Earned Income Diversification

Revenue from earned income streams tied to your organization’s mission can help your nonprofit become more resilient and adaptable to change.

It is easy to hear advice to diversify funding streams, but not necessarily easy to do it, especially if your nonprofit started out using one primary funding source, such as a grant, or a specialized donor group. Having a wide array of funding sources will help cut risk from outside factors including economic downturns, political turnovers in government, or demographic changes. Many nonprofits are primarily dependent on government grants, foundations, and donations from individuals, corporations, and other groups and of course, these can all be great funding sources.

In addition, earned income that fits well into your organization’s DNA can be an excellent source of revenue.

Funds generated by programs directly connected with the mission such as a private school receiving tuition, a theatre company selling tickets, or a museum charging an entrance fee are obvious earned income sources.

For less obvious sources, consider these options:

• Your group’s creative work can be valuable. Books, workshops, and training tools on topics of “how we do it” may be well worth packaging for others to use. We think of educational programs selling their materials, but what about a community service organization that has pioneered a new approach, or a new twist on an old approach? Can you market that to other groups?

• Does your organization generate evergreen material you can market such as recordings, videos, or print articles?

• If your organization does research to benefit your own programs, you may be able to market that research to others, or to incorporate their needs into your research efforts for cost sharing.

• In addition to selling training tools for your program strategies, what about contracting to train others to replicate what you do? Collaborating with other organizations for contracted work can offer a dependable income stream. In addition, strategic partnerships in programming can help build credibility, mission reach, and the ability to gain other funding.

• Your group may serve individuals for free (for instance with meals, tutoring, or a wide variety of other services), but there may be businesses or government entities who benefit by your providing those services to their employees or citizens and may be willing to contract with your organization to provide those services. Additionally, in recent years a number of creative outcome-based financing methods were developed to leverage funding from businesses and governments to fund services of nonprofits that provide improvement to communities. There is much work to be done in this area, but creativity and collaboration is key.

When you develop earned income streams reliably tied to your services or other work or products you produce through your mission, your nonprofit becomes more resilient and adaptable to changes in the external environment.