I am made increasingly aware of the conflict non-profit organizations experience when faced with choosing between:
- Raising the money they need using a traditional philanthropic process.
- Making a profit from selling and endorsing commercial products and services.
The number and variety of selling opportunities presented to non-profit organizations, especially through the Internet, is growing rapidly. All too often, the advertisements for those products and services make outrageous and misleading promises of big and easy money to needy and vulnerable non-profits.
There is nothing wrong with selling a commercial product or service to help support a non-profit organization if:
- The time expended can be justified by the profit gained.
- It neither restricts nor replaces the far more effective and time-proven philanthropic process—a process that has seen billions of dollars raised over decades of time.
- An organization institutes a product or sales program as additional and complimentary to their regular fund-raising, not as a replacement or alternative to it.
“Girl Scouts Can’t Live on Cookies Alone”
Raising contributed income for non-profit organizations requires much more than selling commercial products and services to make money. Such programs have their place, but most organizations simply cannot generate enough income from them to meet all their needs. A number of years ago the Girl Scouts proved that point with their highly visible campaign to let the public know that “Girl Scouts can’t live on cookies alone,” and that the organization required additional major support in the form of philanthropic contributions.
Selling products and services to generate income seems an easy way to make money. Some commercial vendors of products and services even tell their prospective non-profit customers, “all of the money you’ll ever need,” can be raised this way. That “sales pitch” is very attractive to non-profits which are unable to fathom how they can undertake the hard and sometimes frustrating work of recruiting volunteers, identifying prospects, managing campaigns, and asking for money.
It seems easier and less painful to sell products and services to their constituents and to the general public. The “make more money than you’ll ever need” sales hype they hear from some commercial vendors is quite attractive indeed.
While there are many reputable vendors of products and services now in the marketplace who seek to help non-profits develop new sources of income, they do not always apply a customer-first attitude to their non-profit customers and clients:
- They are not assessing the real needs of the non-profits to see if the proposed product or service-related program has a place in the organization at that time.
- If it does have a place, how it can be a good fit.
Well meaning vendors of merchandise and services often fail to realize that many charitable organizations are likely to embrace a sales program because they perceive it as a way to provide quick and promising rewards while being less stressful and labor-intensive than fund-raising campaigns.
A non-profit organization must always prioritize and put into meaningful perspective opportunities to generate contributed income. In the main, they must always strive to raise the greatest amount of money from the fewest funding sources in the shortest period of time. This simple premise is absolutely critical to most non-profits to employ because of their constantly imminent needs and limited resources. All fund-raising efforts should be measured in those ways.
When considering selling a product or service, officials of a non-profit organization should ask themselves:
- If we sell a product or service to help support our organization, will the effort be justified with the time expended relative to the profit gained?
- Will we assure that the selling program neither restricts nor replaces the far more effective and proven philanthropic process we should be employing?
- What marketing plans can we develop which will maximize our chances for real profit?
- Will we attempt to sell to the general public which does not know our organization? If so, do we really believe we will make money by selling a commercial product available elsewhere? In short, what compelling reason do these persons having no relationship whatsoever with our organization have to buy from us?
- If we sell to our regular donors, will we run the risk of annoying them and perhaps losing their charitable support because of what they may see as yet another solicitation? Contrary to what the vendors say, our regular donors will see their purchases from us primarily as charitable support of our organization.
- When we promote the products and services of one company, will we risk the loss of traditional philanthropic support from other competing companies?
- Is the product or service of a type and quality we would want to associate with our organization?
- If the product or service is to be purchased via the Internet access, what do we know about how Internet-capable our constituents are and how receptive they may be to buying online?
- Are we willing to take the chance that the product or service we are selling can be withdrawn by the provider at any time leaving us high and dry?
These are questions the leaders of non-profit organizations should be able to answer, but many times do not have the experience to do so or choose not to address. They need advice and counsel from the commercial vendors of products and services who have integrity and regard for the non-profits’ best interests. At times, that counsel could be that their programs are not right for some non-profits. That’s how a good reputation is made in any business. A good reputation and good living is made in any business when a vendor puts the needs of clients and customers first. Touting a product or service as the always quick and easy answer to the money needs of a non-profit is certainly not the way to do that.
“Make More Money Than You’ll Ever Need”
We all have a responsibility to warn vulnerable and gullible non-profits to avoid the sirens’ song, “Make more money than you will ever need. Turn down that foundation grant, stop begging, and market products for your organization.” We know such lures can be attractive to non-profits unable to fathom how to face the hard and frustrating work of recruiting volunteers, identifying prospects, managing campaigns, and asking for money. Selling goods and services can seem easier. It may seem more comfortable to sell a product than to ask for money. We all have the responsibility to keep telling them that successful fund-raising is not based on a favorable comfort level.
Should you choose to sell a vendor’s products or services to make money for your organization, I suggest that you insist the vendor provide you with the answers to the following questions:
- What will our total expenses be— the cost and description of everything we will be obliged to pay?
- What can we expect to earn as clear profit after we sell what we agree to try to sell?
- Will we be required to buy the product outright? Can we return unsold merchandise without a restocking charge and receive full reimbursement? Is there a time limit for returns?
- If we sell the product on consignment, will there be any penalties or restrictions for returns? Will there be a time limit for returns?
- What will our agreement be regarding either party’s responsibility to pay any shipping and handling charges?
I believe that product and service vendors should display regard for and knowledge of non-profit organizations’ best interests when they solicit them as customers. I think those commercial enterprises should be the means and not the ends to help meet the needs of non-profit organizations. In other words, they should suggest workable treatment for the financial ills of non-profits, rather than promising quick cures.
Non-profit organizations in search of the money they need to carry out their missions must recognize that successful fund-raising cannot be achieved simply by working to give someone a product or service which is commonly available to them elsewhere in the marketplace. The money a non-profit needs must come from generous people who care about the organization and who see the reward of having supported it as value received for their gift.
And please remember, the good name of your organization is far more important than any financial gain. Whenever you associate your organization’s reputation to a particular vendor or service provider, or the type of product and service you will be presenting to your constituencies, be certain to avoid embarrassment for less-than-tasteful associations and watch for any hidden potential for controversy. If at all possible, seek to match the commercial enterprise with your mission for a more acceptable and logical “fit,” such as the Heart Association has with the maker of “lean cuisine” and the Arthritis Foundation has with the maker of aspirin.
The following is a quote from one of your responses above:
“the IRS rules state that a non-profit cannot own a business”
However, on every legal internet site I have visited, the response is the exact opposite (see below):
Can a For-Profit Own a Nonprofit? – Nonprofit Law Blognonprofitlawblog.com › can-a-nonprofit-own-a-for-pro…
Jun 22, 2019 — A nonprofit can own all of the ownership interest in a for-profit entity, whether such entity is a corporation or limited liability company.
Can a Nonprofit Own a For-Profit Business? – Bizfluentbizfluent.com › Legal › Start Your Business
It’s not only legal for a nonprofit to set up a for-profit subsidiary, sometimes it’s necessary. Your nonprofit can legally engage in money-making activities, but if the …
Just wondering why the discrepancy.
That statement was included in a reply written in 2015 by Tony Poderis author of the article to which it is attached. It is wrong. Unfortunately I cannot discuss it with Tony. He died two years ago. We will delete the reply. Thank you for calling the error to our attention.
I have a question. A non-profit organization is trying to find a way to sell some handicraft products made by the target population whom the NPO serves. Can the organization do that and yet follow regulations?
Great suggestions. I am sharing this on pinterest.
We are a research company who has already manufactured the product. Now another vendor would like to purchase some of the product to perform research. How do we deal with this from an accounting standpoint, since our donors have already paid for the manufacturing and we are selling the manufactured product at cost. Credit the donor and expense or treat this as a donation?
— Where do donors, charitable type, fit into a DCG Products research company?
I know of no non-profit organization having a corporate name, such as yours.
What is your Mission?
Whom do you serve? Are they customers, clients or charitable beneficiaries?
We are glad to try to help, but we need more detail, to be clear about what a business does, and what good a non-profit does for the community.
And, how the “vendor” fits into the picture.
I really appreciate your work. Thank you so much for sharing this very valuable information with us regarding the Raise Money For My Organization
I’m glad to find this article. I’m new to this topic. My question is about animal shelters. Would it be doable for the Humane Society or rescue group to sell pet food and supplies in existing retail stores, similar to the way Newman’s Own does? If I’m shopping for kibble anyway, I’d gladly get the bag that supports animal rescue.
I know many shelters are independent or state-by-state; is that an insurmountable obstacle? Could they work under a larger umbrella organization? Thanks for your thoughts –
And my apologies for mis-typing your name, TONY! I knew your correct name, my fingers just were not listening. So sorry! I definitely appreciate your expertise and your reputation. Thanks again –
Just call me Verna
That’s helpful information. Thanks for your reply!
Questions: While there may be a direct tie-in between the Merchant/Vendor and the NFP organization if the shipping & handling charges by the Merchant/Vendor is excessive, is it worth it to deal with them. Alternatively, if they refuse to drop the unit price for more items purchased, is it beneficial to engage them?
Questions: While there may be a direct tie-in between the Merchant/Vendor and the NFP organization if the shipping & handling charges by the Merchant/Vendor is excessive, is it worth doing business with them?
Also, if a Vendor/Merchant refuses to give a Unit break for more items purchased, and insists on charging one unit price per item, it is worth it to deal with them?
If the S&H costs are excessive, and if the business deal is worth the time, effort and expense, you should negotiate what you belive to be reasonable S&H charges.
That is but one aspect of your tie-in, with product quality, delivery and most important–customer base. Are you making, going to make, money enough to justify the business deal.
Read again the article to be sure you are not giving your regular philanthropic fund-raising opportunities a back seat to the selling of products.
It’s really quite simple, no matter the deal details. Is the bottom-line profit worth it? That net profit forecast number should be matched to your overall annual need to be sustainable. It’s either going to make a marked difference, or it is not.
Please do not put all or most of your fund-raising “eggs” in one commercial marketing “basket.”
Randy: Looking again over our Comments posted following my article, others reading the two exchanges may be more fully informed if I briefly touched on what you wrote earlier to me off-line on April 18, and what I replied in the same way.
Regarding your company’s program to help schools (and other non-profits) in California to raise money through the sale of Christmas-related products, you asked why it was some organizations were doing very well with their sales programs, and others were doing poorly. (You could learn directly why that is so by conducting a sample survey of a few of those organizations in both categories.)
However, in my email to you, I replied: “Those that are doing great, if they have relationships with you, are the ones from which you get testimonials and endorsements—then to look for large non-profit prospects as prospects with those endorsements in hand. The large non-profits are the only ones having sizable data bases of constituents where the best chance is make such sales programs work. if no such connection, research, identify, then ask to visit a large non-profit to sell your program, maybe even for starters and to strengthen your track record, give them an even more special deal.”
My article is encouraging enough, but from a lot of experience with such ventures, a few stark realities must be considered.
In your case, you do believe your products are an exception because people already purchase them from retailers, and by simply shifting the purchase to a non-profit fundraiser you are directly creating a market shift—in your words.
I have concerns that the opposite will be more likely to result in success—that you would do better by actually having a unique product not so readily available in the marketplace. I do not believe that successful fund-raising can be achieved simply by a non-profit working to give someone a product which is commonly available to them elsewhere.
Only, or mostly, generous people who care about an organization are the ones who will make such purchases, and even then, perhaps not in large numbers, as they would generally prefer to give money outright, with no expectation or desire for something in exchange which they either do not need,or which can be bought from a commercial source.
The general public, not having knowledge or interest in the organization, is even far less likely to purchase through a non-profit what they can otherwise easily obtain somewhere else.
There are always exceptions, but an organization cannot survive on the exception.
P. S. With no political or ideology agenda from me regarding sales impediments, nonetheless, you are no doubt alert to what we see these days as often an assault on Christmas, especially in public schools. I am only asking if you see that as an issue, where government funded entities would be reluctant to be associated with what has, unfortunately, become controversial.
Randy: You are welcome. I am pleased that my article was of some use. I am indeed interested in what you do, as evidenced by my feature article on the subject, and with my April 18 email to you. You are correct, however, that I cannot be “too much interested” for the reasons I cite in my article above;
For the most part, non-profit organizations must first be guided to the development and operation of the traditional, philanthropic-style, fund-raising methods which have seen billions of dollars, raised by millions of non-profits, over decades of time.
You do understand that is where the initial focus must be, to raise money directly from those capable and caring about the organization. There is certainly room for other streams of revenue, and yours may be one of them. Best wishes for success in that marketing endeavor.
Thank you for your quick response to my question regarding fundraising. I read your articlen”Should Your Organizaton Sell Products & Services to Raise Money?” The information is valuable and informative, however, the Organizations we are dealing with are much smaller,, High School baseball teams, Athletic Directors, ASB Directors, soccer, etc. most of these organizations only do selling of commercial products. I will keep investigating further. I do believe we are an exception to the rule of fundraising simply because we have a product that people already purchase from retailers and simplly by shifting the purchase to a non-profit fundraiser we are directly creating a market shift. I realize that you probably aren’t to much interested in what we do but hearing from someone as noted as yourself is a great asset to our decision making.
Tahnks again for your response, it is greatly appreciated.