Charities and good causes have been around for centuries. Most religions encourage helping the poor and those in distress. There will, sadly, always be a need for purely charitable work (as opposed to developmental initiatives), or at least until government is able to properly care for the vulnerable. However, everyone within the non-profit sector, must make a mindset switch and do so urgently. There is not, and can never be, enough donor funding.

Donors want to see sustainability

‘Sustainability’ remains an often-misunderstood term due to its various uses. Aside from being associated with climate change, it sometimes refers to the ‘keeping going’ of projects. Another use within the sector refers to the financial self-sustainability of an organisation.

No one wants to give an NPO its last one, two or three months’ money before it closes. They would rather invest in organisations that are likely to succeed.

If one considers the almost incalculable total funding needed by every NPO, faith-based group, school and tertiary institution globally, there is, no possibility of enough donor money to meet these needs. So, what does the future of not-for-profits look like, considering that there will never be enough donated money?

Donors want to be part of success. ‘Desperate’ has no place in either written or verbal communication, other than to describe the plight of those served. No one wants to give an NPO its last one, two or three months’ money before it closes. They would rather invest in organisations that are likely to succeed.

Potential donors want to know what own effort (sweat equity) organisations will be putting in themselves, for themselves. Income generation by non-profits has become critical to their survival, not only to bring in funding but also to demonstrate a willingness not to be 100% reliant on others. It is a quantum leap from charity board member, manager or employee to entrepreneur, but it is essential to make this dramatic switch in mindset to attract and maintain donors.

The more that a non-profit does for itself, the happier donors are to support it. Success breeds success. NPO teams must run their organisations in a business-like manner and think professionally. Most donors seek to partner those organisations doing something to generate (make or earn) money. Anything from trading, to tendering for government contracts, encompasses income generation. Many potential donors home in on an NPO’s budget under ‘Income’ and look for the percentage of the annual needs that are self-generated. Planning should include increases to these amounts over coming years.

Income generation vs fundraising events

I often encounter some misunderstanding within NPOs planning to make/earn money. Income generation is not a project in the sense of the projects carried out to serve beneficiaries. And fundraising events are not income generation – they are one-off initiatives to raise money.

Initiatives aimed primarily at earning money for beneficiaries, such as craft production and sales, blur the boundaries between income generation and projects and may have a component of both. However, these are generally easy to classify when looking at the original business plan. (There was one, wasn’t there?) Why was the initiative started? Was it to earn money for the beneficiaries? If so, it is a project. Was it to make money for the NPO? Then it is an income generation initiative. Generally, I find that when asking these questions, the answers are, ‘It was a bit of both’.

The bottom line lies in the bottom line. How much does the NPO make/take? How much do the workers/ crafters/ beneficiaries make per item produced or per hour worked? In most such cases, I find that it is about an 80/20 split with 80% of the profits given to beneficiaries and 20% to the NPOs. These are projects and not income generating initiatives, despite the NPOs profiting nominally. Most bean counters will point out that the costs of overseeing the project and marketing the goods in fact mean that the NPO loses financially, thus reinforcing that these are projects and not income generating initiatives.

Think about what can you do to generate income

Does your organisation have space to let? What skills reside within the NPO via which money can be made through training or consulting? Please! Consider ways to earn money – preferably innovative ideas!

 Photo by micheile henderson on Unsplash