How Do Nonprofits Make Money?
Although non-profits do not exist to make money, it doesn’t mean they don’t make any profit at all. Income may exceed expenses, and the remaining amount will be their profit. For example, non-profits always buy products that they use in for fundraisers at bulk discounts. Some retailers will offer special rates to charity, so that the companies aren’t making a profit off of charitable organizations. The big factor that helps charities balance their books is that they don’t pay taxes for some of their revenue streams, which makes it much easier for them to operate.
Non-profits incomes will be taxed depending on whether they are related or unrelated to the nonprofit’s core purpose. Non-profits make money from the following activities.
1. Coupon Websites:
Seriously! How is that possible? Well, certain promo code websites like Goodsearch.com will give users the option to use their coupon codes on online purchases, and then whatever cash-back they earned can be sent to a charity of the users choice. They are definitely some great coupon websites to choose from, whether it’s CouponLynx in the United States, or in the U.K. there’s Discountgo.uk.
2. Selling Products:
One of the main ways non-profits use to generate money is by selling products that are related to their cause. They may sell a variety of products, that is stuffed animals and t-shirts with their logo, DVDs and any other media featuring event. They try to minimize the cost of getting those products so as they are left with some profits after selling them. One of the main ways they use to reduce the cost is by informing suppliers that they are non-profits organizations, this way they will get products at a discount. They also shop from local suppliers to avoid shipping fees which will lead to a higher margin.
Fundraising is another excellent way that non-profits use to make money. The amount an organization gets from fundraising depends on its public relations and how many people know about it. They start their fundraising campaign a few months before the actual event to make sure many people are aware of it. This will guarantee them higher earnings from the event. Sending invitation letters to celebrities, politicians, and sports figures is another way to ensure high returns from the event. Many people will be willing to support a non-profit as they know it’s after their community affair. They will not see it as a business, and they will promote the event.
If you’re curious about how a particular charity generates revenue, there’s a useful website named Donorbox.org where you can see where their main revenue streams are.
4. Renting property
In case a non-profit has extra space in their premises they can rent it to other organizations and make some money out of it. Incomes from this sector are tax-free making them a significant revenue for a non-profit. This money is used to the running of the organization by paying employees and other expenses. But if it’s commercial premises which are set for rental services only then income from these facilities will be taxable. This is because it will not be related to the organization’s core purpose.
A non-profit may also earn some money by publishing books that are related to its aim. To increase the margin many organizations will publish the books themselves. However, if the organization cannot publish on it own it can land into a contract with one of the publishing companies. For example, an organization that is dealing with domestic violence awareness may publish a book that talks about how to identify and assist teens affected. If the organization also takes interesting original photos during its campaign which is the case with conservation and wildlife-related organizations. It may earn royalties by giving other websites the right to use those pictures.
In summary, although every charity is configured in an unique way, non-profit organizations will generate most of their revenue from these 5 sources:
|2.||Selling Products + Merchandise|