I’m worried by what I see as an excessive focus on generating revenue by nonprofits.
There’s a new old chant in town: “Let’s start a business where customers buy stuff and then we won’t have to rely so heavily on donations!” Articles proclaim that nonprofits are “finally wising up.”
It’s kinda like revenue is better than charitable contributions. Somehow, the reliance on donations is seen as somewhat demeaning. Even the term “nonprofit” suggests—in our capitalistic, profit-driven society—that to be nonprofit is less-than. (As an aside: Notice the trend of foundations to hire for-profit business leaders as CEOs. The message is that there is nothing unique about the nonprofit sector; there is no special knowledge or skills needed. Nonprofits—including foundations—are so incompetent that they have to hire for-profit business leaders to get better.)
In summary, the equation seems to be: Revenue is better than charitable gifts. Customers produce revenue so customers are better, better than donors.
Generating Both Revenue and Charitable Gifts
Let’s step back a moment. Since time began, many nonprofits have generated both revenue and charitable gifts. So the new news is pretty old. Just more egregious with moneymaking entrepreneurs sneering about how to start business ventures.
Theatres and symphonies produce revenue by selling tickets and refreshments. Museums generate revenue with admissions and gift shop sales. Colleges and universities charge tuition. Hospitals charge fees paid by insurance companies and government contracts.
In addition to revenue streams, these organizations run fundraising programs that garner charitable gifts. When I worked at Trinity Repertory Company, one of the top regional theatres in the U.S., we generated 70 percent of our income from revenue and 30 percent from charitable gifts. Nonprofit hospitals, on the other hand, may get only 10 percent of their income from gifts.
Sign up for our free newsletter
Subscribe to the NPQ newsletter to have our top stories delivered directly to your inbox.
Revenue is great, as are the customers that produce the revenue. Nonprofits that can generate admissions, sales and the like may well enjoy a more balanced financing stream.
Uniqueness of nonprofits / NGOs
But nothing substitutes for donors and their charitable gifts. I repeat: Nothing substitutes for donors. And not because of the money. Donors are different than customers.
The uniqueness of any and all nonprofits is philanthropy, voluntary action for the common good. (Thanks, Bob Payton, for that glorious definition. Bob was the first professor of philanthropics in the U.S., and author of the wonderful book, Why Philanthropy?)
Voluntary action for the common good . . . the uniqueness and, yes, the strength of nonprofits. Individuals, families, businesses, service groups, and faith groups giving their time and / or their money to build strong communities. Moms and dads and little kids and teens volunteering in the soup kitchen and cleaning up rivers.
People with a little and lots of money giving gifts to help others. The woman who sent a few dollars to help a charity. The school kids who sent all the pennies they collected. The banker, the janitor, the nonprofit executive director, the pastor—all sending donations to causes they care about. And sure, Bill and Melinda Gates, too.
Voluntary action for the common good. Nothing substitutes for these donors. I say “these donors,” not their gifts. Again, it’s not the money, it’s the donors. It’s the meaning of donors investing, committing, engaging in a cause.
Donors worry about the lives of others and the state of the world. Donors want to make a difference. And nonprofit charitable organizations are the means by which donors make that difference. Nonprofits / NGOs are the conduit for donors to live out their feelings and fulfill their aspirations.
Nothing can substitute for these loyal donors. Nothing can substitute for voluntary action for the common good, not even buying things.
See Part 2 in my next column.