Earned revenue—a source of funding organizations can secure by providing something of direct value, such as a product or service—can support an organization’s financial sustainability and impact. Figuring out if an earned-revenue strategy is right for your organization right now takes time and honest reflection.
Community Wealth Partners has been helping nonprofits create earned-revenue strategies for more than 25 years. In that time, we’ve learned a lot about what works and what to watch out for. As you consider whether an earned-revenue strategy is right for your organization, first consider your motivations. Are you hoping to make a profit right away? Could earned revenue help advance your organization’s impact?
Any earned-revenue strategy will require time and resources, and it could take time to break even or earn a profit. That’s why it’s important that the time and resources you spend pursuing an earned-revenue opportunity are also advancing your mission.
Once you’ve reflected on your motivations, you’ll also need to assess three key elements: 1) marketable assets, 2) market opportunity, and 3) organizational capacity.
- Marketable Assets—what assets do you currently have? These could include a skill you could train others in or a product or service you could sell.
- Market Opportunity—how might our assets be valuable to the market we’re trying to reach? You will need to test whether the market is ready and willing to pay for the products or services you could offer.
- Organizational Capacity—do we have the resources and skills we’d need? If the earned-revenue strategy would require additional capacity, does that seem like something you could realistically develop?
A sustainable earned revenue strategy sits at the intersection of marketable assets, market opportunity, and organizational capacity.
Case Example: Communities In Schools
In 2015, Congress passed the Every Student Succeeds Act, which included a provision clarifying that federal funds can be used to support programs offering non-academic support to struggling students, including supporting students’ social and emotional learning. This change presented a market opportunity for Communities In Schools (CIS) to leverage its model of surrounding students with a community of support into marketable assets. CIS already worked in 2,300 schools to support about 1.5 million students across the country, and the organization saw many possibilities for how it could sustainably increase its impact now that the legislation allowed schools and districts to use federal funds in new ways.
Community Wealth Partners partnered with CIS to help them assess the many possibilities they saw and hone in on the ones that were best positioned to advance their strategy, reach more students, and do so in a way that was financially sustainable. We worked with staff and board members to develop early hypotheses about new ways they could offer programs or services to school districts, schools, and educators. We then conducted targeted market research with a diverse array of potential customers and beneficiaries to assess market needs, explore which of the organization’s assets best meet those needs, and consider the social impact, scale, and revenue potential of various opportunities. Once the board and staff aligned on the strongest opportunities to pursue, we developed a plan for CIS to prototype and pilot some efforts in the short term—to test concepts and learn—as well as a longer-term plan to create new products.
From this work, CIS decided to launch two products:
- Licensing of its in-school support model.
- Professional development courses for school and district staff.
In the first year, these products helped CIS extend its reach into five new markets and brought in an additional $500,000 in revenue. Several years later, CIS received a significant investment in its Licensed Partners work, and, as result, set a goal of reaching 1,000 more schools and has hired additional staff to bolster capacity to meet this goal.
“Undertaking an earned-revenue strategy allowed CIS to reflect internally on what portions of our work were the most requested, mission-aligned and how CIS was able to uniquely add value to communities,” said Michael Huang, vice president, district and community engagement. “The added clarity around purpose and value helped make our work stronger.”
Read more guidance about creating an earned-revenue strategy and examples from nonprofits in our field guide.