Welcome to the e-learning lesson on Building Multiple Revenue Sources. It's usually a safe bet to assume that a nonprofit organization would like to increase its revenue. High-performing nonprofit organizations foster a culture of constant improvement and regularly ask, "How can we grow and sustain increasing levels of income?" The tools, resources, and knowledge included in this training will enable you to raise more money through the development of a targeted strategy that caters to your organization's stage of development, strengths, and community assets. By the end of this training you will be able to: identify fifteen different types of revenue sources and execute the five-step revenue development process, which includes assessing goals and resources, identifying an income strategy, selecting a revenue source, developing and executing a revenue source plan, and evaluating results.
Get started with building multiple revenue sources.
This training provides an overview of fifteen different revenue sources, insight into how online tools can help support revenue development, a step-by-step guide to developing a new revenue source, and analysis tools to help you assess your organization's strengths and limitations. After reviewing this training, you will know how to evaluate, start, and sustain one or more new income or revenue sources.
Build your revenue-generating vocabulary.
The definitions below will gain meaning as you learn more about the revenue development process.
Financial resources — The various assets of your organization, from actual cash, property, and inventory, to your staff and volunteers, goodwill, reputation, constituent base, board members, and partners of your organization.
Income strategy — The direction you will take in the coming twelve months to generate more income, whether contributed, earned, or in some other form. Organizations can choose to raise cash from existing revenue sources; raise cash from a new source; form an alliance or partnership with an organization that brings cash; or form an alliance or partnership with an organization that brings in-kind resources.
Revenue source — A discrete income source with its own characteristics and requirements. It can be earned income or unearned income. Each of the fifteen discrete income streams is called a revenue source.
CHAPTER 1: Revenue Sources
There are countless ways for nonprofits to generate revenue. The fifteen specific types discussed throughout this training include: annual or sustained gifts, major gifts, planned gifts, foundation grants, cause-related marketing, corporate giving programs, earned income activities, unrelated business income, in-kind donations, supporting organizations, benefit events, state and local municipalities, churches and denominations, federated funds, and online donations. Each revenue source comes at a different "price." Though each will hopefully help you to increase your bottom line, some revenue sources are more difficult to implement than others and can require a more significant investment of money, time, and labor.
Develop a basic understanding of revenue sources.
Prior to developing a plan to increase your organization's revenue, you'll need to develop an understanding of each of the fifteen different types of revenue sources and how they work in real-world scenarios.
Download part one of the Revenue Source Primer and review the different revenue sources. Keep the primer close to refer back to throughout the training.
Start fundraising online.
Using Web 2.0 tools can be a powerful way to raise funds; they empower supporters to help you raise money, allow staff to make use of their personal networks, and allow for easy reporting and information-gathering on your donors.
Organizations must be sensitive to managing change when choosing and adopting a Web 2.0 tool to enhance fundraising. Consider:
- How will you communicate your decision to your stakeholders? Should you have an in-person meeting, or is e-mail communication sufficient?
- How will you train staff or volunteers to use the web fundraising tool? How much time will you need to invest and who is the best person to lead a training effort?
- What will your plan be for ongoing maintenance of the tool? How much time will be required and what regular content updates will need to be made to keep supporters coming back?
CHAPTER 2: Assess Goals and Resource Capacity
The revenue development process includes five steps: assessing goals and current resource capacity, identifying your income strategy, selecting an appropriate revenue source, developing and executing a revenue source plan, and evaluating results and striving for improvement.
The first step of the revenue development process helps you organize your goals, project where you hope to be, weigh your strengths and weaknesses, and evaluate the opportunities and threats your organization faces. During this step, attempt to be as detailed and candid as possible, as this can help ensure that the plans for development identified later are clear, concise, and realistic.
Identify organizational goals for revenue development.
Your organization likely has a variety of goals it hopes to meet in the coming weeks, months, and years. Consider development areas such as annual revenue, special project revenue, number of donors, number of volunteers raising revenue, fundraising expenses, and the fifteen different types of revenue covered in Chapter 1. Where does your organization currently stand in regards to these developmental areas? Where does your organization hope to be in the future?
Download the Goals and Financial Resources worksheet and brainstorm your organization's goals with staff. Be sure to include stakeholders, including your board and staff leadership, as these individuals have the power to make decisions as to which of these goals will be supported and pursued, becoming part of the organization's strategic vision.
Conduct a SWOT analysis.
A SWOT analysis (strengths, weaknesses, opportunities, and threats) enables organizations to assess their current financial resource strengths and weaknesses and evaluate the opportunities and threats around them. The result of an accurate SWOT analysis is a refined set of statements about your organization that will help you target your focus in generating more revenue.
When crafting SWOT statements, ask yourself:
- Where can a revenue source build on a strength?
- What weaknesses must we minimize or eliminate to enhance a revenue source?
- Which opportunities support a strength or help eliminate a weakness?
- Which of the threats could potentially undermine an income strategy?
Download the SWOT worksheet to review question prompts, and click on the activity icon on the right to explore helpful tips for each area.
CHAPTER 3: Identify Your Income Strategy
Organizations often waste time and money because they fail to identify a strategy for revenue development. The second step in the revenue development process helps you select a strategy to generate revenue. Most capacity building organizations use one of four income strategies: enhancing an existing revenue source, starting a new revenue source, forming an alliance or partnership to share an organization's revenue sources, or forming an alliance or partnership to acquire in-kind resources. When identifying an income strategy, consider the following questions: Do I build on an existing revenue source? Or, can I "borrow or use" a revenue source from someone else?
Enhance an existing revenue source.
Enhancing an existing revenue source involves applying resources of money, counsel, and time to improve upon one or more revenue sources that already exist within your revenue-generating portfolio. If you have direct mail, you might add a new program to further sort your file of donor names to get a higher yield from certain portions of the file. If you regularly solicit foundation grants, you might add staff or a consultant to bolster research or inquiries, or follow-up on turndowns.
Start a new revenue source.
Starting a new revenue source involves applying people, money, and expertise to initiating and sustaining a new source of income. An organization might start a major gifts or planned giving program, create an institutionally related foundation, start an endowment, or create a sister corporation to launch a business. All of these would be in addition to existing revenue efforts and would therefore require additional resources to implement.
Form a partnership to share an organization's revenue sources.
By entering into an alliance or partnership, your organization can benefit from another organization's monetary source in a way that is beneficial to both entities. The success of a partnership or alliance for sharing revenue sources lies in a well-thought-out plan that is documented within a formal agreement.
Form a partnership with an organization to acquire in-kind resources.
By entering into an alliance or partnership, your organization can benefit from in-kind services by developing an agreement where the value of time and services, materials, space, or other in-kind contributions meet a cost share. As with developing partnerships to share revenue sources, the strength of a partnership or alliance to share in-kind resources depends on the strength of a documented, formal agreement.
Weigh the strengths and weaknesses of each income strategy.
When deciding whether to enhance an existing revenue source, start a new revenue source, or form a partnership to share revenue sources or in-kind resources, you'll need to consider a number of criteria, including:
- Investments required
- Organizational culture
- Staff resources
After weighing the different strategies and criteria, your organization can prepare to identify an income strategy by prioritizing the criteria that is most important to you.
CHAPTER 4: Select an Appropriate Revenue Source
Once you reach step three, you have done your homework and used a SWOT analysis to focus your goals and prioritize your income strategy to provide direction to your revenue development process. The next step in the revenue development process is to select a revenue source. To do this, you will need to review the fifteen revenue sources and consider the features of each source, as well as potential suggestions for enhancement.
Consider your revenue source options.
The task of selecting a revenue source will require you to revisit the fifteen different revenue sources and consider:
- Funding uses. What sort of programmatic or organizational efforts does this revenue source support? What does your organization hope to support through additional funding?
- Staff commitment. What level of staff involvement does the revenue source require? What kind of staffing resources can you commit to generating revenue?
- Necessary systems/processes. What underlying systems or processes must be strongly in place prior to developing this revenue source? Are there systems that your organization would like to build off to increase revenue?
- Lead time. How much planning is required to develop the revenue source? How urgent are your funding needs?
- Return on investment (ROI). How successful is the revenue source at helping organizations raise more funds?
- Methods of enhancement. If already utilized, how can you improve this revenue source to raise even more funds?
Download part two of the Revenue Source Primer to learn more about the different features of each revenue source, and explore the activity on the right for helpful tips on how to enhance each revenue source.
Consider hiring a consultant.
Keep in mind that, if you anticipate adding or enhancing a revenue source with which you have little experience, you may need to hire a paid professional consultant. Consultants bring specialized skills, experience, knowledge, or access to information. They can work on their own or be part of nonprofit or for-profit consulting operations. Universities, businesses, and government agencies often have groups of consultants within their organizations. Ideally, a consultant brings an independent perspective to an organization.
CHAPTER 5: Develop and Execute a Revenue Source Plan
Once you have reached the fourth step of the revenue development process, you have conducted a number of exercises and activities encouraging you to brainstorm and evaluate your current capacity, as well as your goals for the future. In step four, you will formally capture your plans for implementation in an executable revenue source plan. A revenue source plan includes five parts: selection of revenue source, plan objectives, adjustments to systems, schedule, and summary of costs.
Develop meaningful and measurable plan objectives.
Your statement of objectives should be a simple statement of what you want to accomplish by when. It will detail not only the dollars you expect to raise but any additional goals you identified in step one of the revenue development process. Plan objectives are best stated with a measurable output by a specific date. Example objectives could include:
- Acquire 1,000 new names by January
- Reactivate 1,000 lapsed supporters by year-end
- Raise $50,000 at a 4:1 return on investment not to exceed a $12,000 level of investment this fall
Understand the impact of your revenue source plan.
Your revenue source plan has the potential to impact countless areas of your organization, from accounting, to registration and reporting. Reference the systems area summary to analyze how the different revenue systems could potentially impact your organization's systems and procedures.
Document your revenue source plan.
Download the revenue source plan template. This document includes fields to capture five areas of your revenue plan, including plan objectives, selection of revenue source, summary of costs, adjustments to systems, and schedule.
Reference the template as you review the activity to the right.
CHAPTER 6: Evaluate Results and Strive for Improvement
Results matter. A revenue source plan can look great on paper, but if it fails to perform, it is a waste of time and money. Organizations should make a concerted effort to regularly evaluate revenue development efforts and develop courses of action to address efforts that appear to be underperforming or not meeting expectations. Remember that, as you implement any new income strategy, it's vital to include key stakeholders from your organization, including your board, key donors, partners, and a selection of clients. Their support and feedback on strategy, timing, and costs will prove helpful in implementing your plan.
Analyze your performance.
After you've taken the time to document a revenue source plan, you'll want to provide yourself time to observe implementation efforts and analyze progress. Compare your performance against the measurable objectives you identified in your revenue source plan. Ask yourself:
- Are we meeting the mark?
- Where are we falling short?
- What evidence exists to show that we are over- or underperforming?
Unfortunately, not all revenue development efforts will take root and yield a valuable return on investment. By carefully noting evidence of your organization's performance, you can target areas for improvement or revise your revenue source plan accordingly.
Diagnose issues and propose corrective actions.
If you find evidence that your organization is not performing as expected or is not on target to meet the objectives you identified in your revenue source plan, you'll need to do some further research to get at the root of the issue.
In diagnosing the issue, aim to identify whether the revenue source is falling short due to internal factors, such as your own staff and the design of the initiative, or whether external factors, such as a generally weak economy in your local area, are at play.
This training has provided you with an overview of fifteen different revenue sources and suggested ways in which your organization can build off existing sources or develop new plans for generating revenue. The revenue development process guides your organization from broad analysis to consideration of practical alternatives, and towards results through a specific, measurable plan. Thank you for taking the time to learn about building multiple revenue sources.
Learn more about building revenue at the links below.
Cause Marketing Forum
The Cause Marketing Forum, founded in 2002, was created to help promote collaboration between nonprofits and corporations. The Forum provides insight through a resource center, workshops and tele-classes, conferences, and research. The site also provides links to articles on cause marketing best practices.
Council on Foundations
The Council on Foundations is a membership organization that works to support philanthropic causes, organizations, and the general population. The Council offers support to nonprofit organizations through the provision of expert analysis on legal issues and virtual and in-person events on fundraising, grantmaking, etc. The Council also offers insight and resources on private independent foundations, community foundation services, and corporate foundations.
Created in 1965, the Foundation Center connects nonprofits, grantmakers, policymakers, and the general public by maintaining a number of print and web-based resources that provide insight into funding and giving trends. The Foundation Center also offers a number of in-person and web-based events from its locations throughout the nation.
National Center for Charitable Statistics
The National Center for Charitable Statistics, established in 1982, aims to develop and distribute information on nonprofit organizations and their activities to support research into how the nonprofit, corporate, and government sectors interact.
Nonprofits Assistance Fund
The Nonprofits Assistance Fund has, since 1980, worked to build financially healthy nonprofits. The Fund is a 501(c)(3) Community Development Assistance Fund that maintains a number of tools and resources that can assist nonprofits throughout the nation in working towards their financial goals.