Karen Eber Davis
Cracking the Nonprofit Income Diversity Code
If your nonprofit is interested in diversifying income, Mote Marine Laboratory and Aquarium offers a great example. In the late seventies, Mote’s leadership realized that to fund research, they needed more diverse income. They started by focusing on youth, creating a science education program and summer camps. In the eighties, Mote opened an aquarium to reach even more people. At first, it was small. Later, a state-of-the-art shark tank was added that drew 22,000 visitors. Mote also added traveling live exhibits including sea lions. Today, the aquarium provides over $1 million in operating support.
Guess what’s most surprising about Mote’s success? These activities had one purpose. It wasn’t to just grow income. It was to grow donations from local people to fund research. The purpose of the education programs, aquarium, shark tank, and live exhibits was to gather locals with the goal of engaging them to become individual donors. All the other income generated, including $1 million from the aquarium, was a valuable byproduct.
Every nonprofit must forge its own unique path to income diversity. Therefore, what worked for Mote will not work exactly for you. What will work for you is to focus on one stream and adapt a long-term approach to income diversity. Mote focused on growing local donors for forty years. This installment of my column identifies four more critical principles you need to diversify your income.
Why Diversify, and Your Options
The nonprofit sector holds income diversity in great esteem for good reasons. It enhances sustainability. It generates resources. It fires up new communities of supporters. What’s not to like?
To diversify, assuming you have one solid income stream now, you can choose one of six other income streams. Before reading about them, notice that this is an important decision. Your diversity strategy will shape your work. It will shape your organization. Your decision will impact the services you offer and the staff you hire. It will influence the communities you build. It will impact who becomes your customers, donors, and volunteers. With that importance in mind, here are your choices.
To become more diverse you can:
- Earn money from customers by selling them mission-related services and products.
- Show individuals the value of your work and ask for donations.
- Persuade government officials to fund your services or products.
- Assist foundations and grant-giving entities to imagine the result of their gifts and fund your proposals.
- In return for income, partner with corporations and businesses to improve their bottom lines.
- Earn revenue from customers you provide with a good or service unrelated to your mission, such as space rental.
- Persuade people to donate non-cash resources, that is, in-kind.
Other Critical Principles
At the department store, even though a robe’s tag promises “one size fits all,” it does not. (Think 300 pound vs. 100 pound adult.) Likewise, despite what you’ve heard about nonprofits, every income stream does not offer every nonprofit the same fit. By fit, I mean results such as a quick start, amount of nonprofit control, and potential income. You want to design a diversity strategy that fits your organization.
What characteristics should you consider for your custom strategy? Consider your organization’s experiences and assets. Does your database contain thousands of people with a passion for your mission, whom you can readily contact? If yes, entry into individual donations will be swifter than without this resource. Do people currently purchase services? If yes, inviting them to purchase others will be easier than if you never charged for anything. Perhaps one of your assets is a unique physical space. If so, rental income may offer excellent fit. In terms of the mission you seek, is it better to have customers or donors?
Other fit principles involve the skills of your leaders. Sometimes fit is immediately obvious. When Joe, with experience in a national technology corporation, began to lead a national nonprofit, his background pointed to selling mission-related technology to individuals. In another organization, CEO Nick worked his way up through the development department. His skills favored individual donations. You will find excellent fit in the space where your leaders’ skills intersect with emerging income opportunities. While you can, and probably will, hire people specifically to grow your diversity, to start many indigenous groups you can mine their current leadership skills.
Not only must a strategy fit in terms of your nonprofit’s assets and experiences, fit involves exploring the potential income the strategy will generate. Three streams, mission-earned revenue, individual donations, and government money provide the three-quarters of the nonprofit’s sectors cash. You can, of course, defy the odds and succeed. The New York Hall of Science, for instance, receives millions in grant revenue for STEM education. Its success is uncommon. If you choose an income stream outside “the big three,” you face greater challenges and less potential income.
Another way to discover good fit is to examine others. Identify half a dozen nonprofits in your field that you admire. Inventory their diversification strategies. Be careful! Even though it appeared that Mote sought mission-earned income, the organization’s true strategy was to engage local individual donors. Study, question, and understand the strategy nuances of other organizations. For help, see Chapter Eight in 7 Nonprofit Income Streams. The chapter will help you to capture the essence of others’ successes.
How to Overcome Insufficient Income Diversity
Achieving income diversity starts with developing a long-term strategy and focusing one source. It involves examining your experiences and assets, leadership’s skills, and potential income. As you crack your code, be ingenious. Fish in large ponds. Learn from others. Build on your assets and stick with it. You can crack the nonprofit income diversity code and achieve sustainability.