Do you want to know how much money non profits make yearly? If YES, here are 6 factors that determine the income & profit margin non-profit organizations. In order to have an idea of the amount a non-profit organization is expected to make monthly or yearly, you should clearly define the charity cum services the non-profit organization offer.
The fact that an organization is considered to be a non-profit organization does not in any way mean that the organization does not have the intention of making profits. As a matter of fact, most non-profit organizations have revenue generating ventures established for the sole purpose of supporting the organization (their cause). Even though non-profit organizations are allowed by the law to run profit-making business ventures, but they are constrained on how they can generate revenue and what the monies can be used for.
There are several not for profit organizations that have grown so big, so that the area which they cover is not just restricted to the location or country where they operate, but to other parts of the world. For example; one of the wealthiest non-profit organizations is found in the United States of America – The Bill and Melinda Gates Foundation, with an endowment fund of about US$38 billion that covers countries all over the world, not just the United States of America.
It is important to point out that there is no one-mold-fits-all when it comes to how much a non-profit organization is expected to make. There are some factors that we are going to look into before giving an estimate of how much an average non-profit organization can make yearly, and these factors are;
6 Factors That Determine How Much Profit Non Profit Organizations Can Make Yearly
Table of Content
- 1. The Size of the Non-Profit Organization
- 2. The Type of Cause the Non-Profit Organization is Pursuing
- 3. The Management Style of the Non-Profit Organization
- 4. The Business Approach of the Non-Profit Organization as It Relates Winning Donors
- 5. The Advertising and Marketing Strategies Adopted by the Non-Profit Organization
- 6. The Number of Years the Organization is in Existence
- Estimated Profit Margin for a Non-Profit Organization
1. The Size of the Non-Profit Organization
One cannot conveniently state the amount a non-profit organization is expected to make monthly or yearly if you do not know the size of the organization and the number of donors they have. A standard non-profit organization is supposed to be incorporated.
Although most small – scale community non-profit organizations are incorporated but it is important to incorporate a non-profit organization so that it can exists as a separate legal entity/organization.
With that, it will be easier to own its own property, bank account and also to ensure that the foundation can continue with or without the founder. Non-profit organizations are incorporated by simply filing articles of incorporation with the nearest state department office.
2. The Type of Cause the Non-Profit Organization is Pursuing
The non-profit industry is a major component in the equation of our world; be it social welfare, health care, education, spiritual, etc. Non – profit organizations (NPOs) are establishments that make use of their excess revenue to pursue a cause that would be beneficial to the public or a particular group of people.
In a nutshell, the overall goal of non-profit organizations is not to be successful in terms of wealth creation, but to be a success when it comes to giving value to a group of people or a cause. It is important to state that while most non – profit organizations offer services that are valuable to the community where they operate, it is often difficult to measure the actual impact of their services.
This is because changes in community’s behavior or even in individual behaviors may take a while before it becomes obvious. Be that as it may, non-profit organizations still need to look for ways to measure the impact of their services because that is perhaps a major criterion that is used by donors before funds are released.
3. The Management Style of the Non-Profit Organization
Another key factor that will determine the amount a non-profit organization is expected to make yearly is the management style of the organization. Trust me, the results you will get when you are a good manager and first – class fund raiser will definitely be different from a non-profit organization with poor management style and poor fund raising abilities. The idea is that a good manager will not just retain their old donors, they will also keep getting new donors.
4. The Business Approach of the Non-Profit Organization as It Relates Winning Donors
American individuals, corporations, and foundations gave an estimated $335 billion to charity last year. Nearly 10 percent of donations come from mobile devices, and 16.6 percent of donors who support from an email are doing so on their device.
The open rate for nonprofit emails is between about 15 percent and 17.5 percent, with appeals at the low end and advocacy and other emails garnering higher open numbers. The bottom line is that a non-profit organization that knows how to attract big donors will always make more money.
5. The Advertising and Marketing Strategies Adopted by the Non-Profit Organization
Another key factor that will determine the amount a non-profit organization can make yearly is the advertising and marketing strategies adopted by the non-profit organization. Trust me, there are several advertising and marketing strategies that can help a business increase their earnings, though you may be expected to spend more.
But the results you will make will far outweigh the amount you spent on advertising and marketing. Statistics show that 92 percent of nonprofit professionals use content marketing to spread their organizations’ missions, but more than half don’t have a documented strategy for their content.
Nonprofits have an average of 4.4 staff members responsible for technology in some way, a number that increases or decreases in correlation with the size of the organization. You don’t expect a non-profit organization that is engaging in aggressive advertising and marketing to make same amount yearly with a non-profit that is passive with its advertising.
6. The Number of Years the Organization is in Existence
In business, the number of years you are in existence will go a long way to determine the amount you will make especially if the business is well-managed. For example, in your first fiscal year (FY1) you might make a hundred thousand dollars (100,000), in your second fiscal year (FY2) you might make one hundred and fifty thousand dollars ($150,000) and in your third fiscal year (FY3) you might make two hundred and fifty thousand dollars ($250,000).
Estimated Profit Margin for a Non-Profit Organization
Before calculating the profit margin of a non-profit organization, you should understand that while nonprofits can usually earn unrelated business income without jeopardizing their nonprofit status, they have to pay corporate income taxes on it, under both state and federal corporate tax rules. (Generally, the first $1,000 of unrelated income is not taxed, but the remainder is.).
Please note that some nonprofit organizations with budgets under $1 million set the salary of the executive director at around 10 percent of their budget, whereas large major nonprofits with budgets in the tens of millions sometimes use a percentage from 1 to 2.5 percent.
Non-profit doesn’t mean no income, it just means no reported profits. They generate millions in revenue, pay their people handsomely, then donate the rest to charities and other NPOs in order to still qualify as a non-profit organization. If you do that, even to a small degree, you’ll have money of your own to invest.