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.
- Earned income. This is money your company earns. Ticket sales, admission fees, concessions, contracted performances, membership fees. Stuff like that.
- 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.
- 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.
- Corporations. This is money from businesses, large and small.
- Foundations. Foundations are nonprofit corporations that make grants to charities.
- 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.