The National Assembly Earned Revenue as a strategy for diversifying income National Center on Nonprofit Enterprise

Earned Revenues What earned income is. Why pursue Earned Revenues as a strategy. Conditions of success. Taking the right steps. The Nonprofit Entrepreneur

Earned Revenues: terminology Social Enterprise Social Venture Social Entrepreneur Nonprofit Business Commercial Venture Affirmative Business Social Business Earned Income Initiative Pricing a Service

Earned Revenues: definition “…………earning income in a nonprofit entails making products or services available to organizations or individuals, who pay a price that covers some, all of or more than, the costs of these products or services…..”

Earned Revenues: range of activities Price for a service: Healthcare, counseling Current service delivered to new audience (stress counseling to for-profit employees) Leveraging value of assets: - reputation: cause related marketing; - land: parking lot or natural gas Unrelated business activity: Ben and Jerry’s

Ben and Jerry’s

The National Park Service

Computer recycling

Charging for a service

Earned Revenues: a different type of income? 1. Needs Wants Clients Customers 2. Volatility Stability 3. Dependency Autonomy 4. Charity Interdependence

Earned Revenues: Why? More $! More unrestricted $: - management capacity - independence……advocacy To Manage Risk - general diversification - protecting particular activity

Earned Revenues: Why? To Do more Mission To Do Mission better To Develop the skills and culture of the nonprofit To attract more of current types of revenue

Earned Revenues: range of activities John Hopkins Listening Post Project Commercial income % t % e Improved/expanded Marketing Introduction of/raised fees Borrowed money 27 <5 Profit-making subsidiary 5 ?

Earned Revenues: Why Not? Too Expensive Mission Drift Management Drift Other revenue “crowd-out” Culture clashes/Divisions

Earned Revenues: How? The Nonprofit Entrepreneur…….. …………who thinks economics

Nonprofit readiness 1 Clarity of Mission Client Focus Strategic Mind-Set Experience of Change Effective and Adaptable business systems Financial Health

Earned Revenues: How? Nonprofit readiness 2. Leadership: - commitment - consistency - communication - awareness of risks and opportunities

Earned Revenues: How? Nonprofit readiness 3. Marketing approach to work: - focus on the 4 P’s - ability to identify nonprofit’s assets and their value

Ben and Jerry’s criteria Nonprofit status Annual operating budget of more than $5,000,000 More than 5 years in operation Job training and life skills development programs for youth and young adults, ages Experience operating a social purpose business Knowledge of the retail foodservice industry and/or franchising The desire and capacity to operate a social enterprise business A staff and board with small business expertise An excellent credit history Financial acumen and stability A record of fundraising success The willingness and the capacity to manage the complexities of developing a new business

Earned Revenues: How? Feasibility of strategy 1. Clarity of purpose Understanding of customers Customer focus Marketing approach Clear business model A product or service people are prepared to pay for – enough to ensure achievement of purpose.

Earned Revenues: How? Feasibility of strategy 2. People with appropriate experience Clarity of accountability Appropriate place in structure Planning Management Review and learning

10 steps to earned income heaven 1. Clarify what your nonprofit’ program and revenue priorities. 2. Assess how well you raise and use resources now: are your revenues diverse; do you spend the right amount on different types of fundraising; have you assessed the efficiency of your program staffing?

10 steps to earned income heaven 3. Identify the most cost-effective changes that support program and revenue priorities……and make these happen. Not enough unrestricted revenue…assets still underused….. 4. Generate and select strategies: - engage people for ownership; - work on criteria first: assets + customer needs = revenues; relate everything back to mission, program and revenue priorities; risks and rewards.

10 steps to earned income heaven 5. Assess feasibility and risk in detail, and select options for business planning 6. Address structural and legal issues 7. Clarify accountability and reporting protocols 8. Do the Business Plan 9. Find and secure money required for implementation

10 steps to earned income heaven 10. ……….DO IT>>>> Incremental steps Testing and review Roll-out Communication, Communication, Communication

Earned Revenues: How? The Nonprofit Entrepreneur…….. …………who thinks economics

……to achieve mission

The National Assembly Earned Revenue as a strategy for diversifying income National Center on Nonprofit Enterprise