Article at a glance:
Nonprofit organizations normally exist to redistribute wealth, but they can also create new wealth to advance their missions. By selling specialized services or launching new businesses around their areas of social advocacy, they can generate income that helps offset the need to constantly raise funds from donors. These revenue-generating enterprises can take many forms: consulting agencies, services businesses, manufacturing operations, or even “cause-related marketing,” in which a company donates a percentage of the revenue from each sale to a cause. In some cases, it may be advisable to create a for-profit subsidiary, controlled by the parent nonprofit organization.
The take-away
Drafting a business plan helps charitable organizations create a roadmap for attracting investment capital or business loans. Notably, revenues generated from new enterprises can be used to cover overhead and administrative expenses that conventional funders often don’t like to pay for.