Board member Sue raised her hand to ask “If this is successful, is it okay for us to make a profit? After all, we are a ‘nonprofit.’”
In this post-recession world, nonprofits continue to seek ways to increase money to create their missions. One option is to expand earned income or mission income, that is, income earned while doing mission. In this climate nonprofits that never before considered mission income are reexamining their opportunities. Others who dabbled in mission income are now placing it front and center. Here are ten fundamentals for you, as a board member, to consider as you explore mission income opportunities for your nonprofit.
1. Is it okay for nonprofits to make a profit? Yes! It is both okay and advisable to make a profit. It’s “no fun” to end the year in the red. The Maine Association of Nonprofits states it best: “What distinguishes nonprofits is not whether they can make a profit, but what happens to profits. Nonprofits are prohibited from distributing profits in the same way for-profit corporations can. All revenue must be earmarked for the organization’s mission.” Good news: when you make a profit, you must use it to create more mission.
2. Is mission income a common source of nonprofit income? Yes, in fact mission income is the largest source of nonprofit revenue. This surprises many people until they consider entities like theaters, hospitals, colleges, and counseling services and their fees. Mission income totals just under $650 billion per year (Nonprofit Quarterly).
3. What is your organization’s current relationship with mission income? Many nonprofits earn mission income. If yours does, you will want to learn about the sources. What percentage of the income you receive covers the cost of providing the service? Learning about your current sources will help you to make informed decisions. Other questions to ask include: Has the organization earned mission income in the past? What were the experiences? How were they successful? Can it be traced to marketing efforts, the product offered, and repeatable circumstances? In short, what strengths do the organization and staff have around mission income?
4. What are the benefits of mission income? Besides money, mission income offers opportunities for increased sustainability, new ways to involve the community, enhanced brand identity, cause education, greater control, and, with a good consumable product, an opportunity to continually reengage the community. A major benefit of mission income is its versatility. There is virtually no end to the possible ways a nonprofit might earn mission income and fulfill its mission at the same time.
5. What are the risks? Risks exist for all income sources. One potential risk is conflict. Some people may believe that your services should be free. Your staff may be anxious. Relying on mission income may seem too much like being a business. Your staff may lack experience in for-profit ventures. It is important to remember that amongst nonprofit peers, mission income holds less status than individual donations. Staff may fear that a board is selecting mission income opportunities because it appears easier than seeking individual donations. Additionally, if a conflict between mission and income arises, the board may unwisely make decisions based on income over mission. Besides philosophical issues, the venture may fail. Cost is another consideration. To overcome these and other risks, both mission outcomes and revenue need to be significant.
6. What are some additional examples of mission income?
- Girl Scouts teach girls entrepreneurial skills with cookie sales.
- The Humane Society “sells” puppies and holds special sales when their kennels are full.
- A children’s development service offers fee-based group programs for children under five who need support but not individual services.
- A community center whose executive director has strong ties with Ireland offers a “Tour Ireland with Patrick” trip.
All of these support the organization’s mission and make money that can be used to provide even more mission.
7. What are our fee options? The fees you charge, and the percent of the expenses they represent, are a board decision. A continuum of options exist ranging from a token amount ($1 for a more expensive service) to a fee that covers all costs plus a donation.
8. Must we compete with Wal-Mart? Not at all. Mission income efforts come in many sizes. Some groups avoid mission income because they envision that to earn it they will have to open a café staffed by clients. Most entrepreneurial activities can start as an offshoot of current programming tweaked to generate income. A successful free festival, for example, decides to charge $1 for parking. The best mission income ideas are unique products or services that do not compete with Wal-Mart – or anyone else.
9. Does mission income help or hurt individual fundraising? Many donors admire nonprofits that earn mission income. Other potential donors may feel that they have done their part when they make a purchase. After a bit of research, I found no study for the industry on this question. If you are in doubt, survey your donors to learn their thoughts. With or without mission income, donors need education about program costs, income gaps, and how their donations hold the potential to change lives. Since mission income helps donated dollars go father, I suggest you make your ability to obtain mission income a reason to donate to your organization.
10. What is the general process of developing a mission income opportunity? While every organization approaches mission income differently, a general first step is exploring potential customers and ideas for mission income. The potential ideas and customers are then organized into a shortlist for evaluation. After staff and board select top ideas, a business plan is created and opinions from potential purchasers are collected. Finally, all information is taken into account and the mission income opportunity is launched.
Earned Revenue and Other Resources
Podcast #11 Karen Eber Davis Interviews Tax Managers, Victoria Bartlett and Catherine Mary Sullivan
(Getting Comfortable With the Impact of Income)
Podcast #8 Karen Eber Davis Interviews Doug Fleener, Creating Brilliant Customer Experiences (How to Enhance Your Retail Sales)
Karen Eber Davis Consulting helps nonprofits identify exemplary ideas (yours, mine, or ours) to obtain sustainable income. We can help you identify and use dynamic mission income ideas that leave you with more income and more mission. Contact us today so you have the money you need tomorrow.
For more information about other kinds of nonprofit income and fundraising opportunities read this: Can Your Organization Obtain More Income? The 7 Sources
For more in-depth information purchase and listen to Money-tastic #2: Nonprofit Income Opportunities and Money-tastic #3 Creative Revenue Streams for Your Nonprofit.
 Earned, income and other income. Other income is revenue from room rental, interest, and selling candy bars when your mission has nothing to do with any of these three areas. Earned or mission revenue is payment for ticket sales, program fees, and memberships that align with your mission goals. Since you must earn both types of revenues, for clarity we prefer the term mission income over earned income.