By Janine Vanderburg, JVA Consulting
With economic uncertainty continuing to dominate, many nonprofits are taking steps toward strengthening their organizations by exploring and launching an earned income strategy.
Contrary to what many believe, earned income is the largest revenue source overall for nonprofits, comprising 70 percent of overall nonprofit revenue, and earned income from private (non-government) sources comprising 45 percent of overall revenue.
Regardless of whether you are thinking about launching a fully separate social enterprise or simply considering charging for services you already offer—or anything in between—the first step is understanding the facts and demystifying the misperceptions and fears about nonprofits earning income.
The biggest myth JVA Consulting has seen in our work with clients? That there is one right price for whatever product or service you are offering.
At the pricing workshop we offered yesterday, the biggest question participants had was: “What should I charge for my services?”
The answer is, it depends. Differential pricing is a research-based and often-used pricing strategy.
Have you ever:
- Gone to happy hour?
- Shopped at ARC Thrift on Saturday because it was 50 percent off?
- Taken advantage of a free day at a museum?
- Looked at a very expensive painting that you loved and realized that you simply couldn’t pay what the artist was asking? Then wondered why it was donated to a charity auction where it was sold for much less?
- Conversely, paid $100 for a $50 gift basket at a silent auction?
- Seen another nonprofit use a sliding-fee scale for its services?
If you’ve done or seen any of these things, you’ve encountered the essential concept that there is no one right price for a product or service. As in the private sector, different people will value what you are offering at different times, and in different circumstances.
The key is to understand what the drivers are for your product or service. If you are focused on setting just one price, then you are potentially leaving money on the table from people who are willing to pay more, and excluding people who may not be able to afford full value.
If you’re ready to get serious about developing a viable earned income venture, JVA’s Social Enterprise Academy is for you. This week-long intensive program will take you through all elements of planning a viable enterprise, from market research to financing. Click here to register now.
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