You Only Know What You Know: Literacy Organizations Learning How to Diversify Revenue

You only know what you know - is a good way of describing our recent earned income workshop at the 33rd Annual Florida Literacy Coalition conference in Sanaibel Island, Florida. I was fortunate to present alongside Thomas Melville, Executive Director of the Literacy Council of Sarasota. This organization is a participant in Margin & Mission Ignition, The Patterson Foundation’s earned income initiative that helps nonprofits increase entrepreneurial capacity, boost revenue, and expand mission impact. We facilitated a 90-minute workshop titled Mission Based Earned Income = Revenues for Literacy Organizations.

We had 35 people attend the workshop from approximately 30 literacy-based organizations throughout Florida. They represented small and large organizations with literacy programs helping the lifespan from kids to seniors. Some of them were freestanding 501(c)(3) types, and others were embedded in the county or city offices where they are based. Some had stand-alone budgets, and others were part of a larger human-service budget of their parent organization.

None of the organizations represented at the session had earned income as part of their revenue model (other than the Literacy Council of Sarasota). In fact, most of the people attending the session didn’t understand what earned income was or how it might help their organization in the short and long term. They didn’t know how it could help their nonprofits thrive.

We presented an overview of what earned income was, why it’s important for the thrivablitiy of nonprofits, why the time might be right to begin learning more and analyzing their opportunities. We presented the planning and implementation process that Literacy Council of Sarasota has gone through as part of The Patterson Foundation’s Margin & Mission Ignition earned income initiative. Tom shared their earned income idea, why the idea was chosen, and what they have done with regards to launching the product through the implementation phase. He also shared the organizational changes that have taken place as a result of being a part of Margin & Mission Ignition.

To both Tom and I, it was a reminder that “you only know what you know” and that many of the participants thought;

• Earned income was not within their nonprofit taxability. They didn’t realize that they could sell something (especially if it was mission focused) and generate revenue to cover other costs within their agencies. We shared with them that if their product or service idea was “mission-focused” there is a good chance that they wouldn’t need to pay tax on the earnings.

• Many didn’t understand the difference between earned income and fundraising. We gave them an opportunity to brainstorm product/service ideas for their organizations, and many came up with auctions, gaining co-sponsors, and selling tables at events. We explained that these are not earned-income ideas, but fundraising activities. We went on to share that earned income is not a grant, donation, gift of time, or merchandise. It’s selling something and exchanging a product or service for a fee.

• Many of the organizations were “comfortable” tucked into their parent organization. Some don’t pay any rent, so their overhead expenses are extremely low. One person said that they are somewhat “complacent” in their thinking that the world will ever change around them. They have done their work a certain way for so long and if it’s not broken, why try to fix it? Tom and I did a good job in explaining “why” they need to consider diversifying their revenue base. If 30% or more of their revenue should go away at any point in time, could they survive as an agency? Once we shared some statistics around revenue diversification, more of them understood the need to diversify AND that earned income is one way to do that.

We concluded the workshop leaving them with an understanding that they have an earned income “learning curve” and will need to take some time to better understand (1) what it is; (2) what they have that they might sell; (3) do they have the capacity to develop and sell a product; and (4) who would be the internal champion.

As the workshop wrapped up, we tried to instill in the participants to be revenue diversification “proactive” and that earned income could help them accomplish their diversification needs.