Written by Melissa Stanz
For nonprofit organizations in Western North Carolina, in order to thrive they first must survive—and diversifying their revenue streams is increasingly their approach. It’s not always a simple equation, however.
Nonprofits and for-profit businesses frequently appear quite different, but one thing is very much the same for both: Nonprofits and businesses need revenue streams—revenue that leads to forwarding a mission for nonprofits, and revenue that leads to profit for a business. The more diversified those streams are, the better. Most people agree that putting all your eggs in the same basket is asking for trouble.
We asked a number of nonprofits to tell us about their revenue streams. Do they diversify? If so, to what extent, and how? If not, why not? Their answers and insights were as individual as each nonprofit. Many of their ideas have strong merit in the business world.
YWCA of Asheville – Asheville
Beth Maczka, chief executive officer of the YWCA of Ashville (www.ywcaofasheville.org), knows all too well the importance of diversified revenue streams. YWCA has several revenue sources, including a vibrant fitness center, pool, and comprehensive childcare program. These centers make up about 60 percent of their revenue; the remaining percentage comes from grants, donors, and merchandise sales.
“It’s essential for any nonprofit to have earned income revenues, but it’s not easy. You have to be flexible and creative, and come up with new strategies,” says Maczka. “It’s also important to partner with others.”
Maczka notes the YWCA recently doubled the number of new members in their fitness center thanks to new ideas from their membership coordinator.
Last year, state funding was cut for school age vouchers, so the organization had to think creatively to sustain the program.
“We had to rebrand our childcare program, raise rates, and market to families who could afford private pay,” says Maczka. “We needed to balance the number of subsidized families versus private pay. The result is that we were able to continue the program, but we are now serving fewer low income families.”
Childcare is a continuing struggle for many parents. Last year A-B Tech’s childcare center closed, so the YWCA reached out to create a new partnership with A-B Tech. Students who are parents receive up to 12 hours of free childcare in exchange for one four-hour shift working in the childcare center.
“All the student parents participating in this program receive basic childcare training and CPR training, and there are many benefits to that,” she says. “So their child receives great care, and the parent volunteers are trained and challenged; it’s a creative way to solve a funding issue.”
Maczka knows many ways the business community can help the YWCA further their mission of eliminating racism and empowering women, and her advice to any business person is to come and take a tour.
“Get to know us, see if we have common goals and look for ways we can engage each other,” she says. “Your company may need a fitness program and we can help with that. It’s all about collaboration.”
Safelight – Hendersonville
Safelight (www.safelightfamily.org) provides support for Henderson County victims of interpersonal violence, sexual assault, and child abuse. Safelight offers many services with a small staff and more than 100 volunteers. Revenue sources include a resale store that generated $190,000+ in the last fiscal year. That revenue was used to finance programs and basic needs for victims and their children.
Grants and donations make up about half their revenues; the resale store and a restaurant opened three years ago make up the other half.
Dandelion restaurant in Hendersonville is providing a revenue stream and job training for Safelight clients.
Executive Director Tanya Blackford is thrilled with the restaurant’s success. “It’s been phenomenal! Interns from our program gain experience and learn skills they use when they leave us. Over the past three years, our success rate is 70 percent—people who intern in the restaurant get full-time employment and continue to stay employed.”
Blackford uses the revenue they generate from the restaurant to expand the program. She also notes that having a storefront helps increase donations, awareness, and public service.
“I see families coming to us with nothing and in two years they are making money and not using government services at all,” she reflects. “We see that as hard data and a great outcome.”
Safelight partners with other nonprofits to save money. Case in point, years ago they co-wrote a grant with Western Carolina Community Action (WCCA) as a housing partner. That arrangement works for them both.
“We do our piece and let others do theirs; it just makes sense. We do provide some housing, but it’s not our primary service, so partnering lets us do other things,” says Blackford.
Revenue diversification is necessary because it removes dependency and allows Safelight to be more flexible, to act and respond quickly. Blackford notes that crisis services such as Safelight are not funded as often as they were in the past; so having alternative revenue streams becomes even more critical. State funding is also requiring more documentation—documentation that takes more time; time that most nonprofits don’t have.
“We need more conversations about how nonprofits can be creative with funding. ‘How do we fund the work? What are ways to increase self sufficiency? What’s the value per service?’ We’re trying to figure that out now!” she says.
Four Seasons Compassion for Life – Flat Rock
Four Seasons Compassion for Life (www.fourseasonscfl.org) is an award-winning hospice and palliative care nonprofit organization, with administrative offices based in Henderson County and serving ten counties in Western North Carolina. They provide hospice, palliative care, research, bereavement services, and an inpatient hospice facility in Flat Rock called the Elizabeth House. Revenue sources include fee for service and reimbursements, Centers for Excellence, a hospice home store, and more.
President/CEO Chris Comeaux has grown the organization dramatically since he joined them in 2002—a substantial part of that growth is due to diversifying the healthcare nonprofit’s revenue streams.
But Comeaux cautions other nonprofits to be careful about diversifying. “We didn’t diversify revenue just to do it; it wasn’t our goal. We are very careful to stick to our core mission. As long as we serve that goal, it can happen. It also takes a robust leadership team.”
Comeaux’s goal from the beginning was to make Four Seasons the best organization in North Carolina. To do that, he focused on best practices. He also looked at all areas of the nonprofit and discovered ways to turn cost centers into self-supporting centers of excellence.
“Hospices come from all over the country now to learn about our best practices. Everyone wins from this. They learn, it brings us additional revenue, and contributes money in Henderson County,” he says.
Four Seasons was one of the first organizations to offer palliative care. It’s such a new frontier there is currently no reimbursement involved, so Four Seasons is participating in a national grant to prove the model. The organization has trained all its employees and more than 400 providers nationwide—another revenue stream.
Comeaux, like many of his nonprofit colleagues, acknowledges that overhead costs are continually squeezed. To relieve some of that pressure, they implemented best practices, turning a cost center into another revenue stream. They now offer finance services for other hospices.
Implementing these alternative sources of income requires a progressive Board of Directors, and Comeaux is grateful for their support.
“We are in the greatest time of change in the history of healthcare; we can’t be what we’ve always been,” he says. “Our board gave us the ability to turn our finance cost into revenue center. They have stayed true to not letting us lose sight of our mission.”
The trend in healthcare nonprofits, as in most nonprofits, is to do more with less. Donor contributions are steady, but budgets are shrinking and the wave of senior baby boomers is only beginning.
“We provide end of life care; that’s a great responsibility, and we don’t get do-overs,” says Comeaux. “It requires that we look at different ways of doing things so we do the greatest good with what we have.”
The Center for Craft, Creativity and Design – Asheville
The Center for Craft, Creativity and Design (CCCD; www.craftcreativitydesign.org) in downtown Asheville exists to help people better understand craft through research, critical dialogue, and professional development. The 20-year-old nonprofit awards fellowships to ten graduating college seniors each year and places emerging curators under the Windgate Museum Internship program.
In 2013 a generous gift from the Windgate Charitable Foundation allowed CCCD to purchase its historic facility at 67 Broadway Street in downtown Asheville. Having this beautiful building has opened up new revenue streams. They rent spaces for events, rent small office spaces, and generate dollars from parking leases. Their presence downtown has also increased awareness for other potential funders.
“We are putting a stake in the community with this new local presence,” says Stephanie Moore, CCCD executive director. “Having real estate holdings puts our organization in conversations that we normally wouldn’t have. It’s allowed us to partner with others, like the Chamber and WNC Community Foundation. We’re excited to have our arts community help shape the gateway to downtown.”
Plans for the facility over the next year or so include renovating the second and third floor into a conference facility and space designed for co-working. Once this is done, more revenue can be generated to put back into CCCD programs.
“Our largest donations now are for our facility, and our Board and funders want us to get that done so we are not reliant on grants and foundations,” says Moore. “We’ve always delivered a solid ROI (return on investment) because what we receive goes back to grant recipients and community programming.”
Moore advises businesses to treat nonprofits like a business—to value what they offer and invest in them accordingly. She recommends looking at organizations that focus on sustainable revenue streams so that donors’ gifts invest in the future of the organization.
“Just because an organization is nonprofit doesn’t mean they can’t make money,” she muses. “That’s a widespread misunderstanding. We are all trying to make money to further our mission.”
OnTrack – Asheville
Grants and contracts (earned income) provide the major revenue sources for OnTrack (www.ontrackwnc.org), a financial education and counseling nonprofit that serves Western North Carolina. They partner with other nonprofits and for-profit businesses, like Biltmore, to offer home buyer and financial wellness programs. They also teach financial classes for a fee in their offices, including foreclosure prevention, budgeting, and others.
Executive Director Celeste Collins uses the wisdom OnTrack imparts to clients in her own nonprofit. Case in point—OnTrack recently built a three-month reserve for operating funds.
“We put aside a specific amount each month to build that fund and followed our own advice. We have that reserve now and it gives us peace of mind. For years, if you had a reserve it was more difficult to get funders, but with the recession, funders now see the need for it,” says Collins.
The recession was a definite sea change for nonprofits. Collins notes that today’s funders are more specific about what they want and more outcomes-driven. Development directors are now found in more nonprofits, using their recruiting expertise to attract and retain more donors. And most nonprofits are looking even harder at expenses, asking how things are funded, can they afford to fund programs, and tapping into the power of volunteers to help reduce expenses.
“Businesses interested in working with nonprofits should find those that match their vision and culture and then invest with time and money,” Collins. “Be clear and reasonable and hold us accountable.”
MountainTrue – Asheville
Julie Mayfield is co-director of MountainTrue (www.mountaintrue.org), a regional nonprofit that focuses on resilient forests, clean water, and healthy communities in Western North Carolina. MountainTrue is the organization that resulted from three environmental and conservation nonprofits that joined forces almost two years ago.
Like most nonprofits, MountainTrue depends on grants, donations, memberships, and events. But they have an additional source—a fee-for-service component—that helps stabilize revenues. They provide land management services that bring in $60,000-$100,000 annually, depending on the year.
“We entered the marketplace to provide land management services. We control invasive species on conservation land, working with the Carolina Mountain Land Conservancy and the Forest Service,” explains Mayfield. “For years we did the work on a volunteer basis, but when stimulus funds became available a few years ago we started getting paid. It’s tricky work because we don’t want to kill native species while we are controlling invasives.”
Mayfield believes it’s critical for nonprofits to have diversified streams of revenue just like any business or anyone with a stock portfolio. But she recognizes that not all nonprofits can do that.
“There are several reasons why some nonprofits can’t diversify, including because they are small, they can’t find foundations to support them, they are in a highly competitive market for donations given for similar causes, or they just do not have services they can offer for fees,” she says. “There is no harder job that starting a nonprofit and running it with one person—you simply cannot do it all.”
Events and event sponsorships are another way MountainTrue brings in money—the organization hosted a benefit concert at the Orange Peel that contributed about two to two and one-half times more than they spent, but they don’t do an event each year.
MountainTrue’s board asked Mayfield to take a hard look at events because they wanted to maintain the focus on programs. If staff is spending time working on events, they are not working on programs.
“Events done right with enough corporate support can bring in a lot of money. But we all must factor in staff time, and that can really be expensive and hard to track,” she says. “It’s important to look at the full cost.”
Identifying and cultivating specific major donors is another focus for MountainTrue. It’s also an industry trend that started with the recession when so many funding sources shrunk. “We’ve been focusing on cultivating major donors for about three years; it takes organizational work and is very time consuming,” says Mayfield. “And because we’ve had some turnover in development directors we have lost ground. My co-director and I have good relationships, but we need others to come in and help us maintain those relationships.”
Mayfield is also a member of the Asheville City Council; she is on the Council subcommittee for funding nonprofits that support the city’s goals. She has a clear message for nonprofit groups that request funding from Asheville.
“We had several nonprofits asking for small amounts of money, but it seemed they were all doing similar things. My advice is to collaborate and coordinate with each other, then come to the city with a plan as a group. If that’s not possible, be prepared to explain how what you do is different. Dollars are just too scarce, and we can’t be duplicating services.”
TRACTOR – Burnsville
TRACTOR food and farms Executive Director Robin Smith is no stranger to the business world. She worked at the statistical software company SAS before she and her family moved to Yancey County to become farmers.
When TRACTOR (Toe River Aggregation Center Training Organization Regional; www.tractorfoodandfarms.com) began to be formed in 2012, Smith attended many meetings. Knowing the difficulty of being a small farmer in the mountains led her to apply for the executive director position at the organization.
TRACTOR now works with more than 50 small farms throughout Yancey, Mitchell, Burke, McDowell, Avery, Madison, and Buncombe counties. The organization aggregates produce from farms, processes it, and distributes it to retailers and restaurants.
“We help farmers get their produce to larger markets. For doing the marketing work we receive 20 percent of the split,” says Smith. “We’re using different channels to do that, including a wholesale market chain, selling to restaurants, and we’re now exploring a direct consumer channel.”
Other income sources for TRACTOR include grants, farm-to-fork fundraisers, donors, and a membership base, with the majority of revenue coming from grants.
“We would be helped immensely by having a development director to take on the donor and grant process, but we don’t have the staff,” she says. “And that sums up the biggest problem nonprofits have in diversifying revenue. We know we need to, but when someone is doing three jobs already it’s just not possible.”
Smith notes that they need funding for operations and infrastructure, volunteers to help with operations, and an experienced volunteer grant writer.
“We sometimes find that donors get all excited about the latest new, shiny program, and we get just enough money to fail. About the time we are almost there, donors or sponsors are asking why aren’t we already there,” she says. “If you don’t expect that of a new business, then why ask it of a nonprofit?”
MountainTrue’s Mayfield echoes what many other nonprofit leaders told Capital at Play to tell business people:
“There’s nothing wrong with providing general operating support. If you like a nonprofit’s mission and want to support them, you don’t have to tie your gift to a specific program. Let us do our work with your support—we shouldn’t have to follow the dollars. Operating funds are the hardest dollars to come by, but we all need staff and infrastructure to do our work.”
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