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Earned Income as a Sustainability Strategy - Part 1: 5 Things to Know Before You Spend a Dime

Earned income is not a new concept but for most nonprofit professionals it's not been considered a funding method. For grant professionals, we typically do not see an immediate connection to our work. However, grant professionals can serve as earned income champions for their organizations. 

Earned income has been called cottage industry, venturing enterprise efforts, and much more. In short, it is revenue that is not donated but is revenue your organization receives in return for a product or service. Earned income in any form is also not established to replace your entire fundraising program (including grants). This type of revenue provides an additional method for sustaining the organization's mission. It also provides another mechanism for diversifying revenue, as well as access to a potential donor base to which the organization did not previously have access.
There are several things to keep in mind if this might be a strategy for sustainability for you.
In my experience, many board and staff will have a hard time understanding earned income. Change the culture. For professionals entrenched in programs and services, the idea of making money may seem counterintuitive to the nonprofit purpose. Some in the nonprofit sector think “profit” is a dirty word. That is entirely false! Yes, nonprofit organizations can have excess revenue (income to the corporate world) and that is not a bad thing. Excess revenue goes to reserves when you aren't experiencing great times or invested back into programs where expansion is needed.
This is a business effort, and you must treat it like one. Many who have been in the nonprofit sector or grant development have to make a concerted effort to get into a business mindset, one in which ‘profit' is a positive word. A business takes time to build, requires a great deal of research, and takes an investment of resources. This may mean you need to expand the expertise that is on your team. Whether staff or consultants, you will need someone with a business mindset and experience to get this up and running. And do not use volunteers for the heavy lifting on this. To be done well, it will take time and talent over an extended period that would burn a volunteer out. Pay for the expertise.
Do not start with the service or product. A volunteer or staff member may have a great idea for making paper or starting an event venue, which may get introduced with some great excitement. However, is this product or service the best for your organization? Does it interfere with any donors or grant funders? Is this the best investment? Is the market in need of this or is it saturated? All questions you cannot answer right out of the gate. You must start internally to identify resources and expertise and then grow from there.
Hang tight – look for Part 2 (focusing on the risks and realities of implementation) in next week's edition of the GPA Grant News!