With donor contributions continuing to lag for many not-for-profits, you may be looking for ways to make up the difference in income. This is the time to revisit some tried-and-true ways for not-for-profits to generate revenue. It is also time to get creative and brainstorm some new potential money makers for your organization.
Finding Ideas that Work
The following are five general areas to explore as you work to keep your not-for-profit economically viable. Be sure to discuss new income strategies with your accountant — you could be subject to tax on income that is deemed unrelated to your tax-exempt purpose.
1. Services, Programs and Products that Relate to Your Mission — A time-tested way to generate income is to offer services and programs for a nominal fee. For example, you might host speakers, classes or exhibits that are related to your organization’s tax-exempt purpose. You can raise additional funds by having a program guide with advertising or by selling souvenirs, or perhaps items exhibited at the programs. Or, if you are an expert in your field, you may be able to sell your expertise as a consultant to other like organizations.
Sometimes selling products related to your mission becomes a lucrative sideline activity. For example, Minnesota Public Radio grew a business selling T-shirts for Garrison Keillor’s “Prairie Home Companion” radio show. Museums have developed a new revenue stream by creating large direct merchandising and product licensing enterprises based on items in their collections.
It’s important to evaluate the revenue-generating programs your organization currently offers. Are they as successful as they could be? Could they be modified to attract more people? Are you publicizing them well?
2. Memberships — Some organizations may charge membership fees. Memberships typically work well for not-for-profits that provide a service or programs to their members. In return for the fee, members get privileges they would not have received if they were simply donors, such as:
- Discounts on programs, services or products;
- Invitations to special events; and
- Special opportunities, such as members-only website access, facility access or programming.
In addition to providing income, memberships can benefit your not-for-profit in other important ways. For example, people do not always discuss the organizations to which they donate, but they may be more likely to publicize the organizations to which they belong. Memberships may also help in forecasting revenue as you can predict when renewal money will be received.
3. Collaboration with Other Organizations — Working together with other organizations can help you earn — and save — money. For instance, you can rent or share office space with a not-for-profit that has a similar or related mission. It also can be beneficial to exchange or share staff or service providers — or to organize a joint event, which will bring new patrons to both organizations.
Partnering with another not-for-profit brings additional skills and experiences to the table that may help each organization generate new ideas and resolve issues.
4. Special Events — Although it faces more challenges in a down economy, a creative and well-organized special event can be successful — particularly from a fundraising point of view — because it can draw your faithful donors as well as prospects.
Plus, special events, such as walks, tournaments, dinners, auctions and cook-offs, can be memorable and help potential donors and the media learn about your organization’s “softer” side.
5. Investment Income — Even in today’s economy, there are many options when it comes to investing your not-for-profit’s money. But you will want to keep an eye on factors such as requirements for risk tolerance, liquidity, possible conflicts of interest and existing investment policy restrictions.
For short-term investments, a money market or short-term bond mutual fund can offer higher returns than a savings account while still providing a fair amount of liquidity. Keep in mind that all investments have some risk involved, so it is essential to monitor your risk and diversification, along with the tax consequences, if any, of earnings. Consider hiring an investment manager.
Seeing it Through
Once you decide on what it is you want to do to bring in more money, how you go about it becomes crucial. From planning a budget for any new program or service to effectively promoting the event within your community, your team’s organizational abilities and marketing know-how will come into play. Give your staff the creative room to pursue new ideas as you keep an eye on the risks of any new endeavors.
To discuss creative ways to increase your not-for-profit’s income, contact Paul Stumbaugh at 312.670.7444.