Are Grants Costing Your Nonprofit More Than You Think?

Grants are a vital part of the nonprofit landscape.

For many organizations, they’ve been the fuel to launch innovative programs, reach new audiences, and build capacity. There’s no question: grants can do good.

But like anything in the nonprofit world, how we use grants matters just as much as why. If we're not careful, grants can lead us down a path of short-term wins at the cost of long-term sustainability.

In this blog, we’ll explore what grants do well, where they quietly fall short, and how deep community engagement helps build the kind of support no application deadline can ever guarantee.

The Power and Pitfalls of Grant Funding

Grants provide critical opportunities. They can:

• Kickstart new programs.

• Bring legitimacy and visibility through prestigious funders.

• Allow experimentation or expansion that might not be possible otherwise.

But they come with built-in vulnerabilities. Over time, we’ve seen some common and avoidable patterns emerge:

1. Mission Drift
To secure funding, organizations sometimes shift their programming to fit the grant, rather than pursuing their original vision. This realignment might feel subtle at first, but if repeated, it can pull a nonprofit further and further from its core mission.

2. Loss of Community Buy-In
When an organization is funded primarily by grants, the urgency to involve its local base fades. After all, if the check is already written, why do the hard work of building lasting relationships? The result: a weaker support network and fewer community advocates when you need them most.

3. Dependency and Uncertainty
What happens when you build your operations around a grant that isn’t renewed? Programs can vanish overnight. Staff might lose their positions. The community you serve, often left out of the funding conversation, bears the brunt of it.

4. Chasing Grants, Not Outcomes
Too many nonprofits end up focused more on the next grant deadline than the impact they set out to make. The cycle of applications, compliance, and reporting can overshadow why the organization started in the first place.

"A grant can help you grow. But if you're not careful, it can also steer you somewhere you never meant to go."

What Community Engagement Offers That Grants Can’t

Community engagement isn't a fallback plan. It’s a foundation.

Organizations rooted in their communities, with regular donors, volunteers, partners, and advocates, have something even the best grant can’t provide: resilience.

Here’s what community engagement can do:

1. Build Long-Term Sustainability
Recurring gifts and local partnerships don’t rely on approval cycles or funding trends. They grow over time through trust and shared values.

2. Keep You Accountable to Your Mission
When your supporters are your neighbors, they’ll let you know when you start drifting off course. That feedback keeps your work mission-focused, not grant-focused.

3. Unlock More Than Money
A strong community brings volunteers, in-kind support, social visibility, and peer-to-peer reach. People talk about the organizations they feel part of.

4. Foster Ownership and Momentum
When your community is engaged, they don’t just donate. They advocate. They attend. They bring friends. They help build something that lasts.

"A grant will fund your program. A community will fight for it."

The Risk of Building Without a Backup Plan

Some nonprofits unintentionally build entire programs, or worse, their entire identity, around grant funding. It works… until it doesn’t.

Imagine spending years building a program only to lose a grant that kept it running. If there’s no community around it, no shared investment, there’s no cushion when the funding dries up.

This is why community engagement isn’t just “nice to have.” It’s an essential part of risk management. It’s your backup plan and your legacy rolled into one.

Bringing It Together: Grants + Grassroots

This isn’t an either-or argument. Grants and community engagement can and should work together.

But grants should never be the only leg a nonprofit stands on. When that happens, even the most mission-driven organization becomes reactive, pivoting to please funders, chasing trends, and scrambling during the next fiscal year.

Instead, use grants to enhance the work your community already believes in. Engage people early, include them often, and invite them to be part of the journey, not just observers of it.

And when a grant ends? The work won’t.

Strength Built to Last

Grants are tools. Community is your foundation.

The most successful nonprofits we see are the ones that build relationships with their communities, not just applications for funding. They’re the ones that invest in storytelling, invite collaboration, and show up in their neighborhoods year after year.

If your organization is thriving on grant funding, congratulations. That's no small feat. But don’t wait until a grant ends to start building your community. Start now. Let your supporters in. Let them belong. Let them help you build something that lasts.

Wondering how to create more consistent support, deeper engagement, or better event turnout without relying solely on grants? Let’s talk. At Black Diamond Benefits, we help nonprofits build the strategies and moments that turn one-time supporters into lifelong advocates.