A critical output of the financial model will be the size of the gap between revenues and costs (if there is one) over time.
There are multiple ways you could fill this ‘gap’, depending on what is causing it and how long it is expected to last. This is summarised in the diagram below:
|Uses of funding||Sources of funding|
|To fund transition costs (where costs that are greater than revenues in the short term as you transition to a new funding model)||
|To fund new revenue opportunities (where basic revenues are insufficient to fund the cost of investing in new growth opportunities which can generate significant revenue in future)||
|To fund a sustained ‘gap’ (where core revenues are persistently lower than costs)||
For more information about the potential of an endowment, see Funding an endowment.