Especially in the current economy, if you manage a nonprofit, I highly encourage you to diversify your revenue sources˳ If you plan to stay solvent, you don’t want to over-rely on any one source of income˳ Having multiple streams of revenue will increase the likelihood that your business will sustain over the long term˳
A common misconception about nonprofits is that they can’t and shouldn’t make a profit˳ This is totally untrue˳ A nonprofit is a business and it should make a profit˳ It is unfortunate that the majority of people who start nonprofits don’t fully understand how to develop a nonprofit business model that generates sufficient revenue to make a profit˳ It’s fairly simple, you create a product and you sell it˳
Let’s look at some real life examples so you have a better idea of what I’m talking about˳ The Quicksilver Track Club is an elite track and field training program that works with at risk youth˳ Their mission is to train kids, build their athletic ability so they can get college scholarships˳ As you can see if you visit the website, the registration fee is $235 per year˳ The program is not free˳ Yes, they’re serving economically disadvantaged kids, but it costs money to deliver this service˳ Far too many people who start nonprofits want to give their services away for free and you just can’t operate a business without revenue˳ And without a clear understanding of this basic concept, you cannot build a successful nonprofit˳
Another earned revenue option is the sale of tangible products˳ The American Cancer Society has mastered the art of selling products˳ On their website you can purchase jewelry, shirts, jackets, watches, and a myriad of other wares˳ They have a crystal beads bracelet that sells for $18˳99˳ If they sell 1,000 of these in one month, they’ve generated $19,000˳00˳ Their tote product sells for $12˳99˳ Again, selling 1,000 of these will generate $13,000˳00˳ At the time I wrote this article they reported on their website that they raised $58 million dollars through their various fundraisers and sale of products˳
Making A Way Housing, Inc˳ earns the majority of its revenues through the rental of real estate˳ The organization’s core activity is providing affordable housing for homeless persons and those undergoing treatment for alcohol and substance abuse˳ The residents pay rent that is subsidized by grants˳ Rental fees are not market rate, but they’re not free either˳ They have 70 two-bedroom units˳ Each unit is occupied by two residents who may pay between $100-350 per month˳ At these occupancy rates, they can generate between $14,000 and $49,000 per month˳
I like to use the illustration of the pie chart˳ A pie has multiple slices˳ For the nonprofit, each slice represents a revenue source˳ I propose that the most important and the largest slice of any nonprofit’s revenue pie should be earned revenue˳ The wise person is the one who develops their nonprofit business model with earned revenue as the cornerstone˳
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