Build the budget: Revenue models
Becoming a nonprofit may feel like a new world in many respects, but it’s still OK – and good – to make a profit. Most news nonprofits rely on at least three revenue streams, including grants, advertising, sponsorships, events, subscriptions and donations. The 2020 INN Index found that a little less than half of funding (47%) for nonprofit news in 2019 came from foundations, more than a third (36%) from individual giving (including major donors, small-dollar donors and members combined), and close to a sixth (14%) from earned revenue (advertising, sponsorship, underwriting).
How you choose to evolve as a nonprofit will depend a lot on your audience and your distribution strategy. A local nonprofit may find success with community-oriented fundraising events, while a niche, topically oriented nonprofit may do better seeking national foundation support. You need to think about who your target audience is, what your reach is and will be and whether it is broad enough to offer your organization financial support.
Fortunately, we see more communities, concerned about the loss of coverage as commercial newsrooms shrink, eager to step up and pay to help rebuild the local journalism they need. Owners who have converted to nonprofit status report being pleasantly surprised at how enthusiastic their community was. One publisher said she came to realize that the community always had thought of the newspaper as fundamental to their sense of community.
The initial business plan you discuss with community leaders, funders, foundations, and lenders (as used in your IRS application) will evolve, but at a minimum, you’ll need the strategic and financial plans discussed in Chapter 7.
The IRS Form 1023 and your board will need a preliminary budget. Think about what is realistic in terms of staff, expenses and, most importantly revenue. What additional resources do you anticipate from philanthropy? How will becoming a nonprofit impact your paid subscriptions and advertising if they are a part of your revenue model? Will you ask advertisers to switch to a corporate sponsorship model – or do both advertising and sponsorships? Will you ask current subscribers to pay a little more and become members as well? Look at the research you did in the area of foundation and corporate giving. Keeping in mind that the grant cycle for foundations can be very long – sometimes a year – how many grants can you reasonably expect to gain in year 1, year 2?