COVID-19 is Changing the Nonprofit Revenue Model. How Can Your Organization Stay Ahead of the Curve?

May 2020 – Lauriane Lebrun, Marketing & Communications Coordinator

A lot has changed in recent months, and the ways in which nonprofits make the money needed to sustain their organizations is no exception. Let’s take a look at the sources of revenue for nonprofits, how these may have changed (or are about to change), and what you can do to come out on top.

Membership dues

Widespread job loss has led plenty of people to reevaluate their personal budgets to see where they can cut costs. Unfortunately, nonprofit memberships are often viewed as a “luxury” and, therefore, end up in the pile of bills that just won’t be paid for a while.

Some organizations are trying to retain members by drastically reducing membership dues or by temporarily suspending dues payments. The reasoning is that it is better to keep all members for little-to-no cost than to lose some of – or even a majority of – your members.

But, logistically… doesn’t this defeat the purpose of a dues-based membership program? How can you provide member benefits and fulfill the mission your members support, without the financial resources to sustain your organization at all? If you have the money in the bank to support a major reduction / total elimination of your dues program, this may be an appropriate short-term solution; otherwise, it’s a good idea to consider your budget and the real implications of ditching your dues program before you pull the trigger.

Fundraisers

Isn’t it simply “wrong” to ask for donations in the midst of a crisis impacting so many of us, all over the world? If you think the answer is undoubtedly “yes,” then I’d recommend checking out my fundraising article from last month’s Lexian E-News. Pay special attention to the excerpt copied below:

While this certainly isn’t the time to bury your head in the sand and refuse to acknowledge current events, the decision to donate always comes down to, well, donors. And if people felt your mission was worth supporting in the past, it’s unlikely their feelings have changed. Many budgets have been tightened, but giving – even a small amount – makes people feel good, so it doesn’t hurt to ask.

Rather than jumping to conclusions about fundraising at a time like this, take some time to consider why you fundraise in the first place. In what ways will your organization and mission be left unfulfilled because you didn’t even ask if anyone wanted to donate? As to whether or not your supporters have the money to donate to a cause they care about right now – that’s up to them. You might be surprised by their generosity. All you need to do is give them a chance to share it.

Registration fees for events/programs

Registration fees are one area where we’ve been seeing some concerning trends. It is assumed that – because there is little to no cost associated with hosting a virtual event – there should be no cost to attend virtual events. In-person events, on the other hand, cost money: supplies, venue fees, catering, etc. Naturally, you charge ticket fees to cover those costs… and, hopefully, to exceed those costs at least a little, so your organization makes a profit.

If you don’t spend any money on a virtual event, and don’t sell tickets to a virtual event, you break even for that event, right? Nothing lost; nothing gained.

Except, look at the bigger picture: Where does this leave your organization financially? Spinning its wheels until the road runs out?

Furthermore: Don’t forget about the work that is done by staff to deliver an online program! Setting up the software, marketing, handling registrations, communicating with presenters, etc., is all work that carries a cost. Often, overhead costs appear on financial reports without portions allocated to individual programs/activities/events, but these costs are no less real, and they still need to covered.

But how much should you charge for tickets? Let’s say your costs to hold a virtual event only include some office/administrative fees and a subscription to webinar software. A few simple calculations should show you how many tickets at your lowest-proposed registration fee you would need to sell in order to cover your costs and still make a profit. How many people do you think will want to attend? If the numbers look low, consider increasing your proposed ticket fee as needed. No matter what, please keep in mind: A small registration fee will do more for your organization’s sustainability than no registration fee at all.

Selling tickets to an event that doesn’t cost much for you to put on is not greedy. In the long run, doing so supports your organization’s ability to make it through COVID-19 and continue serving your members and mission.

Misc. sales (sponsorships, merchandise, raffle tickets, etc.)

When people give money to buy a raffle ticket, a t-shirt with your logo on it, or a sponsorship, they are supporting your organization and getting something for themselves in return – advertising for their company, a chance to win a prize, etc.

Whether your supporters have money to put toward something like a raffle ticket at this point depends on their individual circumstances. As we discussed in the “Fundraisers” section above, it is important for nonprofits to ask rather than assume. Maybe your supporters don’t have any cash to spare toward donations, but what about buying something that benefits them as much as it does your nonprofit? Once again, it doesn’t hurt to ask, right?

Final thoughts

Think of your nonprofit as a human body. If you had an upset stomach, would it make sense to tell the heart to stop pumping blood for a while, so you could focus all your resources on helping the stomach? Of course not. This wouldn’t help your stomach, at all – in fact, it would hurt your whole body.

Revenue is your organization’s lifeblood. It’s vital to keep it flowing.