5 ways Nonprofits make money | Nonprofit Fundraising

When most people think about non-profit  fundraising they tend to think about the same things: Donations and grants. But there  are many different ways nonprofits can raise funds and bring in revenue and it's important to  understand all of them so that you can identify which methods will be the best fit for your  organization's unique model and programs. So in this video I'm going to share five of the  common ways nonprofits can generate income welcome or welcome back to my channel!  I'm Amber

Melanie Smith. I'm a non-profit founder and executive director who also makes  these videos here on YouTube to help others on their journey to make a social impact whether  that is through starting a non-profit or a social enterprise or socially conscious business or  just getting out there and volunteering and leading positive change in your community as  always I hope that you find this video useful and helpful don't forget to give it a like and  subscribe to my channel for more content like t

his i also have a website FounderToFulltime.com  where I offer some non-profit trainings and resources if starting a non-profit is the path  that you're going down. okay so let's get into these five methods that nonprofits can use to  bring in money and as I'm going through these i really want you to be thinking about what makes  your organization's situation unique what are some of its strengths what assets do you have in your  community that could play a role in helping you fundraise what are

some of the unique programs or  do you have a unique model that could be conducive to designing a special sustainable fundraising  practice for your organization keep all of those things in mind as we go through these and if it's  helpful you can think of this as what does your organization do better than anyone else are  you really skilled at mobilizing volunteers are you really good at creating compelling  emotional stories and social media content are you in a situation where you have access

to  an affordable store front where you might sell items so just be kind of inventorying  these strengths and assets as we go so the first method nonprofits can use to raise money  is one of the most commonly known ones and that is individual donations but i'm also talking about  donations that are small and large so you got your five dollar gifts or your five thousand or five  million dollar gifts and then we have one-time individual donations and recurring donations maybe  you have folks who a

re willing to and are donating every month or every quarter that would be  recurring donation so these donations are of course financial gifts of any size and in  this case i'm specifically talking about from individual people not businesses or grants but  specifically from individuals while a lot of people assume grants make up a large portion  of contributions to non-profits it's actually more likely to be individual donations individual  donations make up about 70 to 75 percent of the charita

ble contributions coming into  nonprofits in the united states each year so that really underscores the importance of  having an individual donor program one with specific goals and messaging to attract people to  donate to your cause and especially getting people to agree to become recurring donors because being  able to count on donations every single month is so helpful for planning and projecting your  future financial capacity one thing that i hear from nonprofits a lot is that it's very da

unting  to start up an individual donor program if you don't already have one or some experience with one  already so i have another video that i can share that talks more about in-depth how to do this from  scratch so you can check that out it's called how do you even begin raising money the second type of  income source i want to talk about for non-profits is grants but there are many different types of  grants you've got your private grants you've got your corporate grants you've got your gov

ernment  grants you've got your family foundation grants there's so many different types and there's  nuances and ways you would find and locate and apply for each different type of one of them  now to get our definition straight grants are of course financial contributions made specifically  by a grant making organization and that could include any of the ones that i mentioned just  now your family foundations local state or federal governments etc and i was alluding to  this before when talkin

g about some of the most common types of contributions for nonprofits  and the perception that grants are a big part of nonprofit funding that's not actually true  within the pool of charitable contributions grants are only making up about 16 for nonprofits  in the united states if you're looking for more detail on each of the different types of grants  and grant making organizations that i mentioned as well as some information on how to find each of  these types of grants and some of the nuance

s with applying for each type check out my other video  called six types of grant makers actually i'm sorry six types of grants for nonprofits but you  get the idea and how to find them now the third type of income for nonprofits that i'm going to  talk about is probably my favorite if you can have a favorite type of nonprofit income and it  is earned income now earned income is money that nonprofits can raise through the sale of goods or  services yes nonprofits can sell goods or services this

is something that is very misunderstood most  people that i hear from in the general public assume nonprofits have to rely solely on donations  or grants to get by when in fact if done correctly they can use the earned income method to  supplement those other revenue sources the catch is that how the process by which you sell your  goods or services and the goods or the services themselves must align with your organization's  mission very directly the act of selling those things has to further y

our organization's public  serving mission i'll explain a little bit more what i mean about that but when i'm talking about  this i'm talking about things like program fees so let's say you um there's a non-profit  theater and you want to buy a ticket that is a sale of a good or a service you're buying a  ticket to their show and the non-profit is going to use the money from the ticket sales to further  its mission of spreading um the love of the arts and of the theater so it is directly aligned

with  its mission as one example so program fees fees for service or in some cases even contracts with  a government entity now despite the misconceptions i talked about earlier earned income makes up  almost half of all non-profit revenue in the usa and if you're sitting there scratching your head  and doing the math because i previously said 70 for individual donations and 16 for grants i was  talking about those being a portion of charitable contribution meaning gifts that are tax deductible

  but earned income is not a donation it is the sale there's an exchange of goods or services so this  is not considered a tax deductible donation when someone gives your non-profit money through  an earned income model it is not a donation it's a sale so a couple of things that are  important to know about earned income that i alluded to a little bit before you can't just sell  anything you can't just randomly sell t-shirts that have nothing to do with your mission it has  to be program fees fe

es for service or contracts that further your actual mission so i have another  video with lots of examples of this at work called 15 earned income ideas that you can check out  to really wrap your brain around how this works but in essence think of it as the theater example  that i shared with you or sometimes red cross will charge a fee for training people in CPR but  the act of training people in CPR furthers their public serving mission they're simply charging  a fee to the public for that s

ervice so i hope that that helps you think about this a little bit  more but when you're thinking about these models thinking about what are those unique assets and  things that your organization does really well or has access to that might help you develop an  earned income idea another thing to consider is that at least in the united states the IRS doesn't  really want you to generate all of your revenue as a non-profit through an earned income strategy  otherwise you're too much like a privat

e business and would be competing with the business sector  so the IRS is going to want you to demonstrate that still at least a portion of your revenue  as a non-profit is coming in through those tax deductible charitable contributions or grants  the fourth type of income strategy i'm going to talk about for nonprofits is sponsorships so a  sponsorship is a little different than a donation and this is why a sponsorship is when a person  business or organization is offering support usually for a

specific event program or it  could be in some cases for the organization overall but they are expecting  something in return for that support it could be recognition it could be some kind  of special access to something you're doing um but there are a lot of nuances with sponsorships  there's nuances for everything as you can tell that you really need to be aware of to launch an  effective sponsorship strategy for example because the entity is receiving something of value in  return for their

support to your organization they cannot count their entire contribution  to your organization as a tax deductible gift instead they will have to subtract the market  value of whatever they received in return from the total of what they gave you and only the  remainder is tax deductible if you're looking for some tips on how to actually find and ask for  corporate sponsorships have no fear another youtube video is here i have one called how to get  corporate sponsorships and i hope that you chec

k that out and the fifth and final common income  model for nonprofits that i'm going to talk about is fundraising events fundraising events are of  course events that take place within a specific finite amount of time that invite your supporters  and followers to come participate in some kind of activity or gathering there are so many  different types of events you've got your 5ks you've got your fancy dinners and your galas  you've got your virtual trivia events there's lots and lots of differ

ent types to choose from  now fundraising events can bring in revenue from a lot of different sources it can be through ticket  sales it can be through sponsorships of that event you can ask for simple donations as part of the  event as well now events are usually a go-to fundraising strategy for a lot of organizations  but one thing that's really important to consider is the return on investment for those events  the thing with events is they take a really long time to plan and depending on how

big they  are can be very complex and sometimes expensive i mean imagine if you're having a  fancy dinner you might have to pay for a venue and tables and chair rentals or audio  visual equipment or an mc and then of course there's the catering and the food um and the  list could potentially go on and you might think to yourself well i'll just get all that  stuff donated but i can tell you that's a little harder than it seems and with event planning the  rule of thumb is you should be prepared

to have to pay for everything and hope for a donation  another thing is the most successful events are going to be held by organizations that already  have a decent sized audience that's because you need people to actually come to the event so you  need to have an audience to market the event to knowing that only a small portion of your total  audience is probably going to be available or interested in coming to that event at all so  spending the time in your fundraising strategy to build up an

audience is a critical part to  basically lay the groundwork for success for any of the five things that i've talked about and one  more thing about events they can vary in success by organization size sometimes events are  a really good choice for smaller or startup organizations because they're also a tool you  can use to introduce new people to your cause and build a relationship and build community with  those people and sometimes they're also good for very large organizations because the pr

ospect of  having to spend money to put on the event is not as big of a deal for them because they have the  money to invest in the first place and they also might have a really large audience size it's those  middle-sized organizations that have to think really hard about their event strategy and if it's  worth it to put on something fancy or if there are more cost effective ways of raising money i will  say virtual events have taken off in the past couple of years during the pandemic and those

  can definitely cut down on some of those event overhead costs but we also might see varying  levels of audience engagement at those events so if you're going to do a virtual event just  be thinking hard about how are you going to keep people entertained and building community  and connecting emotionally to your cause through that platform i bet you're wondering  if i have another youtube video that goes more into depth about events and the answer is yes here  it is how to plan non-profit fundr

aising events i hope you enjoy okay that's what i have today what  do you think i hope that if there's one thing you got out of this video today it's that fundraising  is not a one-size-fits-all thing for non-profits across the board every organization has to think  through what the best fit is going to be for them and really develop a strategy that makes sense for  their community their resources their assets etc for some organizations the earned income model  might be the biggest way you bring

in revenue for others it might be individual donations and  for yet others it might be government contracts or grants i'd love to hear what do you think is the  best method for your organization what are some things you're interested in trying out definitely  share in the comments below and if you're starting a non-profit or need resources to help you figure  out how to build a sustainable fundraising plan check out my website FounderToFulltime.com where  i have those trainings available and ho

pefully they're helpful to you if you're looking for  other resources and funding opportunities and other opportunities to learn more about the social  impact world i have a newsletter that you can subscribe to i will leave the link for that in the  description below so you can join that newsletter anytime and opt out anytime as well final  thing i have a group on Facebook called "change the world or bust"! We've got a couple  thousand folks from around the world and they're having good conversa

tions about their own social  impact and or non-profit journeys and i hope you can join me there and that's all i have for  you today thank you so much for watching - bye! you