Nonprofit organizations are also called non-business entities, because of the nature of the company’s works and income flow. These companies are exempt from paying taxes.
There are different kinds of non-profit organizations, but the most common types are the charitable nonprofits or public charities. Most people are familiar with public charities because that’s where they volunteer, donate, and receive educational, social, and health services.
Nonprofit Doesn’t Mean There’s No Money Involved
The term “nonprofit” can be a bit misleading because like any other companies, a nonprofit organization still receives income. A non-profit’s income should naturally be greater than its expenses, or else it will have close down due to lack of funds. The difference with commercial companies is that the excess revenue of nonprofit organizations all goes to their advocacies. The income is not distributed among the members or shareholders.
To operate, a nonprofit organization must spend money on daily expenses, endowment, emergency fund investments, and infrastructure improvement. Well-funded nonprofit organizations are more sustainable and healthier.
How Does a Nonprofit Organization Make Money? There are two types of activities that a nonprofit organization can undertake to make money.
Related activities: These are activities that are aligned with the purpose of the organization. Income coming from these activities is tax exempt. For example, a book lovers’ organization can provide lectures from successful and popular authors, or sell books that were donated to the organization.
Unrelated activities: Since these activities are not related to a nonprofit’s purpose, the income generated is taxable and is governed by certain tax rules. For example, the same book lovers’ organization can organize a fundraising concert, all profits from which will then go to the organization’s advocacy.
Why is Fundraising Important?
Related or unrelated, fundraising activities are important for any nonprofit organization, and there are several reasons why.
- It hones the organization’s planning capabilities, which is vital to handling more complex undertakings in the future.
- It makes the organization realize its weaknesses and deficiencies, like resource gaps and coordination issues, so they can be fixed immediately.
- It fosters teamwork, since members of the organization need to work together toward a common goal during fundraising activities, even if they are geographically separated.
- It helps in prioritizing where the precious and limited resources should be allocated, in relation to the organization’s purpose.
- It broadens the organization’s reach, since sponsorships and grants are achieved easier if the activities are reaching as many people as possible.
- It joins together nonprofit organizations with similar purposes, and this allows for even greater reach and more grants.
- It sustains the operations of the nonprofit organization, because it’s a source of funds aside from the donations coming from people and companies who support the organization’s goals.
Common Fundraising Activities
Here are some of the most common fundraising activities:
- Peer-to-peer. Fun runs, bikeathons, and walkathons are perfect for getting friends and family to join the fundraising event.
- Members of the organization can donate some of their belongings and have them auctioned to the public. This can also be a good way to get rid of the things that are just cluttering up one’s house, provided that they’re still in good condition.
- Donation Kiosks. These can be physical, like booths in malls and parks, or virtual using, a website to receive donations.
- Parties and Galas. Usually set aside for big donors, galas and formal parties might require higher investments, but they can also result io higher profits, compared to other fundraising activities.
- Every little thing counts, and this is so very true in crowdfunding. It engages a big population of dollar donors, and relies on social networking.
Hiring a Fundraising Consultant
With all the many fundraising possibilities a nonprofit organization can choose from, it can be quite confusing at times. This is where it might be time to hire the services of a professional fundraising consultant.
Campaigns can be complex, and some may require expertise regarding certain activities. The consultant knows all the requirements for certain fundraising activities, and can coordinate all the components needed for the project to work, and give expert advice for nonprofit fundraising. This lets the organization focus on its main purpose.