If you’ve been in business long enough, chances are you’ve during your career interacted with a non-profit organization in one form or another. Non-profits are organizations that are not driven by profits, but rather exist for the greater good of one or more specific causes. Non-profits come in many forms, such as business associations, professional societies, think tanks, non-governmental organizations, and are vital part of the economy, society, and the entire system.
Whether you’ve engaged with a non-profit as a staffer, volunteer, or board member, you’ve most likely come across the pressing challenge in keeping a non-profit sustainable from a financial perspective. Since non-profits don’t really have much to sell, income – needed to pay for overhead expenses and programs of work – is mostly derived from donors and membership dues. Neither are however sufficient to sustain the organization in isolation, and non-profits often find themselves caught up in a constant struggle to survive and being able to continue serving their communities and constituents adequately and effectively.
A sustainable and effective non-profit will not rely on one sole source of income for a number of reasons. Those include, but are not limited to maintaining independence, providing continuity, and an ever-growing need for additional funds that are needed to successfully deliver more and more of its programs of work. This article discusses a number of revenue streams a non-profit has at its disposal to tap into. Although not all may apply to each case, a healthy mix of as many as possible will ensure sustainability, continuity, and ongoing growth and influence.
One of the most common sources of non-profit income are funds contributed by donors, especially during the start-up phases. Typically, a donor agency – such as USAID – will pledge a certain amount in the form of a grant over a few years. The grant is usually contingent to the non-profit meeting a number of KPIs and milestones, and are a great source to getting started.
Donor funds are however not a revenue stream that can be relied on for eternity as donors usually expect the beneficiary to use their funds to build and reach sustainability. Hence, if the non-profit’s business plan does not demonstrate financial and operational independence and sustainability within 3-5 years, chances to secure the grant become rather slim.
In the case of business associations in particular, dues remitted by members each year play a critical role in sustaining operations. However, those are also rather tricky; while founding members are commonly willing to contribute high fees during the early years, their enthusiasms usually cools off and it becomes increasingly difficult to maintain reasonable membership retention rates.
We therefore recommend for start-up non-profits to ask for reasonable and rather modest dues so founding members keep remitting those willingly year after year. In addition to higher retention rates, reasonable dues also play an important role in the non-profit’s ability to recruit new members, and which in turn empowers the organization and gradually increases its influences so it eventually becomes a voice of authority.
Since non-profits serve specific causes and purposes, it only makes sense to organize occasional forums and conferences to discuss relevant topics, best practices, and so forth. These events are not only a great tool to strengthen the community’s ties, but have also proven to become vital sources of large amounts in income.
As forums and conferences mature into flagship events, sponsors become more and more interested to be affiliated with their brand. Adding attendance fees and short-term grants from donors will eventually produce and event that contributes substantially toward the non-profit’s annual budget. In fact, we’ve seen cases where one event is capable of covering a non-profits entire annual admin budget, thereby freeing membership dues to be allocated to programs of work such as advocacy initiatives, researches, white papers, etc.
Most non-profits serve their members and constituents with a variety of services such as monthly meetings to discuss certain topics, training opportunities, consultation, and even the events we talked about above.
With time, it becomes important for the non-profit to convert these services into revenue-generating activities by asking for modest fees. Those can be highly reduced and discounted for members, but they cannot be offered for free on the long run. And if the non-profit is doing a really great job with its services, members and constituents will be more than happy to pay for the valuable services they are receiving.
Similar to “monetizing” services, non-profits can convert some of its activities into revenue-generating products. Examples of those would include an annual report that is published about a given industry, newsletters that are gradually converted into an industry magazine that offers paid advertising opportunities, tool-kits that can be sold in the form of a software application, and so on. Again, offering members and constituents reduced prices will support retention rates and also provide non-members with a compelling reason to become members.
What’s really important though is for a non-profit organization not to rely excessively on only one or two of these revenue streams. Ideally, none of these revenue sources will constitute more than 15-20% of the total annual budget, so that – should it for any reasons seize to exist – the organization doesn’t suffer a blow it cannot survive. Equally important is the fact that donors and members will always prefer to support non-profits that are creative in remaining sustainable and will continue to exist long after they’ve stopped supporting them.
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