Episode 64: Monetizing Your Assets - Fee for Service
Nonprofits can and should sell services or goods to as a part of its diversified funding stream. Learn what type of services and goods a nonprofit could sell to help generate unrestricted revenue and help ensure long-term sustainability.
LINKS:
Canva
Give Lively
NONPROFIT SPOTLIGHT: Our Own
Podcast Transcript
Speaker 1 (00:04):
Welcome to On Air with Amber Wynn, where nonprofit leaders learn to fuse passion and commitment with proven business strategies to create long-term funding, impact, and sustainability. And now here's your host and resident Philanthrepreneur, Amber Wynn.
Speaker 2 (00:27):
Hey fam, welcome to On Air with Amber Wynn. And today we have the beginning of a series called Monetizing Your Assets. Last week we started talking about how a nonprofit should diversify their funding streams, and I realized that it's one thing to talk at my community. It's another thing to provide the roadmap, and that's what I'm here to do, is to support you and not talk at you. I know when I was an Executive Director, that was one of the things that frustrated me the most because really, if I could do it, don't you think I would do it? So when people say, oh, you're new to this, you're new to that, I'm like, I don't have time to figure out how to do one more thing. I don't want to be that person. I don't want to be the person who's talking at you and not really breaking down how to solve the problems that I'm saying need to be resolved.
Speaker 2 (01:24):
So, we're going to start the series off; the Monetizing Your Assets series off by talking today about Fee for Service. I tapped into it a little bit when we started talking about diversifying your funding streams because that is probably the easiest stream of revenue you can generate, which is fee for service because as an organization, you have a cause and you have an expertise. And so fee for service is the most logical way of generating unrestricted funds. So when we come back from this short break, we're going to dive into monetizing your assets, focusing on Fee for Service, when we come back.
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Speaker 2 (02:38):
Welcome back. You're On Air with Amber Wynn, and today we're talking about monetizing your assets. We're going to be doing a series on different revenue streams a nonprofit can leverage to create sustainability in its organization so that it's not dependent on just one, two, or three sources of revenue. Every nonprofit should have 10 streams of revenue for long-term sustainability. We don't want you dependent on one source of revenue. That source goes away and so does your organization. So today, monetizing your assets fee for service, let's jump into it. I start with what I say all the time. A nonprofit is a business. It's just a business with a philanthropic purpose. In that space, a business needs revenue to cover those business expenses; you need to pay for salaries, you need to pay for a place to deliver your programs, you need to pay for the lighting, you need to pay for the internet. Like, a business has business expenses, and all of those expenses are not going to be covered by grants. Grants typically cover what are called restricted.
Speaker 2 (03:53):
Grants typically provide what are called restricted funds, and those restricted funds mean money designated for direct costs. Direct costs are those program costs, not the overhead costs, not the salaries, not the rent, not the lights, not the utilities. A portion of that can come but not enough to keep the organization sustainable. So fee for service is one way to generate revenue for your organization. What do you mean by that? That means when a nonprofit charges a fee to provide a program or a service. So let's just say for example, if you are an animal shelter and you're charging a fee, like an adoption fee for the animals that you are taking care of and you're putting into the community, well, that is a fee for service. You are, you're taking care of the animals, you're making sure that they're spayed and neutered, and then you hold these events where people come in and they adopt these animals.
Speaker 2 (04:56):
Well, you can charge them for that. That is within the mission of the animal shelter. Here's the thing about fee for service. The fees that you charge have to support your mission. If not, you can be charged unrelated business tax income. That is extremely important. You could lose your tax exempt services if the revenue that you're generating is not in support of your mission. Let me give you an example. That same animal shelter, maybe they're selling t-shirts to generate money to cover the organization that's not in alignment with their mission. Their mission is to make sure that all animals within LA County have a forever home. That is the mission. If you are holding adoption clinics that supports your mission. But selling t-shirts do not. So it's important that you understand that. Another example of a fee for service could be an after school daycare, right?
Speaker 2 (06:04):
So, you're charging parents maybe at a reduced price, maybe at market rate, but you are charging to watch kids in the morning, say if it's from six to eight, it's the time before school starts, right? But parents have to be at work at 7:30, so they pay for the before care. Maybe you have a van service, so the parents drop them off between six and eight and your van service takes them to school. That is a service that you can charge because you are a daycare center. So it is an alignment with your mission. The name of your organization is Kids Zone, right? And it's to provide a safe place for kids to learn and grow. Well, if you're providing daycare that is within your mission, but if you are again, selling merchandise or if there's advertising space that is not in alignment with your mission, yes, you're generating revenue.
Speaker 2 (07:07):
Yes, that revenue is going into the organization, but no, it is not in alignment with your mission. That is very, very important. I've had people get dinged because they're like, whoa, whoa, whoa. I've got a tax exempt status. I shouldn't have to pay taxes on the revenue that I'm generating. You should't have to pay taxes on the revenue that you're generating in support of your mission. So it's just important. If you have a program that's a performing arts program, you can charge for the tickets because you're putting on a performance that the kids have worked and in that space they've been able to be the stage manager and the director and all of that goes into this performance. And so the tickets are in support of that mission where you're creating a loving, wholesome community through the arts. So those tickets for that performance is in support of your mission.
Speaker 2 (08:08):
Now, in that space, you could say we have kids who've designed the logo on the T-shirts that they're then selling in merch. If that is a part of your mission where you teach kids how to silk screen and things of that nature, that's more entrepreneurial. If it is in support of your mission, then it works. Now here's what I will say. I have people say to me all the time, well, people do it all the time and we've never had any issues. You don't have any issues until you have issues. I don't espouse people trying to get around the rules. I try to make sure that people know the rules because invariably, one day off the cuff, some weird reason you will be dinged. So it's better for you to know the rule and make sure that you are following the rule so that when that one incident happens, you'll be like, Nope, that's not us.
Speaker 2 (09:07):
So I don't teach. Well, this is how you get around the rule. Or I don't say, well, the likelihood of you getting caught is very slim. It is very slim. The IRS doesn't have a monitoring mechanism for nonprofits to that level. The monitoring mechanism is you submitting your 990, but let somebody report you to the General Attorney's Office. Let somebody report you to the Employment Development Office. Let somebody report you to the State Franchise Board, and that's it. It's over. And the fact that, Oh, all of those other people are doing it has nothing to do with the fact that you are not in compliance. You are not in alignment with the law. And if your revenue exceeds whatever that threshold is, generally speaking, it's about 35% of your revenue should not be from revenue that's not in support of your mission. If you exceed that, that might be a red flag for sure.
Speaker 2 (10:10):
50% will get you into trouble. But I'm saying go in generating revenue that is in support of your mission and you don't have to deal with that. Fee for service is a really great way for organizations to diversify their funding streams. If you are an after school tutoring program, you can charge for that. Maybe for a regular tutor, it's going to be $25 an hour. You can say, well, for the whole semester we're going to charge you a hundred dollars. That's a fee for service. The service is being provided, the client is going to pay for it. Now you have money coming in that's unrestricted. You can use it in the best way that's going to support your organization, and that is one additional revenue stream. Instead of just solely focusing on grants, now you have two revenue streams. We're going to continue to build up on those revenue streams over the weeks, but the goal is to diversify your nonprofit revenue streams so that you have at least 10 streams of revenue. Today, monetizing your assets fee for service. You're going to charge for the program that you're delivering or you're going to charge for the services that you're delivering. You got that? Wonderful. So we're going to pause, but when we come back, guess what you get to Ask Amber your pressing question, when we come back.
Speaker 5 (11:39):
When it comes to online fundraising, Give Lively's fundraising platform provides a variety of easy to use and free options for nonprofits. Let's walk through the ways your nonprofit can use the platform. As a Give Lively member, you start customizing your nonprofit's own fundraising pages where people can donate online easily and securely. Share links via email, on social media or behind your website's donate buttons. For events or special campaigns you can set up individual campaign pages for each fundraiser with separate goals and branding. Use our platform's embeddable widget to fundraise directly on your own site so visitors never have to leave your page to complete a donation. It's as easy as copy and pasting the code found in your nonprofit admin portal to your website. With text to donate, you can easily fundraise anytime, anywhere. It's great for galas, walk-a-thons or other onsite events. Just create a code in your admin portal and link it to one of your campaigns.
Speaker 5 (12:40):
Then, encourage people to text your code, enabling them to give with just two taps. You can track progress toward your campaign goal in real time, turn social followers into donors by adding a donate button on your Facebook page and linking it to your fundraising page. It's a quick and convenient way to reach more donors and encourage giving while visitors are checking out your profile. Last but not least, our platform now offers best in class peer-to-peer fundraising so you can leverage the power of your supporters networks as they easily raise money on your behalf, all maintaining the same customized look and feel of your brand. Choose one fundraising channel or integrate them all based on your nonprofit's needs. Have any questions? We're here to help.
Speaker 2 (13:30):
And we're back. We're On Air with Amber Wynn, your resident Philanthrepreneur, and today we're talking about Monetizing your Assets with the focus on Fee for Service. But now it is time for me to get a question from you. Let's hear what the question is for Ask Amber.
Speaker 6 (13:51):
Hi Amber, this is Susanna calling from Redondo Beach. My question is, are there any personal tax benefits for Founders who start nonprofit organizations? Thank you so much.
Speaker 2 (14:13):
Hey, Susanna, that's a really, really good question. So the answer is no. Nonprofits are public charities and the purpose of a 501(c)(3) tax exempt organization is to allow the nonprofit to have the benefit of not paying taxes on the revenue that they generate to support the public good. But specifically Susanna's question was, are there any personal tax benefits? And the answer is no, because the purpose of the public charity is to benefit the public good and not the individual. A couple of episodes ago I talked about should you start a for-profit or should you start a nonprofit? And one of the questions that I implore nonprofit leaders to ask before they start a nonprofit is, Why are you starting it? And if one of the reasons is for a personal tax benefit, then you shouldn't start a nonprofit because you won't get that.
Speaker 2 (15:21):
You know what I mean? So, to specifically answer your questions, Susanna, no, they're not. Any personal tax benefits for founders starting a nonprofit, I'm going to throw out there, I'm going to lob out there. You can make an impact in your community and get a personal tax benefit immediately if you start a Donor Advised Fund. Donor Advised Funds allow individuals to immediately get a personal tax benefit and to be able to distribute revenues out into a community. So let's just say you want to give out scholarships, a memorial scholarship in the name of one of your loved ones that's transitioned. Don't start a nonprofit. Create a donor advised fund with a community foundation with a personal wealth manager, typically from a financial institution or a bank, and you can immediately get a personal tax benefit because it's a donor advised fund. Not only that, but you're not starting a nonprofit.
Speaker 2 (16:28):
You don't have to create the board, you don't have to hire people, you don't have to have the accounting system, you don't have to do all of that. You have the opportunity to distribute scholarships just like you would do for a regular banking account. You identify the people, you issue the check, it's all being monitored and tracked by the community foundation, your wealth manager. It's simple, it's done, and you get the personal tax benefit. I hope that was helpful, Suzanna to the rest of the community. It was an amazing question. Excellent question because you definitely, if that is your goal to get a personal tax benefit, Donor Advised Fund is the way to go. We're going to keep it moving y'all. Next we have up the Nonprofit Spotlight. I am going to focus today on an organization called Our Own. Our Own dismantles systemic barriers in education, nutrition, health and wellness, entrepreneurship and employment pathways to further bridge the gap and ensure racial equity and social justice. Co-founded by Justin Young and Lee Johnson, they create the community we’re going to talk about. They provide access that they never had in the future that they want. In this clip, witness the impact these young men are making in the lives of youth in Inglewood with their Wellness Center. It's a place that they have reimagined, and you can see the lives that they've transformed. Take a look.
Speaker 7 (18:01):
My first impression of the Wellness Space was kind of unbelievable. I didn't think that a space this could exist in a high school.
Speaker 8 (18:10):
I was honestly surprised because before the room that we had here was rundown and raggedy, but now it's a really fly space where people could just chill, relax, and be calm.
Speaker 9 (18:20):
Definitely something different that I've never seen before. Having a space dedicated to mental health and overall your wellbeing as a human being.
Speaker 10 (18:28):
My first impression of the wellness space was a breath of fresh air because me growing up, I never had no calm in my life. So coming in here and just relaxing and get into just catch my breath for a second, felt nice.
Speaker 8 (18:42):
I have anxiety sometimes and I get real fast, I get jittery. At a point where it's like when I came here, taught me just to chill out, relax, think about what you doing before you do it.
Speaker 7 (18:51):
I think I'm a very reactive person. I don't think about how I'm going to say it or what really happens or the repercussions of my actions. And one thing that I really learned was to just sit, think, be mindful about how you say stuff and what you do.
Speaker 10 (19:09):
The one life lesson I could take away from the wellness space is just reminding myself where I come from and what I could bring into other people's life. Because without this space, I feel like my life would be so much different.
Speaker 9 (19:22):
This space is really, it's really pristine and it's amazing. So just for other people to know that you're welcome in and you're able to just talk about how you feel, the pressures that everybody feels, it's normal.
Speaker 8 (19:34):
What wellness means to me, it means it's an experience. I feel that it's an experience that most people don't take advantage of or don't appreciate, even though what is like it's medicine for the mind, the heart, and the spirit.
Speaker 11 (19:46):
One of my favorite moments had to be the sound bowls. I really like the soothing sounds that came from. I got to really get in my mind, get deep into my mind and think about how my life is going right now and how things are and how can I make things better for myself.
Speaker 10 (20:03):
Nausea, definitely now take a big part of my life. Now that I'm in the wellness, they're people I know I could go to no matter what. They're always here for me. Like I said, back to the family thing, we're all just a big family. So knowing I have those people on campus and even outside of campus, just who I need somebody to talk to means a lot because I can bring that with me anywhere I want.
Speaker 9 (20:22):
I think this space is awesome and it definitely should get pushed to other schools and just be, it's just as great to see. It's great to have and I’m happy to have been a part of it and to continue to be a part of it. I hope more people get to experience something awesome like this.
Speaker 2 (20:49):
Hey, that's what's up. If you'd like to support Our Own, you can check them out at www.ourown.com. That's what's up. All right, so as we close out this episode, we move into a section called Mindset Minute, and it's where I share a minute of something that's just been on my mind that I'd like for you to consider to help you shift the way you're looking at things. Today we're talking about giving yourself permission. In your role as nonprofit leader, especially if you are an Executive Director providing direct services, there's a lot of pressure. There's a lot of pressure to do everything, to be everything. And today, I want you to give yourself permission because no one in the outside world is going to give it to you. And if you're waiting for somebody to come save you, it's not going to happen. You are in this role because there is a need in your community that is not being filled, and because it's not being filled, there's not that balance.
Speaker 2 (21:57):
There's not that levity. So today I want you to give yourself permission, and I'm talking from a space of knowing y'all. I do a lot of work with nonprofit leaders and I try to be at everything, and I try to give everything, and I try to give you guys the support that I know you need because I've been there and I didn't have it. But there are times in my day and my week, in my month, in my year, where I have to give myself permission not to be your everything, not to try and be all things to everybody, because without that permission it’s that guilt, right? It's that love. It's that desire to try and support you because I know you have needs, and I know that I've been there and I wish that there was somebody there for me, but today I want you to give yourself permission.
Speaker 2 (22:54):
I want you to say it's okay. Tell yourself that I missed the deadline and it's okay. It's okay. I couldn't help that person. It's okay. It's okay that you didn't get up at 6:00 AM and that you stayed in the bed till 10. It's okay. And give yourself permission to just do you. If doing you is sitting quietly with a cup of coffee and just being, it's okay. If doing you is taking a walk around the lap, around the field, one lap, two laps, three laps, it's okay, do you. Give yourself permission because you are the most important person in the world. You need to take care of you. So put you first, but give yourself permission. Because when you give yourself permission, then that means you do. If you don't give yourself permission, you are making yourself accountable and you push and you push and you push and you continue to give. So your self-care practice today starts with you giving yourself permission to put you first. All right, that's all I got for today. Next week, we are going to continue the series of monetizing your assets because we want to diversify your funding stream for long-term sustainability and impact. But today, I want you to know that you are special, that you are amazing, that you are loved and appreciated. If by nobody else in this world, then by Amber Wynn, I love you and I got you. Take care.
Speaker 1 (24:42):
Thanks for listening. If you enjoy this episode, subscribe and leave a review on iTunes. Head over to www.amberwynn.net/podcast for the links and resources mentioned in today's podcast. See you next time.
