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  • Writer's pictureJohn Tasci

How do Nonprofits Make Money?


Ever thought about how nonprofits can make money to support everyone and even actually make a profit? Yes, you heard that right, nonprofits can make a profit and most do achieve that. So, what's the meaning of a nonprofit organization?


Nonprofit organization - A non-profit organization is a group organized for purposes other than generating a profit and in which no part of the organization's income is distributed to its members, directors, or officers.


Defined by Cornell Law


This is a simple understanding of how nonprofits work. Let's dive in to learn more about how nonprofits make money.



Ways Nonprofit organizations make money

  • Donations

  • Grants

  • Memberships

  • Selling their products


Donations are the main source of revenue for nonprofit organizations.


Nonprofits can also receive grants which are usually given by a foundation, corporation, or government agency. Grants are not easily given, the nonprofit must have a clear plan and execute to show that they need money to expand their services.


Memberships are also a great contribution because the nonprofit insures money for continued use. The nonprofit can offer benefits to members to make them more willing to join their program. They could also tier the memberships so they get paid more for different memberships.


Nothing is stopping nonprofits from selling their products. They can create their own website and sell shirts to pass around the word, but in fact they both market and make a profit. So, non-profits can make a profit like a normal business, but they market their products to have people wear the shirt so more people support their nonprofit.



How are Nonprofit Profits Used?


Profits earned by nonprofits are not distributed to the founders (nonprofits don't have owners). The net income must be used to help advance the nonprofit. So, this doesn't compensate the founders for their great service but encourages them to invest more in their nonprofit.


Profits can be used for

  • Functional expenses

  • Employee salaries

  • Fundraising set-up

  • Supplies

  • Marketing

  • General expenses

  • Cash Reserve

The three main categories of spending are programs, fundraising, and administrative.



Non-Profit Spending Pattern



To conclude, the profits are first used to continue operations, not fund the founders.


How do Nonprofit Founders Make Money?


Founders can make money by setting themselves a fixed reasonable wage. That's the only way founders can make money directly from the nonprofit.


To set a salary for the founder, the founder must be given a job title to then be compensated for their "work". Leadership roles are preferred because they get paid the most and you are the founder after all.


The highest position you can receive is CEO. Don't think they don't make much because they work at a nonprofit. CEOs at non-profits can earn millions of dollars per year.



Top 10 Highest-Paid Nonprofit CEOs in 2022


1. Ernie Sadau


Organization: CHRISTUS Health

Amount: $13,463,390


2. R Heldebrant


Organization: Star One Credit Union

Amount: $12,465,866


3. Steven J. Corwin


Amount: $12,414,295


4. Peter S. Fine Fache


Organization: Banner Health

Amount: $11,256,938


5. Jack N Gerard


Amount: $10,669,493


6. Anthony R Tersigni


Organization: Ascension Health

Amount: $10,631,627


7. Teresa Campbell


Amount: $9,946,020


8. James D. Dahling


Amount: $8,917,055


9. David C Pate


Amount: $8,564,141


10. Howard P Kern


Organization: Sentara Healthcare

Amount: $8,053,745



How are Nonprofit employees paid?


As said before for how nonprofit founders were paid, employees are paid the same. They have a set wage and earn bonuses or get paid for extra time. Nonprofit employees are paid just like any other employees. So, if you want to work at one, you won't miss out on the benefits that other companies have to offer.


Top Nonprofit Companies By Revenue


Fidelity Investments Charitable Gift Fund


Revenue: $10,031,882,956

Assets: $27,028,513,842


Partners Pooled Investment Holdings LLC


Revenue: $9,476,124,609

Assets: $9,412,249,609


Bill & Melinda Gates Foundation


Revenue: $5,607,122,529

Assets: $47,850,466,255


Battelle Memorial Institute


Revenue: $5,087,879,187

Assets: $1,094,142,717


The Global Fund


Revenue: $4,056,010,831

Assets: $12,710,000,000


Schwab Charitable Fund


Revenue: $3,465,939,041

Assets: $10,634,353,155


National Philanthropic Trust


Revenue: $2,946,578,916

Assets: $16,475,852,379



Conclusion


Nonprofits do earn a profit, but that's not a reason to start one. If you start one just to make a profit then you won't fight for a cause to change the world. Why wouldn't you just start a business to make money? Nonprofits aren't easy to start either. More than 90% of nonprofits fail within 5 years. You're relying on other people for money after all, so it's not easy to secure funding. After you've gone through the startup phase and have become more mature, then you can better spread the money and pay yourself more.



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