delivered public sector contracts.


The challenges facing small charities aren’t just about survival but they’re about reimagining how to thrive. While resilience has long been a badge of honour in the sector, the question now is: How can we build resilience in ways that are sustainable, adaptable, and future-proof?


For many small charities, the answer lies in diversification, not just of funding streams, but of strategies, partnerships, and even their core missions. Here are a few ways to start:


1. Explore new income streams

Relying on a single funding source is risky. Small charities can look at diversifying their income by:

  • Developing social enterprises - Selling products or services that align with their mission (e.g., a charity shop with a twist, training programmes, or consultancy services).

  • Applying for grants creatively - Many funders now support innovation, sustainability, and community wealth-building. Tailoring applications to highlight these aspects can open new doors.

  • Exploring corporate partnerships - Businesses are increasingly looking for meaningful ways to give back. Could a local company sponsor an initiative or provide pro bono support?


2. Strengthen collaborations

Partnerships aren’t just about sharing resources, they’re about creating collective impact. Small charities could:

  • Join forces with other charities - Pooling resources, sharing expertise, or even merging with a like-minded organisation can reduce duplication and increase reach.

  • Work with the private sector - Social enterprises and businesses often have skills, networks, or funds that can help charities scale their impact.

  • Engage volunteers strategically - Volunteers bring fresh perspectives and skills. Could they help pilot a new project or support digital transformation?


3. Adapt to changing funder priorities

Funders are increasingly interested in impact, sustainability, and innovation. Small charities can:

  • Focus on measurable outcomes - Demonstrating clear, long-term impact (not just outputs) can make applications stand out.

  • Show how you’re future-proofing - Highlight adaptability in your strategy, such as diversifying income or investing in digital tools.

  • Seek unrestricted funding - Where possible, apply for grants that allow flexibility in how funds are used.


4. Invest in capacity-building

Resilience isn’t just about money , it’s about people and systems. Small charities could:

  • Upskill their teams - Training in areas like digital marketing, fundraising, or governance can unlock new opportunities.

  • Automate repetitive tasks - Freeing up time for strategic work by using free or low-cost tools (e.g., CRM systems, email marketing platforms).


The good news? You don’t have to navigate this alone. At Social Economy West, we’re here to help small charities in the South West of England diversify their strategies, access funding, and build sustainable futures. Whether you’re exploring social enterprise, strengthening partnerships, or rethinking your income model, we offer tailored support to turn challenges into opportunities.


The support is available until 26th September 2026 so we would strongly advise for you to apply now!



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