Four Key Factors that Should be Considered for a Nonprofit’s Earned Income Strategy
By: Eric Moraczewski
Tags: Earned Income, Mission, Strategy, Nonprofit, Nmbl Strategies

Remember when an annual appeal, an occasional capital campaign and perhaps an endowment were all that were expected of any given nonprofit? Understandably that mindset was ushered out some time ago when nonprofits were unavoidably expected to expand their funding beyond just the status quo, something many nonprofits still struggle to grow beyond. Donors began to expect a more educated and innovative approach to funding. Then 2020 and all the turmoil associated with it arrived and the ante was upped again exponentially. Now more than ever nonprofits need to develop stronger, more trackable funding strategies to adapt to the shift that is happening within the giving space. One of the more common requests in recent months for our consulting firm, NMBL Strategies, has been to develop earned income strategies for clients and to totally reevaluate the strategies around working with sponsors and donors.

NMBL Strategies knows there are often a variety of earned income opportunities that a nonprofit needs to explore as they develop their strategy. Before developing these opportunities, nonprofits should identify the needs of the organization, resources and opportunities and most importantly ensure there is mission alignment. These factors all play a critical role, not just in the selection of earned income opportunities, but also in the overall development success of the organization.

TIMING IS EVERYTHING

By identifying the needs of the organization, both for the short and long-term, nonprofits are able to identify the returns that are needed within their organization. If a nonprofit is developing a product they will sell, it likely will not be a short-term solution to budget deficits. In fact many organizations (both for-profit and nonprofit) budget a loss in the initial years of a new product launch as they develop the market. It does not mean that it will not or cannot come sooner, but it may be foolish to assume it will come extremely quickly. Some opportunities just need time to express themselves in the community, while programming and events may be more short-term revenue drivers.

A great case study to highlight both short and long-term success can be found in New York’s Friends of the High Line. In 1999 it was founded on the idea of turning something that was known as a bit of an eye sore into something the community could embrace. Fast forward to today where the the High Line is one of the more frequently referenced projects when talking about community development and transformation. To keep up with the maintenance and growth of the space, the Friends of the High Line have adopted many creative, community centric programs including adopting plants, membership programs and continual ongoing fundraising. Perhaps one of the more unique aspects of their funding comes from recognizing the impact they have made on the community around them. For example, they pioneered a partnership with The Standard, which was the first hotel to build in corporate support by providing an opt-out program for hotel guests to support the High Line, where every hotel stay a donation was made to the Friends of the High Line and showed up on a hotel guests bill. By making it an opt-out program, the High Line received support at a much higher level than an opt-in program. As the hotel profited, so did the High Line, and long-term support was built over time from visitors, who often were utilizing the High Line, but were not necessarily part of a typical membership demographic. This early partnership created a win-win scenario and spelled long-term success for both organizations.

LOOK INSIDE YOURSELF — INTERNAL RESOURCES

Identifying your internal resources is critical. Does your staff have the capacity and skills necessary to take on new product development, new programming opportunities or new outreach? Does your organization have the relationships necessary to execute the new opportunity? What materials and other resources will be needed to execute the opportunity? It’s critical to identify the internal resources available, as well as the external resources necessary for a successful roll out of an earned income opportunity. By early identification, a nonprofit can quickly assess whether they are in the right position to manage the opportunity and if not, whether external support is required. In some cases external support may be cost prohibitive and that early identification can prevent a future misstep.

Programming can be a great way to expand a brand and build awareness of an organization within its community. However, it can also be a lot of work to get programming up and running, especially to do it well. It’s one of the reasons the National Blues Museum in St. Louis started small and initially only put on one concert per week on Friday evenings. As the fans grew and the staff built routines and learned how to best execute the events, new concerts were added on Saturdays, then Thursdays and eventually even a brunch on Sundays. By not trying to do too much at once, the National Blues Museum built demand and staff knowledge all at the same time.

OPPORTUNITY CALLS

Opportunities exist across the board; however, it’s about identification of the needs and interests of your visitors and the surrounding community. What opportunities exist in your area? Do you have relationships with surrounding hotels, restaurants, etc.? What type of social media following do you have? How many people visit your space? Do you have facilities that could be rented out under your own roof? By properly understanding the opportunities that already exist, you avoid duplicating efforts of others and increase the chances of success.

San Francisco’s The Presidio offers a great case study of how to answer when opportunity calls. The Presidio has been a military fort since Spain established it in 1776. Over the years, the fort transferred to Mexico and eventually to the United States in 1846 where it became a US Army post until 1994. In 1994, the site became home to a national park site, which continues to be developed today. Early in its existence, the Presidio Trust understood two things, first that a good partnership with the National Park Service, who managed the lands around the Presidio (the Golden Gate National Recreation Area), was critical. Secondly, they would not be able to rehabilitate buildings throughout the Presidio without unique fundraising efforts. With space at a premium in San Francisco, the Presidio wisely decided to lease their space. Today you can rent a home or lease office space at the Presidio, in fact, it is even home to Lucas Film subsidiaries. Aligning their space to the needs of the community was a great opportunity for The Presidio to provide a better visitor experience across their 2.4 square miles, while also quickly upgrading and rehabbing the buildings on campus in partnership with their tenants.

MISSION CRITICAL

Mission alignment is unfortunately a category that can get overlooked when building an earned income strategy. Yet, if it is not at the forefront of your work, there can be countless repercussions including having your nonprofit status removed or alienating your donor base. Ensuring that operations align with your mission, allows for the organization’s mission to grow along with financial support. There is no better way to grow an organization than through mission aligned support, because it makes for happy donors, happy staff, and happy leadership.

Mission alignment is well exemplified by Lydia’s House in St. Louis, MO. Their mission is to work in faith to end domestic violence by being a place of healing and a voice of hope for abused women and their children. Lydia’s House realizes that one of the key reasons that a woman will not leave her abuser is that she doesn’t have the financial means to support her family. Armed with this information, Lydia’s Ladles was formed in 2014 in a partnership with famed local restaurant Annie Gunn’s. Annie Gunn’s developed a recipe for a Chicken Pot Pie that allowed Lydia’s House to employ the women they supported and produce the pot pies. By early 2015, the Pot Pies hit the shelves of major markets across St. Louis and continue to be successfully sold throughout the region today. This program was a direct result of mission alignment and has allowed for continued employment for women and families of Lydia’s House, while also creating considerable revenues for this incredible nonprofit.

There are obviously many factors that go into the success of earned income strategy, but these four basic tenants (short and long-term needs assessment, internal resources, opportunities and mission alignment) are the foundation to building a successful one. It’s also important to continuously re-evaluate and ask important questions. Has the nonprofit’s mission changed? Have long-term needs changed? Has the organization gained new or different personnel with unique skillsets? What new opportunities are on the horizon? Take time each year to answer these types of questions.

Perhaps most importantly, never lose sight of the people you look to engage. Based on some of the aforementioned examples, a hotel or restaurant will not form a partnership with a group it does not feel will be mutually beneficial. A product that is not well executed will not be purchased, even if it is for worthy charity, and programming that no one is interested in will not generate crowds and revenues. If interested in learning more please visit NMBL Strategies to learn about our services and award winning team.