Do you have to rely on grant funding to start your business?
Any new business that is set up must generate some revenue to maintain it. The first cause of a company’s failure is a lack of sufficient funding. To further complicate these people who often create non-profit organizations, they have a big heart and little knowledge about how to generate income. Some even want to provide all of their business services for free, as the people they serve may not be able to afford it. To be successful, all businesses, including nonprofits, must achieve a level of financial self-sustainability.
Some of these struggling companies resort to granting money to try to pay off all their bills. They mistakenly believe that “self-sustainability” is when you get other sources (such as grants) to pay your bills.
Grant funds are generally not designed to start a business, to pay annual salaries, or to pay off debt. Most grants are designed to help pay for some of the cost of new or expanding programs / projects.
When a grant applicant has no income earned or any other source of income, it poses a financial risk. Grant funders don’t like to give their hard earned money to a company with a high financial risk. Therefore, before a nonprofit can apply for any grant funding, they should first develop a couple of other sources of income to bolster their financial status.
Perhaps the most common activities for nonprofits are conducting fundraising events. Fundraising events can range from car washes to bakery sales to denomination rights sales. The most successful fundraising event is the walk-a-thon.
Another option is UBI. UBI (unrelated business revenue) is revenue generated by an activity that is completely out of the nonprofit mission. An example might be having a place that serves food to the public in a hospital. Serving food as a restaurant is outside the mission and scope of the general hospital. When a fundraising activity is very successful, it can become your own independent for-profit business.
Income earned. In the financial statement, the income earned is much stronger than donations or gifts. Depending on the nature of the nonprofit business, there are several methods to generate revenue. Almost all non-profit organizations can sell a product (s) and a service. In addition, the sources of income obtained include membership fees and interest earned.
A non-profit organization is a corporation and should be managed like no other.