Nonprofit Earned Revenue (part 2)by Chataun Denis on 07/14/15
In the last blog posting we discussed earned revenue being one of THE most important nonprofit business strategies. I used one of my clients as an example of a grassroots organization that is doing it well. Now, let’s talk about other earned revenue options. One is the sale of tangible products. The American Cancer Society has mastered the art of selling products. On their website you can purchase jewelry, shirts, jackets, watches, and a myriad of other wares. They have a crystal beads bracelet that sells for $18.99. If they sell 1,000 of these in one month, they've generated $19,000.00. Their tote product sells for $12.99. Again, selling 1,000 of these will generate $13,000.00. At the time I wrote this article they reported on their website that they raised $58 million dollars through their various fundraisers and sale of products.
Making A Way Housing, Inc. earns the majority of its revenues through the rental of real estate. The organization's core activity is providing affordable housing for homeless persons and those undergoing treatment for alcohol and substance abuse. The residents pay rent that is subsidized by grants. Rental fees are not market rate, but they're not free either. They have 70 two-bedroom units. Each unit is occupied by two residents who may pay between $100-350 per month. At these occupancy rates, they can generate between $14,000 and $49,000 per month.
When asked how much of a nonprofit’s budget should be earned revenue. I like to use the illustration of the pie chart. A pie has multiple slices. For the nonprofit, each slice represents a revenue source. I propose that the most important and the largest slice of any nonprofit's revenue pie should be earned revenue. My rule of thumb is 60%. The wise person is the one who develops their nonprofit business model with earned revenue as the cornerstone.