Increase Sales Blog

Posts Tagged ‘not for profits’

Not for profits differ from for profits in three ways:

1. How they file taxes
2. The words they use to generate revenue
3. Where these organizations reside within the Revenue Hierarchy

All organizations require revenue. This is essential. Yet for not for profits appear to have some significant challenges beginning with the words they use to secure or generate revenue.  One hears the word business development to foundation director, but never the word sales representative or sales director. In all of these cases, the main goal is to increase sales.  Yet to say this word to a not for profit administrator is almost like using a swear word.  This belief restricts the ability to increase sales or if you prefer the more neutral words of revenue or business development.

Having several not for profit clients I am always amazed at their reluctance to actively sell.  Sometimes I think the belief that people should want to donate to this or that organization just simply overrides common sense.

People exchange their dollars for a real perceived value, not the belief held by not for profits that their organizations are worthy ones. Yes that belief of a worthy organization may be present, but it is secondary to value.  [Note:  I am not saying not for profits are not worthy, but the value must be shown to potential "donors" (buyers). This article is also not addressing religious institutions such as churches, synagogues, etc.  as they are funded by a different belief.]

The other challenge is the availability of where to find potential revenue funds.  Using the above graphic which I call the Revenue Hierarchy, once the following are subtracted from revenue:

• Direct costs
• Employees’ salaries
• Indirect costs
• Profits to shareholders

the DNP – Disposable Net Profit – is very small.  This is a very real challenge especially during turbulent economic times. Even those who sell support services and products come before not for profits unless the not for profit can show a direct link to indirect costs.  Grants are a viable revenue source, but there again must be a balance between grants and donations along with contracts according to U.S. tax laws.

Beyond the real differences is the belief focusing on delivering the programs or services first and not building the revenue base first.  Revenue must be established first before any programs are delivered. By delivering programs first without revenue, the not for profit is always playing catch up and may eventually succumb to business failure.

Until not for profits understand this Revenue Hierarchy and actively work to “sell” the value of their products or services, these well intentioned organizations will continue to miss the business boat.