In previous posts, we discussed Nonprofit Budgeting Basics – An Overview, Grants, Events, and In-Kind Donations, and Board Giving & Direct Mail. In this post, we cover several more potential sources of revenue for your organization: Program Fees, Membership Fees, Fees for Service & Other Sources of Earned Income.
Program fees, membership fees, and fees for service are all closely related. For each source of revenue, there is something the organization gives in return.
Program fees
Program fees are paid by program participants, i.e., student registration fees, tuition, museum entrance fees, fees charged for tours, etc.
Membership fees
Probably most commonly related to museums and other cultural attractions, membership fees entitle donors to special perks, like unlimited visits, special seating, exclusive engagements, etc.
Membership fees may also be used as a way of classifying donors based on their giving level among smaller community organizations. In this case, they would fall under the budget category of individual donations.
Fees for Service
This type of fee is charged to a program partner. In a cooperative agreement to provide a service to their clientele, you charge a set fee.
Other Types of Earned Income
As part of a capital project, you may want to build in an on-going source of earned income. For example, you can create a space available to community organizations that can be reserved for special events. For use of the space, you could charge a rental fee. This is earned income that can be used toward any operational expense; it gives you the flexibility of unrestricted funds.
If you have a museum or other cultural attraction that draws tourism, you could also consider having a gift shop with theme-related and promotional items for sale. Some missionary work is paid for through the sale of donated items to a thrift store. In either case, the store provides unrestricted earned income.
Some organizations may have another means by which they earn income that is not specifically related to their mission. In this case, taxes may need to be paid on income earned, but the flexibility of having an unrestricted source of funding is often worthwhile.
Conclusion
So as you consider your annual organizational budget, you have many options. If the organization you are working with is still developing its long-term financial strategy, encourage them to consider all revenue options and how they will work together. Grants may be an excellent starting point, but they should not be the sole source of revenue for any organization intent on growth.
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