Beyond Donations: Growing Your Mission with Earned Income

How do you grow your mission without chasing the money?

Are you a nonprofit leader struggling with how prioritize revenue to avoid the trap of money becoming the mission?

Curious about how you can be sure a new revenue stream is a great fit for your organization?

You need to hear what Bill Woolsey has to say about earned income.

This week on A Modern Nonprofit, Bill Woolsey joins us to talk about how nonprofits can diversify their revenue streams with earned income opportunities, and tips for making sure those opportunities align with your mission and values.

Bill is the founder of FiveTwo Network and focuses on helping entrepreneurs grow their mission and build better programs by prioritizing revenue generation.

Tosha and Bill talk about how you can diversify your revenue streams with earned income to grow your mission. In this episode, you’ll find out:

• Ways for-profit companies can set up a nonprofit operation or foundation to advance their cause of choice. (4:19)
• How diversifying your revenue streams communicates a hand-up, not just a hand-out. (7:40)
• Why your earned income sources MUST align your mission (9:34)
• The #1 scarcity mindset shift nonprofits need to make and why it’s so hard to find a balance between your mission and the money needed to grow it. (15:50)
• The role every nonprofit founder has to own in order to grow their mission, and why that can be hard for many nonprofit leaders. (18:52)

Thanks for watching. Be sure to subscribe for new episodes every week!

For more nonprofit accounting resources check out https://www.thecharitycfo.com

For more information on how entrepreneurs can combine faith and business through new ventures, visit FiveTwo Networks @ fivetwo.com

https://Fivetwo.com
https://startnewtraining.com
https://startnewtraining.com/mini-course

🎥 Click the video below to watch the episode on YouTube.

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👇 Or scroll below the video to read the full transcript of our conversation

 

 

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A Modern Nonprofit Podcast

Beyond Donations: Growing Your Mission with Earned Income

1/11/2022

Tosha Anderson :

Hey friends. Welcome back to another episode of a modern nonprofit podcast. My name is Tasha Anderson and I’m your host today? I’m here with my friend Bill Woolsey. Bill, you are the founder. I love talking to fellow founders, um, because I’m a founder as well. Crazy people, crazy people <laugh> we have to be, it is not for the week. That is certain. Um, and I also love that because we talk with a lot of founders of nonprofit organization. So I feel like founder to founder and other founders, we can all relate. Um, although we’re in different missions, but we certainly feel that the, the entrepreneur paying, um, or the emotional rollercoaster as it is. Um, but you are the founder of FiveTwo Network. This is a work that equips faith based entrepreneurs. We have a lot of organizations that are rooted in faith. I think most of us that are called to do something in the nonprofit space sometimes are prompted by our faith.

Tosha Anderson:

So you specifically work with faith based entrepreneurs to launch a variety of different startups, right. Um, and these can be all different sorts of types. And we’ll hear a little bit more about that later on, but I know you’ve worked with home of shelters, clinics, churches, sports ministries, um, that I think we can all benefit from this conversation, whether you are rooted in faith or otherwise, um, they all have similar, um, challenges, but Bill I’ve, I’ve noticed sometimes the faith based organizations have a little bit different, um, challenges, um, than the average. But we’ll, we’ll talk a little bit more about that later Bill. Should we just go ahead and dive into some kind of burning questions that whenever I came across your profile, I thought these are some interesting points of conversation that we can have. And I think for, um, so you not only work with nonprofits, you also work for, for profit organizations too, right?

Tosha Anderson :

That are, and this is an interesting thing. Um, I think a lot of people just assume if you’re going to do good work in the community, you must create a nonprofit. And it’s funny, I only work with nonprofit organizations, but sometimes I tell people why on earth? Do you wanna start a nonprofit, right? Or people ask me, Tasha, are you a nonprofit? I said, are you crazy? Absolutely not. <laugh>, there’s so much more or work that goes into running a nonprofit. I think then people realize, but there are for profit organizations that might be doing services within the community that could benefit from kind of donated income or, you know, individuals that aren’t necessarily buying a widget, or they’re not necessarily engaging for services, but maybe they wanna sponsor pay for, or support some sort of initiative that maybe a technically a for-profit organization is, is, is, is out to do. Um, tell us a little bit more about that. Is that a reality, can that happen? Can people operate as a for-profit and still take on some of these initiatives? And if that’s true, then how do they get that set up? Yeah.

Bill Woolsey:

So sure they can, uh, you see this a lot, especially in a number of your social media organizations, or I should say organizations, companies that are very prevalent on social media in part, because your younger generations, millennial down to alpha are very cause driven. Uh, they’re huge cause driven. They want to see a cause impact. And so when you see these for profit, uh, companies understanding that, and obviously it can be abused, it could be manipulated, it could be used just to make more sales, uh, which I would say shame on you, but usually they understand the, the importance of being true to your cause. Mm-hmm, <affirmative> my wife, for instance, uh, she, she, uh, uses cosmetics C a U E. Uh, so it’s a cosmetic, that’s a cosmetic mm-hmm <affirmative>. Uh, and so they understand that when they do that, they’re making a difference, they’re appealing to a slice of the population or a particular buyer.

Bill Woolsey:

Uh, and if it’s in line with their values, so that there’s not this dichotomy or this juxtaposition of, uh, who they are and what they’re trying to do, it’s, it’s a wonderful, uh, kind of synergy that happens because now all of, of a sudden, uh, again, there’s tax write offs, right? There’s actually tax benefits that they could be creating foundations or helping a particular people group. Uh, so for, so for, for profit, I would say, make sure you understand what your cause as a founder, you’re always gonna have a cause of some degree or another, hopefully it’s not just making, uh, and then how that can move into, uh, if you’re a, for-profit, how that could be generated. And then you set up a 501c3, uh, of some type in some states you might be setting up a different kind of entity. Arizona has a different nonprofit structure there. Uh, so you’d have to just go to your state level and check that out.

Tosha Anderson:

Absolutely. And of course, always talk with your, you know, personal tax advisor on setting up some of those things, because you’re right, there are several different strategies that you might decide. There’s a trigger point in which we wanna create a more formal entity structure. Like you mentioned a foundation or an actual 501c3 public charity. That’s how most nonprofits are formed, if that makes sense. And, uh, maybe it will for you, so kind of check, or you may,

Bill Woolsey;

You may actually partner with a charity that that’s really aligned with your cause mm-hmm <affirmative> and you know, you may then have a seat on that board. I mean, there are lots of different ways you could do it. The important thing is that aligns. So

Tosha Anderson:

Yeah, you bring up a good point. I was actually talking to an entre or the other day, and he has no interest in running a nonprofit in any shape or form. Um, but I think what you’re kind of describing Bill is a fiscal sponsorship, right? So you collect the money or you are, um, in this particular case, it was an association members of the association, um, are creating a pool of funds or more charitable giving, not necessarily, Hey, we’re paying this membership to be part of the, this association like, Hey, let’s all throw in a hundred dollars and we will support building projects for habitat for humanity, or if I’m making something up, right. So they pull these resources together and they actually engage kind of a fiscal sponsor, which is technically a nonprofit. You essentially funnel your money through. So there’s lots of creative ways that you can operate as a for-profit do good, you know, collect resources and get them to the communities that you’re looking for without necessarily just creating a nonprofit yourself. So I love that.

Bill Woolsey:

And what you’re, what you’re doing there too, your customer is, is quote unquote, buying into your entity on different streams, different levels. Mm-hmm <affirmative> so you’re actually creating a stronger, uh, client slash customer, uh, uh, relationship.

Tosha Anderson:

Gotcha. Good point. Good point. So on the flip side of that, I’ve noticed because of course I kind of can peek behind the curtain with a lot of nonprofit organizations. Um, we see more organizations, nonprofits, uh, in their strategic plan in just kind of their day to day operations, looking at ways to become less dependent on just general donations from the public and focusing more on what we call earned income. So kind of flipping the script a little bit yet a for-profit looking for maybe donations or contribu from their customer base. Now we’re talking about a non-profit that wants to earn revenue in the same way that a for-profit would either sell widgets, delivering services, those sort of things. Um, I’ve noticed this too, Bill. I don’t know if you’ve seen it more organizations, like I said, are trying to diversify their revenue streams by way of earning it through a more reliable kind of source. Right. What do you think some of the challenges are when these nonprofits decide let’s think creatively about how we can control the flow of money more or differently than, than maybe what we’ve been doing in the past, through earned income? What are the challenges that you’ve seen in your space?

Bill Woolsey:

Well, it’s, it’s just, uh, you’re always gonna have challenges. So in, in our process of, of helping you launch successfully, we want you to have both earned income and donative income streams. Mm-hmm <affirmative>, especially if you’re a nonprofit mm-hmm <affirmative> because again, the diversity, but more than that, it, it communicates a hands up, not a hands out mm-hmm <affirmative>. And so you’re helping, uh, your client actually, uh, grow in accountability responsibility, uh, and in, uh, generating contributions themselves, uh, to, to society. So when you have an earned income stream, your, your, your key challenge is to make sure it aligns somehow some way with accomplishing your mission, uh, and what your cause is. And the closer, again, kinda like the same thing on the for-profit side, but the closer that alignment is now, all of a sudden your donors, your donors are saying, Hey, uh, uh, you know, I’m excited that you’re helping these people, not just by giving them something, but by actually developing them in a great way.

Bill Woolsey:

And, you know, our I, our, our network is roughly a 60, 40, 40, 60 split always has been, uh, in earn income to Don earn income to donative. And so our donors get excited when it’s out there in the hands. Our training process is out there, hands more people, but at the same time. And so our donors make it accessible financially to people mm-hmm, <affirmative>, uh, we’d have to charge a whole lot more. Uh, but at the same time, those people that go through a go through our training, uh, they’re like, Hey, I’m contributing to my own wellbeing. And I’m a, you know, I’m, I’m doing something as well. So yeah, lots of ways you can do it, like you said, uh, uh, you know, fee for service, widgets, whatever it may be, but it needs to align with your, your cause and your values.

Tosha Anderson:

Yeah, definitely. I think you bring up a good point too, of making sure that aligns with your mission, not just from, you know, the public, you know, perception, but also the IRS right. There is what we call UN, um, unrelated business income, which means yes, you did earn the money. Um, but it is not really in line with your mission. So for example, um, if you have a food pantry and you decide to get into the home flipping business, uh, and you generate a bunch of money from flipping the homes, that is something that you not necessarily align with your mission. Now, I also know other organizations that get into, um, renovating properties because their mission is to actually house people with affordable housing that is in line with their mission, and they may choose to rent the properties, or they might flip and sell the properties if the market is right. So, so definitely pay close attention to those things. Um, and we, we see that occasionally, uh, not just with, you know, earned income or UN what we call it’s earned, but unrelated business income. Um, I’ve seen really weird things happen. Sometimes I’ve seen, um, billboards that wanna be placed on nonprofits property, and they get a check, you know, every, uh, for like rental cell phone

Bill Woolsey:

Towers is a big one with

Tosha Anderson:

Churches, cell phone towers. Absolutely. Um, also if you receive gifts, um, like, uh, you know, the, um, ownership writes to like an oil field, you know, it sounds really random, but I’ve actually seen that happen before where a donor will basically gift you with this, and then you hold onto it and you get some sort of residual check every year. So, um, Hey, that’s small price to pay, um, but just know that there’s additional requirements and you do have to pay taxes on those. So, so, okay, now that we have this opportunity of like earned income, whether you’re a nonprofit or donative income, if you’re a for-profit organizations, we talked a little bit about, you know, it aligns with your values, you know, it’s in line with your mission. You talk a little bit more about how your values play into that. Like, what should people be considering maybe they haven’t even gotten into questioning what their values are as where would you start with that Bill?

Bill Woolsey;

Yeah. So, uh, and this, your question is one of the reasons, you know, we spend so much time, uh, in, in clarifying your calling mm-hmm <affirmative>. So clarifying your calling is a deep dive into what values you hold. And we wanna get you to about four that you can articulate that are very transportable mm-hmm, <affirmative>, they’re gonna come out of your experiences, your people that have influenced you, your failures, more outta your failures and your successes, usually outta your joys, outta your hates. Uh, and, and that’s, those are really what we kind of call the boundaries that you have in your life. So I can always tell what your values are. If I tick you off, I did something that broke a value. All right. Uh, I said something, I crossed a line. So those lines important, because that helps you be true to yourself.

Bill Woolsey:

And so when you say, you know, as a nonprofit, uh, and churches have a hard time with this, what do you mean we can make earn revenue, right? Mm-hmm <affirmative>, you know, mm-hmm <affirmative> and, and so for them to go, actually this will help us do the mission more mm-hmm <affirmative>, but that earned revenue, it, it has to be within some certain lines there that I feel good about it when I go to sleep in, you know, at night and I wake up and I don’t feel like I’m selling my soul somehow. So that’s where those values and understanding who you are, because especially as an entrepreneur, uh, when you start something, it’s gonna have the values that you have, it’s gonna look like, you feel like you, and we want, we want alignment there for your sake, especially, but also for the mission.

Tosha Anderson:

Yeah. So speaking of, I guess, values, um, what values do you think donors are seeking and how do you make sure there’s a connection made there aligning your values with what a donor, you know, and that feeling like you’re selling out, not feeling, you know, we have this phrase, you know, chasing the dollars or right. You know, how do you align that?

Bill Woolsey:

Right. Well, you’re chasing the dollar, you know, money’s not the mission, but where there’s no money, there’s no mission. So <laugh>, I

Tosha Anderson:

Love that I can start

Bill Woolsey:

Using that. You have to get that. And I would say, just begin by asking, right. And you know, this, the larger, the gift, the, that person is gonna see it as a ROI. They’re seeing it as an investment and they are very, very clear on what they want to see that gift do. Mm-hmm <affirmative>. And so, and, and when you can find values that of donors that align with your particular values or your particular mission. And so for instance, you know, our whole phrase is that we help you launch ventures that that help people, right? So our we’re, we’re assuming that most people we work with as the founders wanna help people, but we’re also assuming that our donors wanna see people helped. And now times I’m gonna communicate differently to my donors, that I’m gonna communicate to my, my, in clients. Mm-hmm <affirmative>, but the more that similar can be, so donors, themselves, their biggest value they want, they could give their money, a zillion places.

Bill Woolsey:

They wanna see an impact with their dollars. They wanna see that you’re trustworthy that you do what you say you’re gonna do with the dollars. When you say you’re gonna do with the dollars with the impact you say is gonna happen. So those are those three things they’re, uh, a donor’s looking for. And the more they give you, the more they wanna see that, uh, as a buddy of mine says, you can’t fix broken glass. So once you break the glass on a donor, yeah, you restore, that’s very hard. You wanna be sure you do what you say you’re gonna do and show them the impact, tell ’em the impact, you know, tell ’em the stories. So,

Tosha Anderson:

Yeah, I love that. Well, and, and you had mentioned donor, but I mean, going back to whether you’re a for-profit or nonprofit, I think at the end of the day, the don’t wants to see the impact. And if you right, spelled out what you hope to do with it, make sure that it’s visible, give credit where credit is due. And in many cases, we are doing those things. Maybe we’re just not doing as great of a job as we could be, or should be. And, and making sure that, you know, those that help contribute to the cause, see what impact we are making. So that’s a good point. And I’d love that, um, money is not the mission, uh, money there there’s generally no mission. So, you know, and as an accountant, of course, I always like to say that <laugh>, um, or some version of that.

Bill Woolsey:

Well, and, and you, you, I’m sure you’ve seen in many nonprofits that because of their, uh, financial struggles, money becomes the mission all of a sudden, right. And that’s where you lose side of what you’re trying to do.

Tosha Anderson:

And that’s such a balance. I mean, you bring up, uh, you know, money becomes the mission. It’s either like the pendulum has swung that to that direction, that direction, or we, you know, aren’t focused enough on money. Right. And right. And we sacrifice the quality of our programs, the resources that our programs need, the people that our program need, all of those sorts of things without, you know, I just, right before we, we hopped on this call, um, you know, I was having a conversation with a, with a leader of a nonprofit and it’s a brand new organization and she has some seed funding. And, you know, I don’t know if I should do it slow and conservative, or I should just like jump right in and hire these people and all these sorts of things. And, you know, I just mention to her, you know, you certainly don’t wanna chase the dollars, but you’re well funded at this point.

Tosha Anderson:

And the sooner that you get up and running, the sooner you can delegate these responsibilities, like you said, build the momentum, you then as the leader can start focusing your energy on, on fundraising, even more money. Right. And, and I explained to her what, one of the observations I have a for-profit entrepreneur, their number one for focused is always, I don’t wanna say always, oftentimes it ships to a yeah. Revenue generation typically, right? You’re like, I know if I need to invest in something, right. It’s usually not, oh, well, it’s not in my budget. It’s like, how can I afford to pay for it? If there’s going to be an impact on my bottom line, meaning if I’m gonna make any sort of money off of this, then it makes no sense for me not to invest in. I just had to figure out how to pay for it.

Tosha Anderson:

Right. And in the, the nonprofit world, sometimes we, we focus less on revenue generation and we just focused on like, you know, we had set out so many, so much expenses and we just have to manage to that at more of a scarcity mindset than an abundance mindset. I think that like a for-profit entrepreneur, like I need to go out and find the, someone has it. I just gotta find it right in the for-profit world. Well, this is the pot that we, you know, set ourselves up for. This is what we’re managing to. And we, we just have to keep it within that, in that space. And sometimes I think, what, what would happen if we kind of transform that way of thinking? Not necessarily just chase any dollar, but putting revenue generation forefront in our minds. Um, so like, again, you don’t want the pendulum to swing all the way to like money is the only mission that matters, but then also like prioritizing revenue generation, um, higher so that you can therefore have better programming.

Tosha Anderson:

That’s always the dream. But, um, I have found though that many leaders and I, I would say like any business, many leaders of nonprofit organizations, certainly don’t come from a business background. Um, they don’t come from a place of right. You know, raising dollars. And the funny story is, I mean, you know, this Bill, you’re an owner and founder of a, of a for-profit business. I am as well. I never saw myself as a salesperson. I never thought I would be responsible for revenue generation. I’m just an accountant trying to crunch numbers. Um, but one of the interesting things, when you become the owner or the, the, the leader of any business, what somebody told me one time, a really influential woman that, that created what was then be became a publicly traded company. When she met me the first time, she was like, oh, now you’re a salesperson, you know, oh, you’re an accountant.

Tosha Anderson:

Oh, but, but you’re an owner now. So now you’re a salesperson. And I really took that to heart that when you become that, that leader, that now becomes your role and that’s very uncomfortable, wasn’t uncomfortable for me. And I’m sure very uncomfortable for most people. So, anyway, moving on to now creating revenue, um, what are some of the key questions you should ask yourself to ensure that, you know, these revenue streams are great fits for your organization? Uh, you know, it’s like, okay, I heard the preaching, you know, we should be focusing more on revenue generation. Maybe we have these ideas, but what are some of those key questions that you should be asking for to make sure it’s a great fit? Because just because it’s possible to raise money, doesn’t mean it’s a great fit.

Bill Woolsey:

Well, no, that’s, that’s true. And, and I would say you just have to kind of start back at the foundation of what, what’s the cause, what’s your cause that you have, and, and anytime you have a cause you’re looking for outcomes. Uh, so rather than, you know, your, your lead indicators, what are those trailing, uh, you know, what are the outcomes you’re trying to see happen? And if you’re a nonprofit, especially which, you know, we’re a nonprofit. And so we’re looking to develop, uh, all new ventures. We wanna see new ventures and we wanna see them be financially sustainable. We wanna see them, uh, introduce faith into that community. So we wanna see that. And that’s what we measure, uh, now, because that’s the outcome we want. Then we go back and go, okay, what’s the best strategy to get that outcome? Well, one of them is we’ve gotta equip those two.

Bill Woolsey:

And we wanna clarify calling equipped, calling activate calling mm-hmm <affirmative>. But we also know that in our society, if I give it away for free, uh, there’s something about I had to pay for it. It, it creases the value in it. Mm-hmm <affirmative> and it’s actually gonna mean I’m gonna use it more likely to use it. So, so that’s where we had to really wrestle with, uh, you know, what’s our cause is this strategy, how, how can we have a strategy of the earn income that, uh, aligns with that cause, and doesn’t take it away. So mm-hmm, <affirmative>, if I say I’m now gonna charge people who are starting, for instance, a, a smaller nonprofit in the Bronx on for, to help care for single Puerto Rican moms. That’s a real one. Uh, you know, wow. They don’t have a lot of money. That’s true.

Bill Woolsey:

Mm-hmm <affirmative>, we can get, ’em a reduced rate, but they actually feel good about I’m helping do this myself. I’m taking responsibility. So it’s, it’s that it’s really, what is your cause? And this strategy of earned income or fee for service, and, you know, some of the famous ones you’ll see, especially if they’re supporting, uh, women in, in cultures that are underserved and under, uh, undervalued, well, you, you, you can sell their products, right? So you’re helping them create products that you then sell that go back into the non nonprofit, that kind of thing. So it’s, it’s really, and I would say you sit down with your staff or some other person and say, okay, let’s come up with a whole list of things we can do, which ones really are, are tight. That it’s, it’s like when I tell that story, the donor goes, oh, well, of course, that makes perfect sense. And by the way, I’ll buy that purse as well as give you a hundred dollars. You know, mm-hmm, <affirmative>

Tosha Anderson:

So much useful information in this conversation. And I always have to ask this question, Bill, when I start talking to people that have created businesses, created organizations, uh, or missions that help serve the nonprofit community or the, for profit, anybody trying to do something good in the world. I always question, what is their backstory <laugh> how did they end up in this space? So, Bill, tell me a little bit more about how you decided to start five, two, and a little bit more about it, and more importantly, for anybody listening, if they’re interested in hearing more about what you have to say and how to create earned income or donative income. So all of those things let’s start with five, two. What, what made you start that? How did you get into the space?

Bill Woolsey:

Uh, sure. Tasha I’ve been a pastor since 87. I was always the guy who was charged with starting new ministries and growing CA congregations and things like that. And very fortunate to always be in that seat, uh, and learn quickly that new people are attracted to new things, especially in organizations. And so if you wanna reach new people, you’ve gotta start new. Uh, we have a phrase start new to reach new. So, uh, in, I started a fast growing church in West Houston in ’97, scaled to three locations, 1600 families. From seven families, uh, preschool of 400 kids, uh, sports league, all this kind of stuff. So, wow. It was part of all that. And, and in 2009, we wanted to help church planters cuz it was very difficult job mm-hmm <affirmative> and we launched five, two. Our name comes from the feeding of the 5,005 loaves and two fish in that miracle.

Bill Woolsey:

Abundance of scarcity, as you mentioned already. Yeah. But then in around 12 we realized that church planters are pretty small group of people and uh, yes, we wanna, and we still pour into church planners, but we said, what if we just poured into entrepreneurial Christians, uh, who probably don’t realize that all of life is sacred and how can we help them transfer their business knowledge or transfer their faith knowledge? Mm-hmm <affirmative> into their business knowledge. And in 15, uh, I, I left full-time pastoral ministry to lead this network and we were off to the races. So, uh, we had a, a training process that we lovingly call Mother Theresa Meets a Friendly Mark Cuban <laugh> and, uh, we, we combined this theology of presence with lean business, star principles, business model, canvas, customer pains, gains jobs, theory, that kind of thing. Uh, and it’s just been, it’s been a wonderful, wonderful ride.

Bill Woolsey:

So yeah, I get to do, I love doing and living through people so you can, you can reach me. You can go to fivetwo.com F I V E T W O.com. Uh, we’ll new site by the time this goes live, our new site will all be launched there. Uh, and there’s resources, blogs there. You can reach out for, uh, just a quick coaching call. If you’re trying to figure out some things from one of our staff, uh, you can also go to startnewtraining.com. That’s all one word. Okay. That’s where our training platform sits and we’d love to help you and love to help you be successful in creating ventures that that help people

Tosha Anderson:

Startnewtraining.com. You said, right?

Bill Woolsey :

Startnewtraining.com. And actually there’s a free mini course. If you’re just interested in kind of tasting some stuff, uh, startnewtraining.com/mini-course mini course. Uh, you can go there and, uh, we have some stuff on how to gain immediate traction and it’s about a four, four, so, uh, video brief video.

Tosha Anderson:

Okay. Bill, that sounds like a lot of really helpful resources to get started. We will go ahead and put all of those links in the show notes for everybody to refer back to Bill. Thank you again so much for the conversation. This has been a fantastic conversation and I always love talking about creative ways for nonprofits to run things differently, um, or kind of look at things, um, outside of the box or be creative in that sense. So this has certainly helped us with that Bill. Thanks again so much for joining us and until next time, thank you all. Bye.