Our Top 13 Nonprofit Ideas To Make Money
Many people equate a nonprofit with an organization that does not make money. At the very least, they do not think of a nonprofit organization as an entity that assists the community with profit in mind. So, can a nonprofit make money and still retain its tax-exempt status?
The answer lies in the motivation behind earning the money in addition to the individuals who benefit from that money. In some cases, the distinction can get a bit tricky, requiring an accountant’s help. However, our goal today is to present you with some money-making ideas that do not require outside help.
Today, we will cover the following topics:
- Nonprofits vs. For-Profits
- Can a Nonprofit Make Money?
- 4 Common Nonprofit Funding Sources
- 13 Nonprofit Fundraising Ideas
- Final Thoughts
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Nonprofits vs. For-Profits
The goals of nonprofits are quite different from those of for-profits. For-profits are business entities that seek to make money. Nonprofits have a wider reach, directing their efforts toward the community rather than themselves. Due to this difference, nonprofits are subject to tax benefits that for-profits do not have access to.
Now, you may be asking yourself: do nonprofits have shareholders? The answer is no. Nonprofits have a hierarchy that begins with an executive director, president, or CEO. This person answers to the board members and oversees the paid employees. However, they do not benefit directly from the net earnings of the nonprofit, as the excess funds get directed back into the organization to continue its charitable efforts.
Salma is having a think on the differences between nonprofits and for-profits.
When it comes to reporting, both for-profits and nonprofits have to stay accountable to the IRS. However, nonprofit organizations extend this accountability and transparency past the IRS to make their financial information available to the general public.
Pro Tip: To remain in good standing with the IRS, nonprofits must file an annual tax return as well as follow other regulations, such as nonprofit bank account rules. Nonprofits that do not follow these regulations are subject to consequences, including the loss of their tax-exempt privileges.
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Can a Nonprofit Make Money?
With these parameters in place, it is legitimately and legally possible for a nonprofit organization to make money. There are no rules against a nonprofit making money, just guidelines that dictate how those funds must be allocated.
As a requirement to remain transparent, nonprofit organizations must clearly define not only what they did to solicit the funds, but how those actions aligned with their goals. For example, a nonprofit for at-risk youth may make money from a fundraiser. It then needs to disclose exactly how it is going to use these increased resources.
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4 Common Nonprofit Funding Sources
To demonstrate how nonprofit organizations can earn money, below we take a look at a few types of funding sources. These sources support nonprofits so that they can continue giving back to the community.
Nonprofit organizations see two types of income. The first is funding that they then put toward their mission. For example, maybe they use membership dues to keep the membership program going.
The second type is unrelated business income. This is additional revenue that they keep for themselves instead of putting back into their goals. An example of this could be renting extra office space that they have to a company.
These two types of income are treated differently for tax purposes. Come tax season, nonprofits have to report related and unrelated business income and pay income tax on the unrelated income.
An individual contribution is just a donation, though it can range in size and circumstance. Here are a few scenarios where someone might make an individual contribution:
A fundraising event
A planned gift in the event of someone's death
A matching gifts program
Foundations, corporations, government agencies, and other charities all provide grant opportunities. These are another way nonprofit organizations can increase their funds. Most grants include some sort of application process. Additionally, the winning nonprofits usually have to report back to the grantors on how they used the funding to forward their goals.
Nonprofits have the opportunity to open brokerage accounts just like you and me. Since these entities are tax-exempt, they may not have to pay income tax on the dividends that they receive from these investments.
Matt is setting up a brokerage account right now!
The majority of nonprofits invest as a way to maintain or grow their long-term savings. Individuals within the organization do not benefit directly from the funds. Instead, those earnings go toward helping the nonprofit stay open and serve the community.
Endowments are a common investment for nonprofits. An endowment is a type of fund where a nonprofit receives a chunk of money from a donor and invests it. It then uses the earnings from the principal as extra funding.
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13 Nonprofit Fundraising Ideas
The four categories we defined above are massive and vague. To give you tangible ideas on how to move forward with them, we put together this list of fundraising ideas:
Organize a peer-to-peer fundraising campaign to get your supporters to solicit donations on your behalf.
Find and cultivate recurring donors on whom you can depend for consistent donations throughout the year.
Look for businesses in your area that have similar values, and ask them for corporate sponsorships.
Form a subsidiary entity that generates income on behalf of your nonprofit organization.
Sell T-shirts, trainings, or other items or services.
Set up a phone-a-thon where supporters can call in to donate.
Apply for grants.
Issue fundraising letters to the community.
Create crowdfunding campaigns for urgent causes.
Set up an online donations page on your website.
Charge membership fees for perks.
Activate text messages where supporters can donate in seconds by texting back.
Host seasonal in-person events, such as a wreath-making workshop around Christmas or a potluck around Thanksgiving.
Pro Tip: One easy way to find money-making ideas is to see what other nonprofits in your area or sector are doing. You can look at their calendar of events or peruse their social media accounts for inspiration. For example, if you see that almost all of the organizations in your area of a similar size and with a similar mission host a gala, raffle, silent auction, or marathon, then you know what type of activity your target audience wants to see.
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While operating a nonprofit can feel like a gift to you and your community, you still have practical considerations. For example, every nonprofit needs funding.
Try some of our funding ideas from this article. If you are new to fundraising, they give you a jumping-off point. With these fresh ideas, your nonprofit is more likely to continue receiving the money it needs to grow!
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💡How can a nonprofit make money?
Nonprofits can make money in a variety of ways, with the most common funding sources being income, individual contributions, investments, and grants. Find out more.
🔑 Are nonprofits allowed to earn revenue?
Yes, nonprofits are allowed to make money. If the money is related to the nonprofit’s mission, the nonprofit does not have to pay taxes on it. However, if it is considered unrelated business income, the nonprofit needs to report it and pay income tax on it. Find out more.
📝 What are some ideas on how nonprofits can make money?
There are many ways to fundraise for your nonprofit, including applying for grants, selling T-shirts, and setting up crowdfunding campaigns. Find out more.