New Sources of Nonprofit Revenue

 A post by James V. Toscano

This post is dedicated in memory of Ron McKinley.

For a few years now, these posts have been pointing out the need for new sources of nonprofit revenue. Now, in the Chronicle of Philanthropy, under the headline, “Social-Service Groups Won’t Survive Without New Sources of Revenue”

Diane Aviv, the CEO of Independent Sector, and Antony Bugg-Levine, the head of the Nonprofit Finance Fund, agree.

When national leaders make these kinds of announcements, it is clear that the sector is, indeed, undergoing seismic change. Read their words, “The financial base that underpins the social-service system in America is crumbling.”

While they are focused on social service agencies, their message is true for most nonprofits. They now see the necessity to go beyond just protecting what nonprofits have relied on for decades, e.g. tax deductibility for donations, and now urge going after “new pools of money to support charitable endeavors.”

From Heresy to Advocacy

What would have been heresy just a few years ago now sets the new tone:

“The emergence of impact investing—the deliberate effort to channel for-profit money to social causes—could mobilize substantial resources to complement government and private efforts to solve real problems.”

We have written often about this opportunity, with considerable reaction and criticism from the sector. Now these leaders spell out many of the same things that have appeared here and elsewhere. Good for them!

Their article should be read. It is a turning-point in the national discussion and will help set the new course for our search for revenue, with new rules, new methodologies and many new players.

The two authors spell out specific opportunities: investment of foundation endowments, extend the Community Reinvestment Act, make it easier for individuals to do impact investing, and allow nonprofits to tap resources now used by small business, e.g. Small Business Administration programs.

Given their backgrounds and orientations, they stress what government can do to change the rules in many of the above situations. Nevertheless, it’s a good start. And let them work what they know and have expertise in: changing government rules and regulations.

Going Beyond Their Ideas

What they miss is the pure power of the private sector’s resources  combining with the expertise of the nonprofit section in a wide variety of collaborations that will produce public benefit and private return. This list is endless.

Public benefit and private return? Yes, that is where we have to go to make this work. It needs to be a win-win for all.

And this is a good thing. With the advent of so many changes in the way the private sector operates, the nonprofit sector needs to take advantage of these advances and incorporate them into the way we do business. And doing business if what it will be about.

Learning from Each Other

We will learn from each other, certainly. Perhaps the for-profit sector will move even more directly into humanitarian need, expanding a value system that has been changing for decades.

Nonprofits will also understand that the word “nonprofit” doesn’t mean “profit” is a no-no. The nonprofit itself benefits from an increase in net assets in many ways.  A healthy nom-profit needs such surpluses annually, especially when partnering with for-profits to both have a return on investment and a larger return to the society.

This will start with low-hanging fruit, such as areas now pioneered by social impact bonds. The results here will certainly be of benefit to us all and will encourage going further up the tree. Innovation in these collaborations will surprise all of us and point to solutions unheard of at the present time.

And it will be poverty that will emerge as the major target of all of our collective efforts,  the major cause of many public, social, health,  crime, and related problems. We need all sectors of the society involved and so, we welcome into this area, the third, most resource-rich of the three, to work collaboratively and, once and for all, make a major dent in this shameful blight on our society.

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