Simply put, earned income is revenue generated from the sale of goods, services rendered, or work performed. One popular nonprofit example is Girl Scout cookie sales. If you have ever purchased a box, you have contributed to the earned income of the Girl Scouts organization. Thanks! Many arts nonprofits also benefit from earned income through ticket sales and gallery events.

Earned income is gaining popularity among nonprofits. 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. Some nonprofits may be scared off by the possibility of having to pay taxes on what the IRS calls unrelated business income, but many experts say it's still worth it.

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?"). A nonprofit's earned income strategy could be just about anything but most people say stick with what you know, as in what your nonprofit does.

See also our related Knowledge Base articles:

- What is social enterprise?

More articles on nonprofit management

Topic(s) Finances Social Enterprise

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