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Knowledge Base
Q:
What is earned income and how do I learn more about it?
A:

Simply put, earned income is revenue generated from the sale of goods, services rendered, or work performed. One popular nonprofit example is Girl Scouts cookie sales. If you have ever purchased a box, you have contributed to the earned income of the Girls Scouts organization.

Earned income is gaining popularity among nonprofits as factors like increasing competition and a flagging economy have caused income from grants and individual donations to level off. Revenue-earning programs allow organizations to diversify or expand their base of support to meet growing needs and to better sustain their operations over the long term.

Fortunately, there are helpful online resources you can consult to see if alternative revenue options are in your organization’s best interest. The Society for Nonprofit Organizations’ Fundraising Guide to Earned Income is a good start. It states that earned income may help improve your organization's image and visibility, but for-profit businesses may feel you're competing unfairly and could challenge your tax-exempt status. The guide also includes tips and questions to ask yourself before starting such a venture (i.e. "What programs, products, and services does your organization already have in place that you could adapt for the marketplace?"). Tony Ramsden explores this topic in an Earned Income Assessment at the Stanford Graduate School of Business.

The Foundation Center can help you too, through our free class Nonprofit Sustainability: Building Blocks to Organizational Success. Whether your nonprofit is considering an alternative revenue stream or already pursuing one, this course helps you maximize the opportunities—and avoid the pitfalls—of earned income. Please check the registration page regularly for upcoming dates and locations.

See also our related Knowledge Base articles:

- What is social enterprise?

More articles on nonprofit sustainability»

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