Trends in Creative Nonprofit Revenue Generation

May 2019 | Article

The nonprofit umbrella covers many different types of organizations, including arts and culture, community development, education, health, human services and more. Arts organizations may do things very differently than human services organizations, which do things very differently from health-focused organizations, and so on. However, all nonprofits can be innovative and think creatively to identify sustainable revenue sources.

Funding nonprofit work has always, and will always, be challenging. In our experience, sustainable nonprofits address this challenge with creative, innovative ideas like collaboration and partnerships, looking at existing assets (mining your diamonds), social engagement and social enterprise.

Collaboration and partnerships are about coming together on an activity or initiative that benefits all involved. This can be comprised of nonprofits, for-profits, or a combination of the two. These relationships help leverage resources and expand missions. The benefits may be financial, operational, programmatic or all the above. Financially, these relationships may allow organizations to share in costs and reduce expenses tied to joint efforts. Operational efficiencies may be achieved by sharing in program development or implementation, allowing organizations to enhance their programs and grow constituents. Growing an organization’s reach by expanding into new markets, demographics or services helps expand program capacity. Overall, organizations can grow their value proposition by expanding their mission but not their budgets. The result is both parties are stronger and better positioned to maintain efficiency and withstand changes in funding, which leads to long-term sustainability.

An example of this concept is a nonprofit that serves free, nutritious meals to people in need. This nonprofit developed collaborative partnerships with other local nonprofits, allowing for more meals to be provided to more people in more places, while maximizing resources and realizing substantial cost savings. By partnering with other nonprofits, the nonprofit was able to provide more meals without the expense of opening and managing new dining sites. Upon receipt of food, the collaborative partners provided their own staff and volunteers to prepare and serve healthy, nutritionally balanced meals to their constituents. This partnership increased the total number of meals served by 63% over a three-year period.

Are you familiar with the concept of mining your diamonds? Think of the television show Antiques Roadshow. People pull items from their homes, often basements or attics, and bring them to the show to have an appraiser look at them. The show highlights things people have just laying around that they themselves could not see the value in. They didn’t properly value these assets until a third party told them what they’re worth to others. Nonprofits continue to apply this concept of taking a deep look at what they already have—relationships, programs, expertise, physical space, technology—and asking how they can make it go to work for them.

What if your asset was a historic building that was causing a drain on your resources because of required maintenance? One nonprofit looked strategically at what the building could do for them instead of merely what they could do for the building. The nonprofit created a ticketed artist-designed immersive theater experience within the organization’s 130-year old building. Remade from scratch each year, it provided a unique, individualized performance for visitors, using a combination of sound, light, smell, sculptural installation and professional and amateur actors. Through this event they were able to engage new audiences and volunteers, serve and engage the theater community, raise substantial general operating revenue, and all while publicizing the unique status of their building.

Remember the Ice Bucket Challenge several years ago that generated $115 million? We haven’t yet seen an organization duplicate this and have the same level of success. What made this fundraising effort so successful were the “P’s” of social engagement.

The challenge was public in nature—Facebook, Instagram, the media. You saw this everywhere you looked, which allowed donors to be recognized by the communities of people they most care about, which included their family, friends, co-workers and clients. Participating in the challenge immediately moved you into a growing and prestigious club filled with celebrities, politicians, and many of your most admired contacts. Peer pressure and the power of influence should not be underestimated. People you knew and respected challenged you to step up and donate. The challenge was simple, with plain instructions: either donate or dump a bucket of ice water on your head for all to see on video. And, you also had the requirement of passing on the challenge to three others. These instructions also included a deadline—this pressure on time forced people to act, and act quickly. All of us are more responsive to specific deadlines. If we feel like our timeframe for acting is unlimited, then we will often take an unlimited amount of time to make a move.

This activity required participation. This was not a circumstance where you donated quietly, with you and the organization being the only ones aware of the transaction. Some aspect of your donation process required that you do something more than provide a check or your credit card number—you had to acknowledge the challenge you received and then publicly respond. Finally, this challenge required a degree of pain. Oddly enough, there is research that shows that donors relish pain. That is why we have races, polar plunges and the Ice Bucket Challenge as common fundraising techniques. Are these things your organization considers in your revenue generation efforts? Do you intentionally tie a deadline to your ask or your activity? Do you make it easy for your donors to reach out to their own peers?

Social enterprise initiatives have become popular in the nonprofit industry as they allow organizations to develop a revenue generating business model to engage the community while supporting their mission and vision either directly through the initiative or with funds raised. We are seeing more fully-integrated social enterprise models than in the past. In the past, social enterprise activities may have come about simply to generate a new revenue stream. Now, fully-integrated models are emerging where the social enterprise is entwined in the mission of the organization. These models may be stronger in both creating meaningful impact, and in building a financially sustainable organization. Every time you put effort into growing the “business” side of the social enterprise, you are at the same time reinforcing and improving the impact side too. And vice-versa—every time you work to improve your impact, you automatically improve the profitability and overall health of the social enterprise.

Examples of this business model are everywhere. One nonprofit created a social enterprise to provide transitional employment opportunities for men with challenges to stabilization and to sell reclaimed goods from the projects they work on. Another nonprofit created a marketplace with the vision of investing more deeply in the economic health of the extremely poor communities where the nonprofit already worked, by building relationships with artisans whose goods are sold at fair prices at the nonprofit’s volunteer sites and events. Lastly, another nonprofit created an indoor sustainable agriculture facility featuring several 500-gallon aquaponics systems. The systems grow produce year-round, which is sold to chefs at local restaurants for a premium price. Creating this social enterprise allowed for revenue generation, engaging youth in the local sustainable food economy, and a direct connection to the organization’s mission of empowerment through entrepreneurship.

You never know what the future holds, but it likely will have new challenges that create opportunity for the nonprofit sector to be innovative and creative. With more than 2,200 nonprofits served by Eide Bailly, we have significant insight into how organizations are staying relevant and innovative. Contact us to learn how you can tap into those resources.

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