If you look nonprofit up in the Merriam-Webster dictionary, the definition is: “not conducted or maintained to make a profit.” However, this is a simplistic definition, and one could argue that many of the United States’ most prominent hospitals and nonprofit agencies, such as the United Way Worldwide, Feeding America, St. Jude’s Children’s Research Hospital, and Direct Relief, have significant revenue. However, the difference between these large nonprofit enterprises and large corporations is that the profit does not go to shareholders as dividends. Instead, nonprofit revenue goes back into the organization and services for nonprofit clients and community, including new buildings, paying staff salaries, purchasing and distributing goods such as food, medical supplies, etc. Forbes compiles a list yearly of the 100 largest U.S. Charities by total revenue. You can see the 2022 list by clicking here; Feeding America topped the list at $4.209 billion in revenue.
This list is interesting because Forbes also rates charity donor dependency. Almost all charities are highly dependent on donors. In fact, of the top five largest charities in the United States, four relied on donors for 69% or more of their operating revenue. Not surprisingly, of the top five largest charities, United Way Worldwide and Direct Relief are 100% dependent on their donors for revenue. However, it is striking that according to the Forbes list, the Salvation Army ranked as the fourth largest nonprofit in the nation with a revenue of $5.795 billion, is only dependent on donors for 4% of the organization’s revenue. According to a Salvation Army 2022 Annual Report, the organization earns 36% of its revenue from investment income and 9% from direct sales to the public. You can see the annual report here.
This model for nonprofits is often called developing an earned revenue stream. Earned revenue attracts donors and builds sustainability into your programs and services. Please watch for additional posts on program sustainability and earned revenue models, but for now, suffice it to say that we could continue talking about the difference between nonprofits and for-profits forever. However, our point is that being a nonprofit does not mean that you do not have significant revenue. As you can see by the Forbes list, all of these organizations have revenue. The difference is that the profit goes back into their organization and is used to pay for buildings, staff, and client services such as food supplies and housing.
