Nonprofit’s have found themselves increasingly strapped for financial support from traditional sources such as private donations and government subsidies. They are also increasingly interested in developing better management approaches, and one outcome of this is cause-related marketing. Cause-related marketing is creating partnerships to generate sales between nonprofit’s and for-profit organizations. Naming rights have also become a big revenue source for nonprofit’s. Here is a little excerpt from The New York Public Library about a recent naming gift: “Mrs. Marron and Dr. LeClerc also announced that Stephen A. Schwarzman has donated $100 million to the Library as the lead gift toward a newly launched fundraising campaign in support of the plan. They were joined at the Library by Mr. Schwarzman, the Chairman, CEO and co-founder of The Blackstone Group, and a Library Trustee since 2001. His gift is by far the largest single donation in the Library’s history, and, indeed, is the largest outright, unrestricted gift by an individual to any cultural organization in New York City. In acknowledgment of his extraordinary donation, the Fifth Avenue building – currently known as the Humanities and Social Sciences Library – will be renamed the Stephen A. Schwarzman Building.”
As a nonprofit marketing manager understanding the constrictions that a nonprofit must operate in both in legal and financial environments is important as marketing plans and strategies are devised. The IRS in the United States is clearly the dominant organization that influences both of these environments, what a nonprofit must do to preserve its tax exempt status, how the relationships with other organizations affect the financial environments and what legal restrictions exist when forming alliances, partnerships and even more permanent operating arrangements. These types of operating arrangements are discussed further here, Nonprofit Mergers and Acquisitions.
How nonprofit marketing managers acquire information is part of a growing technological trend in the consumption of big data. This is a trend that you should know more about and there are several articles here I would like you to read to get a better overview of this concept – Big Data Wall Street Journal and Big Data and Nonprofit Giving
Another organization that is hoping to influence the way nonprofit’s think about finance, beyond traditional fundraising and grant writing comes from the Nonprofit Finance Fund, a nonprofit dedicated to help other nonprofit’s make smart financial decisions, guide marketing activities, and invest wisely for future growth. What they will do with this growth and how it will affect their marketing and operations, even how they will collaborate. And collaboration services for nonprofit’s to work together Collaboration Services is important to understand as part of the overall operating environment possibilities.
Additionally, there are sources for statistics that nonprofit marketing managers can turn to as they benchmark and assess their financial environment against nonprofit’s in similar and different operating sectors. The Urban Institute provides such data through the National Center for Charitable Statistics. Chesapeake Bay Foundation Financials.
But what about when turmoil strikes the nonprofit financial environment? Sadly, even in this sector of corporations established to do good and fill voids between government and private sectors financial fraud occurs, a recent case of this is discussed here regarding the Hereditary Foundation, Nonprofit Embezzling Charges. There is also an interesting legal twist going on in the world of crowdfunding and how the SEC may loose ground to States taking legislative action, Crowdfunding State Law vs Federal Law.
I would like wind up a discussion of the financial and legal environments with several resources that can help a nonprofit marketing manager navigate marketing channels with respect to operating constraints and possibilities here are two for your review, the Council of Nonprofits, Own Your Own Costs and You Tube Nonprofit Program.
Foundations – Every organization that qualifies for tax exemption as an organization described in section 501(c)(3) is a private foundation unless it falls into one of the categories specifically excluded from the definition of that term (referred to in section 509(a)). In addition, certain nonexempt charitable trusts are also treated as private foundations. Organizations that fall into the excluded categories are institutions such as hospitals or universities and those that generally have broad public support or actively function in a supporting relationship to such organizations. As defined by the IRS.
Corporations – In forming a corporation, prospective shareholders exchange money, property, or both, for the corporation’s capital stock. A corporation generally takes the same deductions as a sole proprietorship to figure its taxable income. A corporation can also take special deductions. For federal income tax purposes, a C corporation is recognized as a separate taxpaying entity. A corporation conducts business, realizes net income or loss, pays taxes and distributes profits to shareholders. As defined by the IRS.
1. Select a nonprofit of your choice and see if they currently have a corporate partner or partners, and describe what kind of marketing relationship the two appear to have. If there is no evident corporate partner then suggest a corporate partner.
2. Choose one of the sites from the Independent research section and discuss why you think it is important for a nonprofit marketing manager to either understand the concept or understand the definition of a certain financial term.