7. Bridge The Gap. The bridging the gap step is key to your efforts to earn more funds next year. How will you move from here to the place you seek? What strategies will you use; that is, what frameworks for decision-making will set the nature and direction of your work? What specific actions must be done to move toward your vision? To complete this step, determine a sequence of events that moves you from where you are now to the income you seek. You cannot successfully assign this to a committee, although a committee’s advice can help.  Personally write a sequence of achievable and realistic steps that are needed.

After her preparations, Jackie outlines a triple approach to reach the three percent funding increases established earlier. She decides to close the funding gap with one-percent funding increase in:

1. Individual fundraising

2. Fees for services, and

3. Grants that help them streamline operations.

8. Reality Test. Check The Plan. Will the bridge to your vision really bring you to your desired destination? Or, are you building a bridge to nowhere? Will the bridge, as designed, carry adequate traffic? A bridge made out of marshmallows may be pretty and interesting, but it will fail with the first rain. What is a marshmallow bridge? One made of sweet ideas that vaguely resemble reality, like a plan to build a $10 million dollar structure when you’ve not raised your first $100,000.

Jackie knows it is not only necessary to do the right thing; it is necessary to first know what the right thing is. Jackie needs information on their fees for service in order to implement changes soon. Aware of her limits and the benefits of an outside perspective, she approaches a board member with a passion for “making good business decisions” to underwrite a consultant to advise her on the reality of her plan, coach her, study their fees, and help them to identify their best new funding opportunities. The feedback from the consultant’s analysis confirms the plan. Her bridge is solid. It will lead the organization to more money next year.

9. The North Star. You will be busy. Your busyness is the reason it’s critical to know your essentials; your North Star. When you pause and gaze up, knowing the essentials will help you to know immediately if you are on track. What are your essentials? Be specific. One organization that sought to increase individual funding identified these “musts.” The number of contacts added to the mailing list, people “touched,” and individuals asked face-to-face for specific donations.

Jackie develops three touchstones. These are movement on the fee for services project, dollars of requested grants that will help her to reduce operating costs long-term, and the number of donors she thanks, touches, or requests funding from.

Underway

10. Schedule and Do. Schedule time on your calendar. Invest resources. Once scheduled, follow Nike, and Just Do It. One expert, for example, advises that planned giving can be accomplished in two hours a week. I find this brief period a challenge. Nonetheless, in one personal project, to date, two hours consistently applied over three months has yielded consistent weekly marketing to 200 people and a committee with growing planned giving skills.

As the year begins, Jackie’s plan to earn more money next year becomes earning more this year. Jackie schedules four one-hour blocks of time in her calendar each week. While over time these hours gets nibbled at like a cheese block surrounded by hungry mice, her consistent effort is enough to create improvement.

11. Evaluate Often. Are you on track? How will you know?  Evaluate often—but simply. Do not wait until the end of the quarter, like school grades. Instead assess your progress at least monthly. What do you check? Focus on your North Star essentials. Schedule 30 minutes once per month. Then, for fun, challenge yourself to complete it in 20. Record this time in your calendar now, for the next twelve months.

Jackie sets up a monthly chart that she sends to her board and shares with her staff. It takes her an hour to develop, and fifteen minutes a month to complete it.  She measures and reports on her North Star essentials. As the year continues, she add details: the amount of time invested with donors individually, the number of telephone calls made, whether successful or not. She also includes an “ask for money” — indicating conversations that proceeded deep enough to request funding. Staff copies her model and creates similar charts. Not only does this keep them on track, but also it changes the conversations in the organization. They focus on mission and funding, instead of budget fears.

By mid-year, Jackie’s non-profit organization doubles its requests for grants. One funded grant provides resources to reach fifty new paying customers. The consultant’s recommendations regarding earned revenue are underway. Jackie and she continue to explore ideas and small important changes. While Jackie never dedicates as much time as she would like to individual donors, her hours are greater and more consistent now. The mailing list and volunteers continue to grow.

12. Gain Knowledge. To fulfill your plan or any great endeavor, you must learn more. For example, if you seek corporate sponsorship, identify the industries most likely to sponsor your efforts. Talk to people in that industry. Read their trade journal. Subscribe to e-newsletters that focus on sponsorship activities. More generically, gain knowledge for now and in the future. How do others obtain a source of funding? What has succeeded? Obtain new knowledge, think, and decide how you apply it.

As the swift moving stream of information flows by her, Jackie reads, highlights, and takes notes on everything about individual giving that crosses her desk. At yearend, she has a notebook full of tips that she is using and an idea list about growing a culture of philanthropy.

13. Celebrate Success. Do you need help with this? Most groups don’t. Many do need to slow down, appreciate their accomplishments, and thank (again) everyone who helped. The destination is lovely, but the journey is important, too.

At yearend, Jackie’s organization reaches its funding goals. Jackie sends a handwritten thank-you note to everyone and a general letter with a request for a yearend gift to celebrate the success. The letter raises $5,000 over their budget. Jackie dedicates every penny of it to raise more money next year.

More Resources

For more help with creating dynamic strategies, see Month By Month, the Strategic Organization. To learn which tools you need in your funding tool kit, read Want Money: Karen’s Basic Tool Kit for the New Year.  To dig deeper into the nonprofit funding opportunities, buy the Money-tastic series here. To read the rest of the series, start here with More Money Next Year, Part I.

Every year trillions of funding dollars pass through the books of non-profit organizations. Chances are you and your board would like more of this non-profit income to pass through your coffers. The goal of the Leaders Series Lunch: Seven Key Funding Strategies on January 12th is to help you explore what will work for your non-profit. We’ll talk about the seven key ways that non-profits earn income for their mission and you. Which are you tapping? Which have you dismissed because years ago someone decided the source was impossible?  Where might you tap or expand a source?

Does looking at a limited list like this help? Yes. Over the past decade, I’ve helped many non-profit organizations to develop new and enhanced funding streams starting from these basic facts. Once a non-profit organization understands where their opportunities lie, they’re in an ideal position to make the most of them.

Here is a quick glance at one source:

Mission Income

Non-profits receive this income for services they provide related to their mission. Non-profit housing organizations charge rent. Theaters charge patrons for tickets. Ride services charge based on mileage. Mission income is the largest non-profit revenue source, with 28 percent of the total. For heath care organizations, mission revenue is almost 40 percent. Almost every organization has opportunities to earn mission income, even if you now only provide free services. For example, we developed a viable mission income concept to offer critical data to new customers in one session, with a never-charged-a-fee organization. Exploring their opportunities within this one funding stream helped them to “clear the fog” and begin to identify and pick their best growth opportunities.

Other organizations have been earning this funding for years, but have been too busy to explore if they are maximizing it. One non-profit automatically renewed a contract to provide mission income services for seven years at the same price. The folks receiving the service were never going to mention to the non-profit that every other one of their expenses had increased during that period.

On January 12, we will help you to take a fresh look at your opportunities in mission income as well as the remaining seven sources. You leave the event with funding opportunities to explore at your non-profit organization.

In the meantime, download one or more of these Mission Brilliant Podcasts to listen to as you drive to Rollins or elsewhere in Central Florida. If you have or are considering memberships, you will love the one with Robbie Kellman Baxter. If you aren’t interested in membership, scroll down. You’re sure to find something of interest to help with your non-profit funding. On January 12, be the first person to tell me your favorite podcast and why—and you will win a small prize.

Looking forward to learning with you in January.

Karen Eber Davis

Karen@kedconsult.com

941-924-4860

4. Status. Jackie meets with her finance staff. Sharing her commitment to earn more, they review current funding streams by category to identify the patterns. (See Can Your Organization Obtain More Income? The Seven Sources.) What is happening with major funding sources? Are they decreasing? Increasing? Are any sources or sub-sources declining over several years? Where have they made more effort this year? What payoff do they see? To illustrate and share the data, they create three funding pies for their current budget, their status, and one of their ideal funding sources. The third was drafted at their last strategy retreat and is still “under construction.” More money next year will not be done in isolation. They plan how to educate staff, board members, and key stakeholders about their funding needs.

To earn more, first you know where you want to go, as established in Part One. Second, you need to know your starting place. Your current income is part of this. Where are you now? What does your funding look like? Draw income pies or other easy-to-decipher visuals. How did you get here? What trends exist in your individual fundraising, grants, earned revenue, and other sources? What funding efforts prove useful?

5. Stabilize Current. Doing a good job this year, including filing reports, thanking donors, and related stewardship tasks, supports continued income from existing funding sources. Big picture, how are you laying the groundwork for next year’s income, this year? For instance, Feeding Children Everywhere has nineteen sponsored food-packaging events. To stabilize funds next year, they want to sign up all of these sponsors again because of their great experience this year. How are you stabilizing current funds? Review your current contracts and relationships. Are you fulfilling them energetically? Evaluate the odds of obtaining the same or a similar funding next year. What steps support this? Believe every funding source can be impacted. Decide on actions to take. Schedule them.

Jackie gathers her development and finance staff for a focused meeting on stewardship. During it, they review their current funding sources. For each, they review how to engage them and the benefits each funding source receives from their relationship. They develop immediate follow-up steps for several neglected entities. They plan to ask several tasks forces, including finance, earned income, and development to create complimentary efforts. Jackie asks the development staff to create “engagement checklists” to systematize interactions with investors, donors, and customers. (Click here for an example of a checklist for grant opportunities.)

6. Growth Points. Successful non-profit organizations need at least one new growth area to increase funding. The Florida Center For Child and Family Development, for example, starts a learning institute to reach other providers who can benefit from their knowledge – a mission earned income approach. Might you add earned revenue, planned giving to extend individual giving, or corporate sponsorship (not just tables at your event)? Perhaps your point will be to make extra effort next year in recruiting new individuals to donate.

Successful growth points replace dwindling resources and help you to meet inflation. They can be new sources, i.e., earned revenue, or a sub-source, like planned giving. Commitment to growth fuels hope. Even if you face funding challenges now, growth helps people believe, “Things will get better.” Growth points lead to new skills.

Once you indentify a point, decide the steps needed to move toward it. What next steps are needed — tomorrow? What will you invest? What resources do you need? Explore and answer questions like these to activate your growth point.

Jackie’s non-profit organization’s growth point is increasing individual donations. This fall, they added an annual appeal after doubling their contact list. After talking with her board and staff, Jackie decides to continue this effort. She talks to her direct mail specialist to ask for next step guidance to ensure further growth. While Jackie does not anticipate this growth point will create all the increased funding they need, it will help. The lessons the organization learns about increasing community connections support all their efforts.

End of Part Two/What’s Ahead

With this second set of practical steps that focus on shoring up current funding and identifying a growth point, Jackie already feels more confident about earning more funding next year. Even though she is crazy busy with this year’s emergency appeal, the time she dedicates to More Money Next Year already encourages everyone. She, her staff, and the board are more focused on funding and expressing new energy.

To arrive at More Money Next Year requires changes in thinking, time investment, and actions. Next month, we will continue to follow Jackie as she creates solid plans and take actions to close the gap between what she wants to earn and her current funding.

The Opportunity

Besides wonderful meandering gardens and a singing tower to enjoy, Bok Tower Gardens, located in Lake Wales, Florida, owns Pinewood Estate. The Estate is a 12,000 foot 1929 mansion. Historically, the Gardens offered daily tours at specific hours. Interested guests paid an extra fee inside the Visitor Center before a docent guided them through the Estate.

As you can imagine, the Gardens found that keeping a large, historic estate in tip-top shape was pricy. For several years, staff and board members explored how to increase income and visitors to this interesting attraction before they instituted two minor changes:

1. At the front gate where the Gardens admission is collected, they offered a combo ticket option that included the Gardens and the Estate. They continued offering tickets at the Visitor Center and they also sold tickets at the Estate’s front door.
2. After adding signage and creating a brochure, they positioned the docents inside Pinewood Estate and opened the site for four hours daily.

The Results

In three years, Pinewood Estate tripled its revenue and attendance. What else? Jennifer Beam, Director of Visitor Services and Programs, shares, “Pinewood Estate is now a regular part of the Bok Tower Gardens experience, rather than a step-child.”

With two reversible changes that cost less than $2,000, Bok Tower Gardens substantially improved their funding. This means of increasing income is a category our consulting firm identifies as, “Improve Your Process.” To tap into similar opportunities, examine what you currently do. Then, make adjustments. Measure how they impact the amount of income you earn.

Your Profitable Non-Profit Opportunity

How else can you learn from and adapt Bok Tower Gardens’ success? First, believe that you have options, and that it is possible that small, medium, or large changes hold the potential to earn new funding. Then, consider these options:

1. Study, With An Attitude. Ponder and study your setting and current processes. Ask questions like:

• What simple changes might you make to invite customers to invest more of your mission?
• On an experimental basis, what if you changed something that has always been done a certain way?

2. Space Design. Bok Tower Gardens reminds us that space impacts dollars earned. By adding a combo option for the Estate at the Front Gate, guests had the opportunity to pay once. For out-of-town visitors who had just finished a considerable drive, the value of electing to add the Estate to their visit was readily apparent. What space change might trigger funding increases for you?

3. Combine and Profit. If you charge more than one admission fee, explore a combo ticket. Even though the Gardens did not, contemplate offering a discount on this ticket.

4. Divide and Profit. Take the opposite approach. Contrary to the Bok Tower Gardens example of offering a combo option, if you now charge only one fee, consider offering separate options. Visitors from afar may prefer not to do it all, especially those arriving late in the day. Would an “un-combo” work at your non-profit organization?

5. Shop and Learn. Don’t just shop at other successful museums and retail establishments. Instead, observe as you shop. What kind of customer experience do they offer? How might you adapt or tweak their process for your non-profit organization? To further study your retail experiences, listen to Podcast #8 with Retail Sales Consultant, Doug Fleener.

Every day, good non-profit organizations find ways to improve their funding streams. One way to improve your income is to tweak a process, like Bok Tower Gardens did. Even if their model fails to fit your needs, consider new options so you too can become a profitable non-profit.

Our next column is about Zoobilee. Can’t wait? Visit Karen’s website today to read about the seven sources of non-profit income.

Welcome to Your Profitable Non-Profit. This column explores remarkable ideas that leading non-profit organizations are using to increase their income. Each column shares a successful funding concept, plus adaptations for your use.

Can Lessons from a 1929 Mansion Increase Your Nonprofit Organization’s Funding? -December 2011

Are you part of an association that serves non-profit organizations? This column is available to add value to your members.  Contact Karen to learn more.

Money. Not only is it desirable, it is essential. To cover the impact of inflation and to fulfill your mission statement, your non-profit must earn more. Have you, like Jackie, decided enough is enough, and that next year is the year? Or, perhaps you avoid eleventh hour drama like this, but just need to earn more funding or raise more funds. Whatever your situation is, obtaining more income starts with knowing that earning it is possible. It starts with knowing it is achievable with the right activities. This series outlines them. While much more can be shared, this series offers a quick map for your journey. As, you learn the steps, we’ll follow Jackie, a non-profit executive director with a five-year track record of providing extraordinary service to her community, as she organizes her non-profit organization to earn more funding next year. The thirteen steps ahead will help you to take the right actions next year, and in the years to come. We start with three thinking steps.

All Starts With Thinking

The first three steps of earning more money involve establishing a conducive mental mindset. Despite other needs, or even catastrophes, if you are serious about improving your funding, you will make earning more of a priority.

1. Vision. How much money do you need? Your financial success starts with a specific amount. This amount combines what you want with what you need. For most, it includes meeting your budget plus some growth to meet inflation and new challenges. What dollar amount is necessary? Give this serious thought. Write down the amount of funding you need. My clients find it helpful to determine three: a must-have number, a want number, and, after some consideration, a goal. The funding goal is usually an optimal combination of wants and needs.

Jackie contacts her budget officer and staff for suggestions. She queries several financial types on her board. With this help, they establish a budget for next year that is three percent higher. One and five percent were her must-haves and wants. Her emotional touch point is that one year from now she, her staff, and board will use their energy to celebrate and plan, instead of conducting another all-hands effort to avert year-end fiscal disaster.

2. Believe. Believe that your non-profit cause is worth funding because of the value you provide to the community. Believe you can solve your income challenges. To make this concrete, calculate your value. Read ROI For Nonprofits: The New Key to Sustainability by Tom Ralser to begin to calculate a ballpark figure of the value of your services. Or, for a free peek on how to value your work, listen to a five-minute audio at the bottom of this web page where I share how to calculate the dollar value of a single referral partner.

Good non-profit organizations offer tremendous value. The most successful non-profit organizations offer stupendous value. Translating your value in dollars will help you to make this reality concrete. Believe you can and will earn more funding next year by providing this value and more to your community. This is not la-la-land thinking, but a belief you hold and act upon that is in your gut. With effort, work, investment, and the continual provision of value, you will reach higher income. Believe.

Jackie listens to her staff, board, and volunteers. To engage them, she asks for information on three-income success and three areas to improve from this year. At the end, almost everyone agrees that a three percent increase is possible and desirable. She talks to her most successful peers. She learns that they too expect to increase their funding next year. Two agree to support her during the year, to help her increase her skills, and to remind her that the goal is attainable if she becomes discouraged. She believes.

3. Realistic Optimism. While related to belief, realistic optimism is more. It is like donning a pair of glasses. The lenses affect how you interpret the world and your work. Use your realistic optimism view to shape your thinking.  Vietnam Prisoners of War, who embraced uncertainty (we don’t know when) and faith (we will get home) survived. Others perished.

To earn more money next year, adopt realistic optimism. It will be both challenging and worthwhile. Even if you earn more money in 367 days rather than 364, the goal is worthy. Embrace uncertainty of timing. Mix it with hope. You can get there.

Jackie considers her own mindset. She has been with the organization for five years. Each of the last Decembers, they faced a budget crisis. Jackie decides that this is a behavior that can be changed (faith). She lists the commitments already made for the next year—to begin certification, to finish a building project, and to upgrade staff policies. Improving income is as important as these efforts. Improving funding will help them all. She believes it is possible and is optimistic that they can do it with focused effort. At her regular meeting with her board chair, she shares her thinking. He agrees that changes are in order. They agree that it can happen next year, but they understand that a five-year-old pattern may take longer to exorcise than 52 weeks (embrace uncertainty). It’s worth a multiyear effort if that is what it takes (believe). He agrees to present the challenge to the non-profit’s board of directors as a regular agenda item.  They commit to approaching the challenge with realistic optimism.

More Money Next Year

Jackie’s successful non-profit organization is well on its way to earning more funding next year. For Jackie and you, clear and tough thinking is a critical start. Much lies ahead. Next month, we will share the practical steps Jackie takes to earn more money next year, especially securing current funding. In the months that follow, you will learn more about her planning, acting, and evaluating actions. In the meantime, for more information, read some of the many non-profit funding and fundraising articles here.

1. New? The new service involves flipping an existing one. While the project will serve traditional customers, the innovation repositioned a side event to a main one. How might you create something new and profitable with existing components so that your organization can do mission and earn funding from doing it?

2. Remember the Goal. The project will be self-sustaining and improve your funding. You will be delighted with the projected mission results. Do not forget the goal.

3. Run the Numbers. Estimate income and expenses early. Run them at your planning mid-point and at the end. Adjusting paper models is easy.

4. Pricing Trade-offs. Pricing always involves trade-offs. You can serve more by charging less, but if you charge too little the program won’t survive. Remember #2.

5. Start small. To test the idea, my client piloted it in January with 18 people.

6. Controlled Growth. Resist the temptation to ramp up a new effort too rapidly. In this plan, the first year takes the project to a sustainable scale, and leaves room for future growth. The non-profit organization has the capacity to earn an additional $20,000 and serve 100 more customers, but ramping up this much would cause unnecessary stress, risk service quality and leave little excess capacity for unforeseen surprises.

7. Tap Many Sources. In addition to earned revenue, the project’s funding includes four of the other seven nonprofit sources. Funding diversity enhances stability just like successful cocktails take mixing.

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For more help improving your funding by earning revenue your earn from doing your mission, see

Can You Make Money With Your Mission? What Your Board Needs to Know?

Better Than Leftovers, Other Income

Podcast #11 Karen Eber Davis Interviews Tax Managers, Victoria Bartlett and Catherine Mary Sullivan
(Getting Comfortable With the Impact of Earned Income)

Podcast #8 Karen Eber Davis Interviews Doug Fleener, Creating Brilliant Customer Experiences (How to Enhance Your Retail Sales)

Unreasonable income expectations include too little stretch, like not seeking any growth to meet inflation. They also include too much stretch, like going from zero to a half million dollars with a new funding source. The first causes under performance and reduced revenues. The second, too much stretch, stresses everyone out and results in budget shortfalls. Joe, you, and your leadership want and need expectations that are “just right,” that is, expectations that are realistic and positive. These are expectations that include growth to cover expected inflation and to respond to the increased effort you are making. Use this test to determine if your projections are realistic. To take the quiz, read the sentence below and then check each true-for-your-organization description.

Expectations about the non-profit income to be raised next year are based on:

1. Experience. Does the income estimate represent reasonable growth based on your experience from recent years? In the last three years, Joe’s organization raised $120,000, $90,000, and $80,000 respectively from individuals. Joe checks yes.

2. Industry Standards. Do non-profit organizations, ideally in your sector and genre, regularly achieve this level of funding or income growth? For example, according to American for the Arts, fifty percent of non-profit arts organizations’ income is earned. Joe calls his statewide service association to confirm that the level of corporate support is common. He marks a second yes.

3. Solid Strategy. Do you have a path from here to there? Joe talks to his executive director and learns that several corporate sponsorships are in the works and a list of prospects has been developed. The two discuss how they can achieve the corporate support goals. Mark this yes if you know the action steps needed to achieve your goals. Mark it no if expenses less other income was used to determine the amount of individuals’ donations you must raise and no strategy how to do this exists. Mark it no if other goals without plans exist.

4. Resources. You can’t make spaghetti if you lack pasta. Do you have what you need to achieve the results you seek? Joe learns that there is a list of potential grant sources with an interest in his cause. Several foundations have funded the group in the past and are encouraging applications. With a flourish, he checks this off.

5. Skills. An individual can be an expert at brain surgery theory and have a full hospital of resources, but if they have never operated, would you want them to touch your skull? There is nothing magical or unknowable about obtaining non-profit income. Joe has some skills. He is an avid reader in the field. For more help, he has access to a consultant, board members, and professional groups. His board is experienced in helping to raise money, and donates as well. Half gave gifts of more than $5,000. Joe knows the more skills he has or can access, the better the predictability of his income. He looks forward to growing his existing skills after he checks this yes.

6. Time. Having resources and skills and using them are two separate experiences. Many people own treadmill machines. They know how to use them. Yet, they are covered with spider webs and dust bunnies. You may have incredible prospects, like wealthy widows with no children. If you fail to invest time interacting with them, are your expectations realistic? Joe speaks to his Executive Director. She decides to assign another staff member the marketing and public relations function that were part of his job description. After this, Joe concentrates his efforts on contacting donors and pursuing the three income sources assigned. He uses a pen to mark this yes.

7. Commitment. You, your board, and its members may intellectually understand that achieving your income goals will require different actions, but if everyone continues to embrace necessary changes only halfheartedly, you lack realistic expectations. When it gets hard, does tough income work become a low priority? When a “no” disappoints, does this reduce efforts for 60 days? Mark this yes if you are steadfast in your commitment. Mark this yes if board and staff are willing to invest, grow, and take actions even if it makes them squirm. Check this yes if obtaining income and fundraising is really a top priority. Joe checks this yes after three months of hearing choices that confirm commitment to obtaining income and sensing team support.

8. Flexibility. Flexibility is about a willingness to learn and respond to real changes. All the skills, resources, commitments, and income strategies which were successful before the Great Recession face new challenges during and after it. If you are flexible on how you will obtain income, and recognize that you do not control all the factors influencing it, check this yes. Joe does, when he is sure his boss and board understand the challenges of fundraising and income growth, and he learns about adjustments being made midcourse.

Scoring:

To find your score, add up all your check marks. The higher your score the more realistic your expectations.

6-8: Great, go for it.

4-5: Maybe.

1-3: No way.

No matter your score, like Joe, you can modify your goal and actions now to create realistic expectations and the funding you need next year. Setting realistic expectations, obtaining income, and fundraising are processes. Start sharpening your expectation setting tools today.

For more information: read: Setting Realistic Expectations About Income

If you have been reading this series about nonprofit income sources, you may be surprised to find in-kind on a nonprofit income source list. After all, in-kind is not cash. Yet, its impact is huge. More importantly, looking at in-kind as a source can help your nonprofit to think differently. While money will work to solve your need, what you really need are the resources that money buys. Obtaining the right in-kind allows you to skip the cash step and obtain your need. (See the second equation below.) This article invites you to look at in-kind in fresh ways as a first step to maximizing it.

Figure 1: Gifts of Money vs. In-kind

1. What is in-kind “income”?

In-kind is nonprofit jargon for gifts-in-kind. In-kind represents goods or services you receive for little or no cash. In some cases, in-kind includes resources you cannot buy, like the endorsement of a media star. All nonprofits receive this source of support, often in the form of donated goods, discounts, and services.

2. What are some other examples of nonprofits earning in-kind income?

• In Florence, Kentucky, Faith Community Pharmacy’s budget is $3.2 million. It receives $2.9 million in in-kind.
• Gary and Marguerite Lenfest gifted their 59-piece Pennsylvania Impressionist Collection to the James A. Michener Art Museum in Doylestown, Pennsylvania.

3. What forms of support does in-kind take?

In-kind donations take five forms:

• Donation of Goods: Goods are given to you at no cost. This includes everything from food to office supplies to vehicles.
• Time. This category includes all volunteers who donate hours that use their skills, but not their expertise. For example, a retired teacher sits at your front desk and directs visitors to their destinations.
• Expertise. This is similar to the above, but it involves the volunteer’s expertise. In addition to the front desk, the teacher offers a computer class. An environmental engineer donates time at your site to advise you on how to handle your parking lot’s drainage problem.
• Services. This type involves the use of equipment, space, and the like. A bank allows you the use of their boardroom for meetings. A restaurant provides their commercial kitchen once-per-quarter for you to make your famous spaghetti sauce.
• Discounts. You receive services or products at a special or reduced price. Your printer donates the paper she provides to your organization for all print jobs. You receive a 25 percent courtesy discount because of your nonprofit status.

4. What about large sources of in-kind?

Good360 (formerly Gifts-in-kind International), Tech Soup, and the National Association for the Exchange of Industrial Resources represent several of the large international organizations developed to facilitate the exchange of in-kind goods. Tech Soup, for instance, provides nonprofits steep discounts on software. If your organization uses a lot of goods, check with these organizations.

5. Is this a common source of nonprofit income?

Yes; it represents one of seven sources of nonprofit income. (Read about the others here.) 

6. Besides the goods, services, and other help, what are the benefits of this source of support?

• Save Cash. Your organization can save its difficult-to-obtain cash income for items like payroll taxes.
• Entry Point. In-kind provides a great entry point for new donors who are often willing to participate by giving outgrown clothing or a buy-one-get-one peanut butter. Donors like the direct participation in-kind offers. For the savvy nonprofit, in-kind offers a point to begin longer-term relationships.
• Environmental Good. For items that would otherwise fill landfills, in-kind helps the environment.
• Not Available for Money. In-kind can provide access to resources that otherwise would be unaffordable or unavailable, including endorsements and expertise. Wouldn’t it be amazing if the Ad Council selected you for its next campaign?

7. What are the risks?

• Misfit. You may receive items or services that are not the quality or quantity needed, such as winter clothing for disaster victims in the tropics.
• “You get what you pay for.” This is true on two levels. First, in-kind does not always mean high quality or good-fit. Secondly, too often discounted or free means that a nonprofit fails to appropriately invest, which dooms projects, especially those involving expertise, to failure. 
• Donor Confusion.  Donors believe they supported your cause with their donation and do not learn that cash is also needed.
• Worth It? You spend more time collecting items than the value obtained. The truck sent to pick up items returns empty.

8. What is your organization’s experience with in-kind?

Leaders need to learn about their nonprofits’ experience with in-kind. Starter questions include:

• Is in-kind a significant slice of your income pie?
• What are the in-kind sources and amounts? How do you obtain them?
• How much time do you spend obtaining it?
• Are there other benefits that need consideration, such as community awareness and participation that collecting in-kind offers?
• Is the income worth the effort and risk involved?
• Are you handling any tax implications correctly?

9. What is the role of the board?

The board’s role here involves oversight and resourcing including issues like:

• Identify Opportunities. Ask if you buy items that might readily be obtained via in-kind donations. Also, consider how you can help to create professional connections, invite new volunteers, and obtain one-time help, gifts, or discounts.
• Not Free. All resources have costs associated with them. Donors need to know that their gift will be used and used well. Unappreciated volunteers find other places to help.
• Dumpster Protection. Avoid waste; that is, items and services that will not be used. Even if the item will not go in the dumpster and you avoid dumping fees, storing that used sofa takes up space and has costs. Establish policies and guidelines about acceptance of gifts. See example gift acceptance policies on the Internet.
• Proper Procedures. In-kind gifts have IRS and Canadian Revenue Service tax implications. Check with your accountant to learn how to fulfill them.

10. How might your nonprofit identify new sources of in-kind?

• List needs.
• Organize them into categories. Establish priorities.
• Consider your connections or connections you might make.
• Take action.

In-kind as an “Income” Source

In-kind gifts are a wonder of the nonprofit world. No other sector enjoys and can take advantage of them like nonprofits. To take full of advantage of your in-kind opportunities, focus on what you need, explore how to fill those needs, take actions, and set up barriers to keep unwanted items out.

For more on nonprofits and funding opportunities, listen to our collection of audio downloads, especially Money-tastic #2: Nonprofit Income Opportunities and Money-tastic #3: Creative Revenue Streams for Your Nonprofit. Both are great ways to learn new income ideas to help your nonprofit.