Non-profit does not mean Non-revenue
If only those compelling youth-produced documentaries and essays paid for themselves.
But, they do not—and are not likely to—unless youth media organizations articulate and execute a well-planned earned income strategy. Earned income is defined generally as receiving money in exchange for a product or service that an organization provides. That includes any money a group generates from ticket sales, subscriptions, program service fees, advertising or contracts.
The focus on earned income within the nonprofit community continues to rise, fueled by boards, funders and stakeholders enamored with the idea of social entrepreneurship and diversified funding streams. The good news is that youth media groups are in an excellent position to capitalize on the trend, as they often produce a tangible product like videos, web sites and magazines, said Tony Ramsden, an earned income expert with the Stanford Business School’s Alumni Consulting Team. Plus, youth media groups have access to a coveted young audience prized by many in the advertising and corporate worlds.
With proper planning, these powerful products can generate significant revenue for a nonprofit organization. One immediate bottom line benefit for youth media groups is generating flexible dollars for spur-of-the-moment needs or simply general operating costs.
“My philosophy is always: The more income you can make, the less strings that are attached,” said Matthew Johnson, executive director of Strive Media Institute in Milwaukee, Wisconsin, a group that generates 55 percent of its budget from its media products and services. “You’re a lot freer to make quick decisions and, being in communications, you have to make those decisions.”
Market Research is Youth Media’s Friend
Before a nonprofit launches a dazzling new product or allots increased attention to boosting its earned income, the group should ask a few fundamental questions and create a comprehensive business plan so that the income strategy is organized, sustainable and relevant.
The first step is to conduct preliminary market research exploring who will pay (and how much they will pay) for the intended product or service that the organization could provide. For example, if a group is considering expanding its ad revenue, it could interview 10 businesses that might be willing to place ads and explore why they would or would not advertise, what barriers to advertising exist and what rates they would pay, Ramsden said.
The market research will also help an organization discover whether the earned income opportunity has the potential to create a profit. According to Cynthia Massarsky, a social enterprise consultant and president of SocialReturns, a nonprofit dedicated to growing social entrepreneurship, “You have to keep your eye on demand and continuously ensure that demand exists. Not say, ‘If we make it, they will buy it,’ but find out a way in advance to determine if there is a willingness to pay, not just a need.”
Do Not Ignore the Business Plan
This market research should feed into a comprehensive business plan created by the group and its board that articulates an income-producing strategy. The plan should address market demand, management, human resources, operations and capitalization in a written document that describes the business, Massarsky advises.
While planning, non profit organizations should consider whether the organization has the right people and entrepreneurial culture in place to be successful at earned income. In practical terms, that means that the nonprofit organization’s leadership and selected board members have applicable business expertise to complement programmatic expertise.
“Anyone in business will tell you management is key,” Massarsky said. “If you don’t have the right people in there who know how to do the job and do it well, it’s kind of a recipe for failure.”
Youth Radio in Oakland, Calif. has found board members with experience in the business of media who have been instrumental in asking the right questions and designing the most beneficial deals and professional media partnerships,” said Lissa Soep, senior producer and education director.
The vital entrepreneurial spirit that experts cite existed from the start at Youth Radio. The organization has examined the possibilities for earned income since its founding in 1992. Today, Youth Radio earns income from fees for its radio products, such as stories aired on NPR, and studio rentals.
“It was kind of an entrepreneurial starting point, to say, ‘There’s a need for youth perspectives in every major story in the news, not here and there, but to really hear from young people,” Soep said of Youth Radio’s founding.
Don’t Forget the Mission
Like all things related to fundraising, earned income can drain staff time in the endless pursuit of increasing revenue. It is important for organizations to continually examine whether or not the earned income strategy enriches an organization’s mission.
The effort and planning it takes to earn revenue often drains mission-driven work in organizations that don’t plan well, Ramsden said. “Once you start to earn a little revenue and it looks like it’s going well, sometimes the tail can start to wag the dog,” he said. “The message here is that you need to be prepared to spend more time on this than you wish you had to, both in the planning and execution phase.”
For former film and broadcast producer Jeff McCarter, founder and executive director of Free Spirit Media(FSM) in Chicago, Illinois, that has meant starting to formalize the organizational structure to support the contract production work that the video education and production organization conducts. FSM earns 40-45 percent of its revenue from contracts with schools and businesses to provide media education and video production, such as filming the concert festival Lollapalooza for the past two years.
“When I left doing professional production work, I had to say no to these kinds of projects a lot to get Free Spirit’s core educational mission off the ground,” he said. “I realized that this is an opportunity we have in a limited fashion to bring these on.”
That’s not to say that earned income cannot add to the youth development experience for youth media. In fact, young people at Youth Radio have embraced digital media culture and the creation and distribution of media online along with an increasingly entrepreneurial culture.
“Our young people have a sense of passion and urgency to be in the game, and they really see Youth Radio as a way to do that and to see and think of themselves as media makers who are business-minded,” Soep said.
Tips from the Field
As a youth media group starts planning and refining its earned income strategy, here are a few selected tips from the field:
– Make products and rates available to clients: When Puja Telikicherla joined Young DC newspaper as managing director this past summer, the organization didn’t have an organized rate card and advertising information available to potential advertisers. She immediately created an ad kit for the 10,000 circulation youth-written monthly newspaper, posted it online and started receiving ad requests.
– Provide free “samples”: After she got the rates and kit established, Telikicherla began offering free and discounted sample ads to her friends and potential clients to illustrate sample work. It also helped increase the aesthetic look and variety for the newspaper. “Since I came on, I thought the only way to get ads, is to print ads.” She checked with professional newspapers that advised her that this was standard practice. Young DC has had paid ads every issue since and has a contracted commission advertising person who receives 15 percent commission from every ad he sells.
– Make your business case to clients: Johnson of Strive Media Institute said it’s important to “put together a deal that allows the sponsor to see the value in the business and get value in what they’re spending.” Whether that’s emphasizing the reach of a TV show or publication or emphasizing the public relations angle or tax write-off, non profits need to demonstrate how this will benefit a corporate donor or client. “If you can do that, the money is released easily.” For example, Manpower Inc., a global employment services firm, has sponsored Strive Media’s Gumbo Teen Job Directory, a comprehensive guide to teen jobs in Milwaukee, a natural sponsorship connection.
– Do not underbid the product/service: Make sure that the product or service that the organizations deliver makes money, Johnson said. Don’t underbid the services or product and watch out for expense overruns. That goes back to knowing the business and doing research beforehand.
– Explore new media and professional partnerships: Youth Radio is currently working with iTunes to distribute media content and is exploring other online revenue streams for digital content, Soep said. The Internet has made earned income more accessible. For example, Youth Radio is exploring premium subscriber content for its Teach Youth Radio Project, a free online curriculum for teachers that explains how to integrate youth-produced content into classrooms and other settings. This might mean having subscriptions for updated monthly lesson plans and new stories, Soep suggests.
– Learn to say no: Don’t get drawn astray from the mission by promises of large sums. At Strive Media, Johnson was forced to turn down a contract of more than $180,000 from the city of Milwaukee for his participants to conduct undercover compliance checks to purchase cigarettes. Though the money was tempting, it did not enrich the students’ media education or communication skills. At Youth Radio, the leadership ensures its youth participants have a voice in which projects the organization undertakes and that its youth editorial advisory board has full control. This has meant turning down a number of offers to conduct youth focus groups, as that doesn’t contribute to the groups’ mission, Soep noted.
– Find the right partners: For Free Spirit Media, a sizable portion of its budget comes from working with schools that donate space, equipment and dollars for the organization’s services. It was not always that way though. “Not every school sees value and some schools either have budgets that are not flexible or have administrations that are not imaginative enough to pull off this kind of relationship,” McCarter said. For him, that means finding schools willing to provide financial support to FSM and schools that appreciate its work. McCarter suggests youth media groups working in schools explore the school’s arts or youth development budget categories, as school discretionary funding is also spoken for.
– Encourage an entrepreneurial culture: Strive Media uses different techniques to encourage an entrepreneurial culture, one of which is assigning business titles to youth working on Gumbo products. The participants also receive business cards so when they are meeting with clients and potential funders, they feel more confident about making a pitch.
These are only a few helpful tips for youth organizations wishing to begin or refine earned income opportunities. Experts suggest tapping into the numerous articles and books that tackle social entrepreneurship and earned income which are available online. Organizations should also work with board and staff members to begin examining an organization’s potential for earned income and to draft a comprehensive business plan. The process usually takes about six months to 1 year.
For more tips, articles and resource libraries on earned income, check out:
– Social Enterprise Alliance: The membership organization for stakeholders interested in building sustainable nonprofits through earned income strategies. www.se-alliance.org
– SocialReturns.org: A nonprofit organization dedicated to growing social entrepreneurship. www.socialreturns.org
– Community Wealth Ventures: A social enterprise consulting firm with a great resource list. www.communitywealth.org
– The Stanford Social Innovation Review: A magazine dedicated to providing research and practice-based knowledge for social innovation projects. www.ssireview.org
– Aspen Institute’s Nonprofit Sector and Philanthropy Program (NSPP): www.aspeninstitute.org
– Ashoka: Dedicated to recognizing and supporting global social entrepreneurship. www.ashoka.org
Sara Melillo is a journalism program officer for the McCormick Tribune Foundation in Chicago, Illinois. The Foundation’s journalism program invests in organizations working in News Leadership, Free Speech, Journalism Education and Youth Media. www.mccormicktribune.org. Note: Free Spirit Media and Strive Media Institute are current grantees in McCormick Tribune Foundation’s youth media portfolio.