Budget cuts at the state and local levels are having a huge adverse effect on nonprofits all over the country. Couple budget cuts with the reality that grant makers expect to give fewer grants in 2010, and you have a recipe for another difficult year for nonprofits.

Fundraisers and nonprofit directors need to look at alternative income streams to replace traditional sources operating funds like grants, individual donations, and state funding.

Here are a few ideas for alternative income sources:

1. Earned revenue. The profits from a product or service that people will pay for is a great way to raise needed funds.  A separate, for-profit company is sometimes needed to do this. Some nonprofits open coffee or ice cream shops. Arts organizations set up historic-area or architecture tours in their cities to earn tourist dollars. Others publish books, print t-shirts and mugs, or open thrift stores. The possibilities are endless, with a little imagination.

2. Major gifts. Developing relationships with philanthropic organizations or community groups is crucial. Find out who has money to give and make sure they know your organization’s mission and needs.

3. Rent out empty space. If there are empty offices in your building, offer them to entrepreneurs, other nonprofits, or professionals.

4. Sell assets. Are there assets you own that are not increasing in value or earning a return? If your NPO has not already done its spring cleaning, it may be time to look at what assets you can sell. Vehicles, parking lots, vacant lots, buildings–they should all be considered.

5. Diversifying your outreach. Social media is the answer to getting your organization’s message out to the masses. Smart phones are the new information delivery system, but consumers will only let in information they want or trust. Make friends and fans by setting up Facebook and Twitter accounts, and gather your supporters’ cell phone numbers as a way of mobilizing them when you need to.

6. Diversify your fundraising. Try sponsoring a fun run, a 5K or even a long-distance run. Get a booth at a community event and sell something: t-shirts, hand-crafted items, or food (cupcakes, candy, brownies, or ice cream.)

Creativity and diversifying will be the keys to increasing your nonprofit’s income in  2010!