Types of Nonprofit Income

Wad o' Benjamins

I met a new client yesterday. He had an exciting nonprofit theater, about 18 months old. He wanted to know about making a budget. But he didn’t understand the different types of income he should be considering.

I know lots of you folks are in the same boat. So here is a cheat sheet for nonprofit income.

Two Types of Income

Nonprofits have two different streams of income.

  1. Earned income. This is money your company earns. Ticket sales, admission fees, concessions, contracted performances, membership fees. Stuff like that.
  2. Unearned (or Contributed) income. This is money your company receives as donations and grants. Your company doesn’t actually earn it. It is a gift. There are four basic sources for unearned income.
    1. Individual donations. These are gifts from regular people. This is your largest single source of unearned income, to the tune of 75% or more. It is the most reliable place to find money.
    2. Corporations. This is money from businesses, large and small.
    3. Foundations. Foundations are nonprofit corporations that make grants to charities.
    4. Government. This funding comes from city, county, state or federal sources.

There are variations on the four themes: corporate foundations or public-private partnerships come to mind. Don’t fret about that. Just make sure you have a strategy for pursuing each funding source.

And let me repeat, in all caps. INDIVIDUALS ARE YOUR SINGLE MOST IMPORTANT SOURCE OF FUNDING.

Got it? Good.

About Scott Cargle

Scott is a nonprofit consultant, specializing in fundraising, business development and grant writing for arts and education organizations. He has worked with dozens of arts, education and community organizations in Los Angeles and New York. He has raised funds from the National Endowment for the Arts, New York Times Foundation, James Irvine Foundation, NY State Council of the Arts, LA City Department of Cultural Affairs, LA County Arts Commission, Jewish Community Foundation, and many others. From 1993-2006, was the Artistic Director of the Shakespeare Project, which presented large-scale outdoor productions, free in parks all over New York City. Over a 12-year period, he grew the budget from $800 to $400,000, with nearly 95% coming from unearned revenue. Scott has served on grant-making panels, including LA City Department of Cultural Affairs, NYC Department of Cultural Affairs, New York Times Foundation, NY Foundation for the Arts, Alliance of Resident Theatres/NY, and CEC International. He was also honored to serve on the board of directors for the Alliance of Resident Theatres/NY from 2003 -2005. He currently serves on the board of Keshet Chaim Dance Ensemble.
This entry was posted in Donations, Fundraising, Giving, Grant Writing, Grantwriting, Nonprofit, Writing and tagged , , . Bookmark the permalink.

8 Responses to Types of Nonprofit Income

  1. My only quibble – and I quibble because words do matter – is calling contributed income “unearned”. Speaking as a fundraiser, believe me, it’s earned!

    Liked by 1 person

    • Scott Cargle says:

      Hi, Mary. I think that’s a reasonable quibble, Sybil! Updating now.

      Liked by 1 person

    • franklinreedcomcastnet says:

      I agree with this quibble wholeheartedly. I’m an accountant and the nonprofit I works for is a performing arts organization. When I hear adminsitrators use “unearned income” I get confused, since we have unearned ticket income/revenue. I have to always clarify. Contributed Income is concise. Thanks for pointing that out!

      Like

  2. Shana Ross says:

    I always break my individuals down into Big and Small (though I sometimes use a variety of fancier terms for the categories)…if your client is really trying to wrap his head around revenue streams, it seems useful for him to think about strategies for getting a steady base of small gifts and a few big gifts when it comes to individual giving.

    Like

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