FINANCIAL STRATEGIES TRACK DIVERSIFYING REVENUE STREAMS. Funded in part through a Cooperative Agreement with the U.S. Small Business Administration

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1 FINANCIAL STRATEGIES TRACK DIVERSIFYING REVENUE STREAMS Agenda My Non-Profit Experience 15 Revenue Sources 5-Step Revenue Development Process Summary Resources 1

2 15 Revenue Sources 1. Annual/Sustained Gifts 2. Major Gifts 3. Planned Gifts 4. Foundation Grants 5. Cause-Related Marketing 6. Corporate Giving Programs 7. Unrelated Business Income 8. Earned Income 9. In-Kind Donations 10. Support Organizations 11. Benefit Events 12. State and Local Municipalities 13. Churches 14. Federated Funds 15. Online Donations 3 June 8, 2010 Annual or Sustained Gifts Include one or more fundraising programs that generate sustainable gift support on an annual or more frequent basis A donor that has given at least twice is considered a sustaining donor Cultivated by direct mail, membership programs, the Internet, telethons, etc. 2

3 Major Gifts Large donations as defined by the receiving organization as major Prospect usually cultivated for a period of time before formal solicitation Many major gifts include restriction for use and may require personalized recognition (like naming opportunities) Planned Gifts A large gift from a person given in the event of his or her death Integrates sound personal, financial, and estate planning concepts Has tax implications and usually transmitted through a legal instrument such as a will or trust 3

4 Foundation Grants A financial donation given to support a person, organization, project, or program Requires research and submission of an application Have specific guidelines, limitations, and assets Cause-Related Marketing A for-profit uses the name and reputation of a non-profit to promote its product In return, the for-profit provides financial support to the non-profit Financial support is usually according to a predetermined formula based on sales and purchases 4

5 Corporate Giving Programs Donations by a for-profit corporation that is part of the corporation s annual budget Usually in the form of a grant In some cases, corporations have established foundations to provide grants and financial assistance that align with specific missions Earned Income My favorite! Fees for services rendered, product sales, interest generated from investments, etc. For activities related to an organization s mission (tax exempt purpose) 5

6 Unrelated Business Income Any revenue received for business conducted to make money that is not related to mission This use is defined by the IRS as unrelated business income For more information, see IRS Publication 598, Tax on Unrelated Business Income of Exempt Organization In-Kind Donations Donations of goods or services Equipment, inventory, supplies, space, or staff time The donor places a monetary value on such contributions for tax purposes 6

7 Supporting Organizations Qualified charity operated, supervised, or controlled by specified public charity Groups such as auxiliary, association, friends, group, or other nonprofit organization Examples are the Women s Guild of the Huntsville Museum of Art or Friends of the Library Benefit Events Social events from which net proceeds are designated as a donation to one or more causes These events include golf tournaments, races, balls, galas, concerts, etc. Example would be the Red Cross Red Dress Gala 7

8 State and Local Municipalities Funds that are under the direction and discretion of a non-federal agency These sources include grants and in-kind services Good luck in Alabama with our current budget woes! Churches Collect cash and in-kind contributions for a worthy cause This source includes local churches, church foundations, church-run service agency, etc. Christian Women s Job Corps is a good example 8

9 Federated Funds Also referred to as community funds Monies raised for a cooperative group of nonprofits through employment-related annual giving campaigns Examples are United Way and the Combined Federal Campaign Online Donations Web-based tools to make contributions fast and easy for the donor Successful online campaigns are linked to the use of Social Media marketing tools (blogging, Facebook, YouTube, Twitter, etc) Online giving is a small percentage of revenue today; expected to grow significantly 9

10 5-Step Revenue Development Model 1. Assess goals for future and current resource capacity 2. Identify income strategy 3. Select an appropriate revenue source 4. Develop and execute a Revenue Source Plan 5. Evaluate results; strive for improvement Step 1: Assess Goals Organize your goals Project where you hope to be Weigh your strengths and weaknesses Evaluate the opportunities and threats Be as detailed and candid as possible! Development plan should be clear, concise, and realistic 10

11 Step 2: Identify Strategy Four income strategies: 1. Enhance an existing revenue source 2. Start a new revenue source 3. Form an alliance or partnership to share revenue sources 4. Form an alliance or partnership to receive in-kind services Step 3: Select Source Consider the 15 revenue sources Review the features and possible enhancements of each revenue source Consider what each source funds (i.e., operations, projects, programs, capital, people, endowment, in-kind, etc.) and match to your needs 11

12 Step 4: Develop & Execute Plan Develop your implementation plan A Revenue Source Plan should include: 1. Plan Objectives 2. Selection of Revenue Source 3. Summary of Costs 4. Adjustments to Systems 5. Schedule Step 5: Evaluate & Improve Results matter---a Revenue Source Plan can look good on paper, but fail to perform Include stakeholders such as board members, key donors, key partners, clients, and other constituents in the beginning Support and feedback from stakeholders to strategy, timing, and costs are key to success! 12

13 Summary Step 1 challenges you to set goals and conduct a thorough assessment of current capacity and desired capacity Step 2 helps you identify income strategies that work within your organizational culture and climate Summary Step 3 guides you through the process of selecting appropriate revenue sources Step 4 documents the necessary elements of a revenue resource plan Step 5 encourages you to evaluate your organization s results and strive for continued improvement 13

14 Resources Building Multiple Revenue Sources Grants.gov FoundationCenter.org Causes on Facebook FirstGiving Network for Good National Center for Charitable Statistics Contact Info