Breaking Good: Forget “Charity.” Think Like a Business.by Josh Jacobson on January 28, 2019
Time to break Rule #1 — Nonprofits Should Raise Most of Their Dollars from Donations
When I say “nonprofit,” do you think “charity?” What do these words mean and how do you conceptualize them? With today’s myth-busting missive, I’m targeting our preconceived notions about how nonprofits fuel their business models.
According to the Brookings Institute, what you might think about nonprofits is probably way wrong. It may be surprising to learn that just 13% of revenue for nonprofits comes from private contributions, including all the ways you’ve probably supported a nonprofit – coins dropped in collection bins, gifts made at special events and your cousin Larry’s crowdfunding campaign. etc. Fully 70% of all revenue to nonprofits is derived from fees charged in exchange for goods and services.
Admittedly, skewing those numbers a bit are higher education and hospitals that are also nonprofits (yeah, really), but the point holds. Queens University and Novant charge fees for their services. Why wouldn’t other types of nonprofits come up with earned revenue offerings?
The fact is, many of the most successful nonprofit organizations are very much market-based. When you think of Goodwill, you probably think of their stores where they monetize your contributions of gently used items. The YMCA benefits from strong membership fees at their fitness centers. Admission fees is one of the largest revenue sources for Discovery Place. The list goes on.
So why don’t more organizations build earned revenue as a prominent part of their business models? Why are so many of them willing to sink risk capital into hiring a fundraising professional, but would retreat from a conversation about launching an earned-revenue strategy?
Maybe they should speak with Erin Santos, founder and Executive Director of the Isabella Santos Foundation. When her daughter was diagnosed with a rare form of childhood cancer called Neuroblastoma, her parents mobilized to raise money to fund research and other supports. When Isabella lost her fight in 2012, Santos went all-in on the Foundation. To-date, the Foundation has raised more than $3 million for Neuroblastoma research and other children’s cancer charities. The organization is perhaps best known locally for its 5k/10K race each fall.
“Our events are very successful, but events are expensive and time consuming,” Santos said. “Not to mention the fact of reinventing them year after year to keep them fresh is a challenge.”
This is a typical challenge for nonprofits that define themselves around a signature event. It is difficult to continually grow event revenue. And, it is unlikely a sole strategy to scale. With this in mind, the Isabella Santos Foundation launched Cancer Messed With, a lifestyle brand that allows people to show support for someone battling cancer.
“Right from the start of our cancer journey with my daughter, I instantly felt like an activist,” Santos said. “I would be interviewed and say that ‘cancer messed with the wrong family,’ and we began putting it on merchandise and people were really drawn to it.”
In 2017, the Foundation launched Cancer Messed With as an apparel line and it has taken off.
“Ideally, I would like this earned revenue strategy to become 50% of our revenue in the next three years,” Santos said. “In the end, the product is still about my little girl and her mission to find a cure for cancer. This just allows us to continue to work smarter, not harder to do this.”
“Smarter, not harder” may be the mantra nonprofits in the Charlotte region need to hear. It begins with wider appreciation for the entrepreneurial instincts of our nonprofit leaders.