Alice… “Would you tell me, please, which way I ought to go from here?”
“That depends a good deal on where you want to get to,” said the Cat.
Every year trillions of revenue dollars pass through the books of nonprofit organizations. Chances are your board would like more of this income to pass through your coffers. This article can help. It presents the seven key ways that nonprofits earn income for their mission. Which are you tapping? Which have you dismissed because years ago someone decided the source was impossible? Does a list like this help? Yes. Over the past decade, I’ve helped many nonprofits to develop new and enhanced income streams. Once you understand where your opportunities lie, you are in an ideal position to make the most of them.
Source One: Mission Income
Nonprofits receive this income for services they provide related to their mission. Nonprofit housing organizations charge rent. Theaters charge patrons for tickets. Ride services charge based on mileage. Mission income is the largest nonprofit revenue source, with 28 percent of the total. For heath care organizations, mission revenue is almost 40 percent. Almost every organization has opportunities to earn mission income, even if you now only provide free services. For example, we developed a viable mission income concept to offer critical data to new customers, in one session, with a never-charged-a-fee organization. This one concept helped them to “clear the fog” and begin to explore new opportunities.
Source Two: Individuals Wanted: Dead and Alive
This income source is donations from individuals. Ideally, individuals give to your organization because they have a passion for your cause, the means to give, and a relationship with you. Donor income includes everything from the check your board member writes, to special event revenue (above and beyond the cost of the gala dinner), to the stocks from Mrs. Bates’ will. Income from individuals represents the largest source of donated revenue nonprofits receive. Yet, this is only 16 to 29 percent of all nonprofit revenues. Nonprofits that successfully grow donor income make an ongoing commitment to be inclusive and interactive with a community they develop. Donor development is akin to gardening. You plant seeds now, nurture them as they become seedlings, and harvest later. Additional examples include the $25 check you wrote last year to the school foundation, and the bequest that the Lighthouse for the Blind received for one million dollars. All nonprofits by virtue of their 501(c)(3) status have the potential to receive individual donations.
Source Three: Government
Government funding comes from direct government sources, like states, provinces, national governments, and municipalities. This source also includes quasi-government agencies, like water management districts and arts councils that redistribute tax dollars. Successfully receiving government funds is a result of competitive grant applications, requesting proposal, and obtaining earmark. Government funds constitute 21-30 percent of nonprofit income. A client recently (in 2010!) snagged $100,000 in new government funding based on the organization’s past high-quality service. Most, but not all nonprofits, can receive government revenue. Exceptions include faith-based groups that proselytize and groups that represent out-of-favor or controversial issues.
Source Four: Foundations and Other Organizations
While foundation funding represents only a small portion of nonprofit income –some 2-4 percent, foundation’s importance is greater than the numbers indicate. Besides funding for other projects, foundation money often pays for nonprofit research and development opportunities. This is money from a partner who will share some new venture risk with you. Around 100,000 foundations exist in the United States. These range from the vast, like Ford, Rockefeller, and Gates, who carry recognizable name brands and tremendous assets, to the small family foundations. The majority are the later—often, in essence, individual donors. For example, a local foundation funds a technology upgrade at a nonprofit for around $40,000. The upgrade allows the nonprofit to provide additional service equal to one staff member without increasing staff. This income category also includes organizations that give grants, like the Junior League, Kiwanis Club, and congregations. They generally use an application process akin to those foundations use. Almost all nonprofits can access foundation funding. Fifty percent of your success in this area involves identifying groups that care about your cause in your location. If you have a replicable idea, you can often access national and international foundations.
Source Five: Business
In the big picture of nonprofit income, corporate and business contributions are small. However, when you are talking about 1-2 percent of a 1.5 trillion nonprofit economy, corporate income represents significant potential money. This income accomplishes two goals: nonprofit support, and enhanced business outcomes for the business partner. The enhanced outcomes are often marketing related. Most nonprofits can obtain this funding. Potential sources include entities that share your customer, donor, or advocacy base. Consider large corporations, like Target, Best Buy, and American Express. Don’t forget your local print shop and regional stores and services. Think about new businesses. Recent research by Ernst & Young and the Fidelity Charitable Gift Fund found that entrepreneurs donated two times the amount of their profits compared to older businesses. Business support often comes in the form of grants, cause marketing, and sponsorship.
Source Six: Other Income
The sixth source of income is a catchall “other income” category. It represents 10 to 16 percent of all nonprofit income. Other income includes everything from candy sales, tent rentals, and consignment store revenue, to the sale of your worn van. A Tampa Bay group rents a room in their facility that nets $200,000 in yearly income. You probably already earn other income, even if it is just the interest on your bank accounts or soda machine proceeds.
Source Seven: In-kind and Partnerships
This final income source is not money. It acts like money. In-kind resources include goods and services that a nonprofit receives at low or no cost. We include it in our list of seven magic sources because of its budget power. In-kind includes everything from donations of dog food to the humane society, to a free event speaker, to the website savvy board member who maintains your website at cost. Appropriate in-kind frees cash for items that require it, like payroll taxes. In-kind is available to nearly all nonprofits. It is obtained from corporations, individuals, and governments. Your potential in-kind support is limited only by creativity and the relationships you have. Partnerships are also included in this category. While they too usually do not provide cash, they can save cash while providing important resources. Partnership benefits include everything from the referrals you receive (in lieu of marketing your services) to the opportunity gained through long-term alliances and mergers.
Can Your Organization Obtain More Income? Yes. You can solve your income challenges. It will take creative thought and hard work. Each of the seven income sources has possibilities and challenges. All take effort, focus, and investment. Little is easy, but finding ways to sustain and grow your organization is priceless. This article helps you to begin to understand your options so you can start to select your ideal funding streams. Which streams should be major rivers of support vs. occasional trickles? Identify your key sources. Become an expert in them. This will help you to streamline efforts, increase your income, sustain your nonprofit, solve your income challenges, and ultimately give you the ability to pursue more mission.
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