A guide to help as you plan, launch and operate a nonprofit news organization.
INN created the Startup Guide to help new nonprofit newsrooms take root and get set up for success. The guide covers the essentials for founders: the tech you need, how to define your ethics and more.
The Startup Guide was published in 2019 and last updated in 2022.
Chapter 1: So you want to start a nonprofit news organization?
Congratulations! Your passion for truth telling and your desire to be your own boss has brought you to this point.
Starting a nonprofit business can be an overwhelming endeavor, but this Startup Guide will navigate through the process. It has lots of questions you will need to answer, and the tools and resources that are right for your concept.
This process is not easy. You may be tempted to skip some of the steps. But in our experience working with startups, we have found that shortcuts end up costing time, energy and money.
The skills required to run a nonprofit news business go well beyond great reporting and editing expertise. With this guide, you will be able to fully develop your concept and test its feasibility. It steers you through the complexities of forming a nonprofit entity and lays out a tactical launch plan with a timeline to keep you on track.
We hope you will find the guide beneficial. It is a living document and we will continue to add information over time in collaboration with the INN community. We welcome your feedback.
Being a successful business owner requires investing your own money, time and effort. You may be attracted to the idea of being your own boss, but are you cut out to successfully meet the demands of owning a business? The only thing certain in business is that nothing is certain. Are you comfortable with being uncomfortable? Can you handle taking educated risks and surviving the constant ups and downs of operating a business?
Running a successful business is not just about having great ideas. It’s more about strong execution. If you have a hard time staying focused, if you are uncomfortable generating revenue, and if you are averse to managing all aspects of the organization — not just the editorial component — then entrepreneurship may not be the way to fulfill your journalistic passion.
It is important to have a realistic picture of the characteristics and skills you bring to this venture. Perhaps more important is understanding why you want to take this challenging step. Here is a questionnaire with some tough questions you may want to consider before embarking on this journey: Entrepreneurial self-assessment worksheet.
Essential Qualities for Business Owners
You can be a successful business owner even if you don’t possess every skill needed to run a small business. However, certain qualities are essential for success.
RESOURCES:
Types of Business Models for New Journalism Ventures (Local News Lab)
All beginnings require exceptional care if they are to result in great harvest. — The I-Ching
Many entrepreneurs get excited about their idea and move forward without thinking through all the components involved in starting a sustainable business. That’s why it is important to spend time on a business plan.
Your business plan should provide the narrative that explains your concept and demonstrates to funders, potential board members, employees and others how well you understand the complexities of how your enterprise will function. Who will find value in it? How will it operate sustainably? Why should it be funded?
Given the importance of the business plan, why don’t more entrepreneurs pay attention to creating one?
One answer is that business plans are perceived as being repetitive, using language that is foreign to most entrepreneurs. And because business plans are written in a linear fashion, entrepreneurs often lose sight of the interconnectivity among the various components.
The animated video series “From Idea to Business” can help you and your organization quickly articulate your business concept and the key components necessary to execute it using a business model canvas.
Once you understand how a canvas works, you can use this business model canvas tool to plot out the nine building blocks required for your concept.
The canvas includes the key questions for each of the nine segments of the canvas that have been adapted for nonprofit news organizations.
The value proposition is a statement that explains to members of your target audience why using your product or service would solve their problem or improve their situation. If other options are available to your target audience that meet the same need, the value proposition explains why your concept is better.
The value proposition helps you define the news product you are going to create, as well as explain it. For a startup to succeed, it can’t just meet your idea as a founder of its value – it has to provide something that your audience finds valuable to meet a need or make an improvement.
To craft a compelling value proposition – the next step in building your business model – you will have taken time to research the target audience your news will serve. Your knowledge and understanding of who they are and what they value in news will be essential. To find the information to build your value proposition, you must get that information from those you seek to to serve with your news coverage. In other words, market research, by talking to as many people as you can who are part of, or knowledgeable about, the audience your news organization plans to serve.
Our Value Proposition Builder Worksheet provides a framework for developing your value proposition. Here are some additional questions to help you assess the environment in which your business would exist. In the worksheet, you will have identified any alternatives your prospective customers have to the service you are envisioning.
RESOURCES: The Traction Model Overview
Before marketing a product or service, creating an event, developing a website or starting a blog — anything that will have an audience — you should have an in-depth understanding of your expected target audience. Such an understanding will help shape the product or service to best meet your audience’s needs, as well as determine the most effective way to reach them. If this analysis is not done before or in conjunction with the development of the product, your idea may never reach its intended audience.
Here are a few questions to consider:
More questions to consider while developing your product:
While developing your product, consider what channels you can use to reach your audience.
What are the preferred ways your target audience wants to be reached? What is the best way to deliver your value proposition to your target audience? What alternative distribution strategies are worth considering? More specific questions:
Based on those considerations, what mix of direct and distributed audience strategies might work best? You will have to answer this question before you can write a business plan, so we’ll come back to it at the end of the next chapter, applying your answers to the questions above to the building of your product and distribution strategy. We will explain how nonprofit news organizations choose between two basic structures or strategies when they create a publication or become a reporting service that distributes or syndicates its content.
Answering the questions about your audience, the relationship they have with you, and how you plan to deliver your content requires more than anecdotal evidence. It will require market research and market analysis. Market research provides data about the industry, the area of focus and the target audience.
Below are some market research guidelines to help you get an understanding of your audience.
Once you have completed market research on each of your target audiences, it may be helpful to develop a persona for each of them. Using this INN-Persona-Profile-Form will consolidate all you have learned about your audience into a clear picture of who they are.
As noted before, market research tells you who your target audience is; where they are and how large the potential market is. Here are some of the key dimensions of the target audience that should be determined:
Primary and secondary research is necessary to answer these questions about the market.
RESOURCES: These are general demographic and psychographic resources
Harvard Business Review: The New Science of Customer Emotions
US Census Bureau’s data website
Demographic and Geographic Data Analysis
U.S. states with the highest levels of income inequality (CNBC, 2018)
This topic’s author, Tim Windsor, has more than 20 years of experience in leading or helping media companies and other organizations develop and improve their mobile and digital strategies and technologies, grow audience, and build sustainable digital revenue. Here he discusses why you need a product-centered strategy.
Start off by asking what you are going to do for your audience. You can’t just answer that you are going to cover a particular community or topic, or even a broad topic within that community, such as covering crime in your city. You must think deeper about what the people in your target audience really care about, and then put together a list of five or so specific topics that are really compelling as of your launch time.
Either you know for sure that your readers cannot live without this information, or you have tested out the topics on a sample of your audience. The fewer the people working with you, and the more competition you have, the more your topics must be narrowly focused so you can provide sustained and distinctive coverage. (Some narrowly defined topics are self-limiting, but if you have done a good job of connecting with your audience as you cover a story to its natural end, your reporting or the response from your audience will lead you to a new topic.) You also can test your topics by trying to come up with a list of story ideas. If you can’t fill out a whiteboard in a half hour with story ideas you are excited to pursue, those topics won’t work out and you’ll have to revise your list.
Next determine what you can sustainably deliver and at what frequency. Are you a daily, a weekly, an hourly news source? Make that expectation clear at the beginning and deliver on it. We’ve all seen news sites that start strong but the gap between postings gets longer and longer, and then they are gone. They disappear not because of a lack of interest by the content creators, but because they did not have the time, energy or resources to continue to deliver at the frequency they started out at.
In my own career, as an editorial director at Patch.com, I saw the reporters for the hyperlocal news site killing themselves trying to cover everything that moved in their communities. What made the best editors stand out is that they understood what mattered in their community. They aggregated a lot of news, but had limited their scope of original reporting to a list of five or so topics on which they could break news.
In a product-centered strategy, you start off by asking, “What are you doing for your users that they cannot do for themselves?” Clayton Christensen, a Harvard Business School professor known for his theories on disruptive innovation, describes the strategy as a marketer realizing that the customer is hiring a product or service to get a job done.
As you define your product you have to ask whether it will solve an urgent need in the lives of your target audience. News does fulfill an urgent need for those who absolutely must know what is going on in their community. Just having something fun and entertaining to read can fulfill an urgent need for some people. But it is not enough for your product to be interesting. Before you just start posting interesting news, ask what your product does for the readers:
If the product does one or more of these jobs, or meets some other urgent needs, then you have designed a marketable product. Thinking of your product like it came in a box on a shelf, you would know what the box says on the outside. More practically, you have a sentence or two to use prominently in your business plan and donor appeals, because your product is what gives your journalism impact.
An earlier section covered the content distribution strategy, but let’s look at it again with a product-centered approach: How will the customer use the product?
If the content distribution will rely on a website, how will the customer use that website? The answer increasingly involves a smartphone, so it would be dangerous to design a website that is not mobile-friendly, and soon if not right away, a mobile app might be the product. A survey by Pew Research Center in 2018 found 58 percent of U.S. adults often get news on a mobile device, 19 percentage points higher than the 39 percent who often get news on a desktop or laptop computer.
If you are covering topics that are relevant to different target audiences that are unlikely to visit your website regularly, you may have to distribute your product to them with targeted newsletters or syndicated content in the publications they already read.
If the job you are doing for your users involves giving them a way to interact with you or each other, that need will affect the design of your product. For example, any website can create a forum for user-generated content but it will only be successful and sustainable if users have an urgent motivation to be active on that forum.
Syndicating content through well-established publications can be an effective way to get information to those who urgently need it. But the syndication must contribute toward your strategy of sustaining coverage of your topics (See the section on Distributed Audiences in chapter 3).
To borrow a concept from the technology industry, once you think you have a product that meets an urgent need, you’ll want to take it to market in some simple way as soon as possible. If you wait until you perfect your product or build every possible distribution channel, a competitor may corner the market. And if your product does not succeed in its current form, you can pivot by asking, “What else can I do in this space?”
If you want your organization to stay small, you have to start simple and say “no” to a lot of ideas. But if you are planning to grow, your business plan (discussed in chapter 6) will have to envision sufficient staff to manage all aspects of your product.
As a startup, you need to know how much time it will take you to manage your minimum viable product (MVP in tech-speak). Then as you develop your business plan you can consider strategically adding features to that product gradually over time as long as you have the revenue to pay for staff to manage and support the growing product.
Suppose you start a newsletter as your MVP and charge enough for subscriptions to pay your costs. Over time you add more newsletters, need more elaborate social promotion to get enough subscribers, and start sponsoring events and considering some other initiatives to keep the subscribers engaged. Because adding too many features to a product can make it bloated and unsustainable, you or your team must periodically test, measure and evaluate what you have created. You must either set aside time in your work schedule to handle that work or delegate it to a product manager.
All this talk about product can be disheartening to those journalists who see their calling as breaking news and telling stories, and leaving the business talk to others. But in the next chapter we will connect this product-centered groundwork back to your news mission.Resource: News Product Alliance Product Kit (2022)
Chapter 2: What’s the mission of your nonprofit news organization?
This chapter addresses what needs to be in your organization’s mission statement, with examples, and how to develop a brand. It will explain what an impact model is and how to measure output, outcomes, and ultimately impact. It will explain how and why to do a competitive analysis.
A mission statement conveys the intention of the organization to make something happen in the world. The mission statement focuses on outcomes, not activities, and it should clearly articulate your value proposition in a way that your stakeholders understand what’s in it for them.
A mission statement answers the following questions:
RESOURCE: Dick Tofel on mission-driven journalism
Branding is “the process involved in creating a unique name and image for a product in the consumers’ mind,” according to the Business Dictionary. “Branding aims to establish a significant and differentiated presence in the market that attracts and retains loyal customers.”
In other words, branding is necessary for nonprofit news organizations wishing to cultivate an audience and support.
When considering branding, independent publishers should think about both the visual identity of their brand and consistent phrasing to describe their organization, its value and what it does.
Step One: Define your brand attributes
Step Two: Create a brand strategy
Step Three: Create a strong visual identity by creating a standard set of graphics that are used consistently across the organization’s digital, print and multimedia assets and communications (e.g., the website, letterhead, marketing materials, YouTube videos).
Step Four: Establish your brand’s voice, creating and sticking to specific language that describes your organization in your content, communications and website.
Step Five: Build brand equity. When finalizing the visual and text branding elements, it’s important to test them with your target audiences to ensure that the values actually communicated by your materials match your perceptions. Once you have assembled your branding package it is also highly advisable to keep files and copies in a shared drive that can be easily accessed by all parties that need the information.
While an organization cannot control how it is described and referenced outside of its products and social networks, it can still ensure that its values and messaging are conveyed through consistent and proactive brand management.RESOURCES: Brand Archetypes (personality development), How To Create Your Own Brand Guidelines, Content Style Guide
This section provides a broad and extensive overview of the nonprofit news landscape, the risks and opportunities, and then offers strategies for assessing the feasibility of your plan. It is adapted from a grant-supported whitepaper INN produced several years ago. The principal author was Elizabeth Osder, who helped launch ProPublica, working with editor Evelyn Larrubia and contributing writer and research analyst Kaizar Campwala.
Technological changes have shifted the media landscape and undercut the tidy economics built on the bundling of content into a limited number of distribution channels. Today journalism has become unbundled from traditional packages, through an endless-channel digital universe. This has fragmented audiences, and created fierce competition for the most precious commodity in the information economy: attention.
A fragmented media market with dwindling audience attention requires product-marketing discipline. You need to listen to the market not only for the stories that can make a difference, but also to identify opportunities for packaging and distributing those stories in the most productive way. In the product-marketing world, good products that are well marketed (delivering the right message, at the right time, in the right channel) to a clear customer often find success.
The forces that destroyed the profits that underwrote great commercial journalism have not gone away. In order to avoid becoming similarly unsustainable financially, nonprofit news sites must confront these market realities and keep their eye on the bottom line.
The other, more hopeful side of the coin is the emergence of a new media ecosystem that allows content creators to publish cost-effectively and find audiences with a degree of efficiency and scale unimaginable in the past.
If you want to be both a content creator and distributor of news, you must ask whether revenue from distribution activities will subsidize the cost of content creation, as it did for newspapers and other traditional media. Since the internet unbundled production of content from distribution, you face a huge number of choices about how and where to find an audience. Just because you can write once and publish across many platforms doesn’t mean you should. Decisions about how to distribute, bundle and productize your journalism require disciplined prioritization and measurement. You need to ask yourself: “Does the value of this channel justify the complexity and cost of delivering it?”
The exponential increase in information channels ushered by new technologies has diminished the reach of newsprint and broadcast news. Aided by tools like Google, Twitter, and Facebook, consumers can now find the content they are interested in across thousands of information publishers online. To maintain mass reach, media companies are increasingly forced to package their content and distribute it across a variety of channels, from online to mobile to apps.
Revenue and production management across a growing array of channels will continue to be a challenge for the foreseeable future. Tried and true time-based broadcast style promotion (using email, social media, events, and partner promotions) is essential to maintaining your audience. Being organized is only the beginning; classic project management skills and frameworks that remind us of the challenges of maintaining quality in the face of increased scope, and limited resources and time can come in handy but are generally applied in a far more agile way. In the example here, the challenge is to maintain an equilateral triangle, so changing one dependent variable (scope, schedule, or resource) requires a change in the others.
Failing business models, bankruptcies, consolidation and reorganizations have pressured commercial news organizations to reduce fixed costs across the board. Coverage of public policy issues has been disproportionately affected, due in part to layoffs of older, experienced (and more expensive) journalists who have traditionally covered these complex topics.
As news executives look to continue reducing fixed costs, they are more likely to entertain variable cost solutions like outsourcing and collaborations. There are countless examples, with varying degrees of success.
The marketplace for INN member sites and content still resembles a colorful bazaar where it’s often difficult to discern:
• Who is doing the selling and who is doing the buying?
• What are they selling?
• How are they packaging and promoting (a beautiful sign, a pretty bag, or a baker’s dozen)?
• Why buy from one vendor and not another (quality of goods, uniqueness, credibility of the vendor, pre-existing relationship, or the recommendation of a trusted friend)?
Issues of pricing are still immature, and there is not enough combined scale in the market or clear editorial budgets for pricing to become more standardized.
The explosion of nonprofit news sites bodes well for innovation in the industry. But it’s unlikely that all of these organizations will find a path to sustainability. For some perspective, approximately 75% of nonprofits registered in the United States fail in the first year. Although many reasons are cited, some of the most common include:
• Lack of planning
• Over-expansion
• Poor management
• Insufficient capital
• Poor diversification of funding
These factors are similar to new small businesses, 50% of which fail in the first five years, according to the U.S. Small Business Association.
The National Venture Capital Association estimated that 40% of venture-backed companies fail, 40% return moderate amounts of capital, and 20% or less produce high returns. In his blog post titled “Why Early Stage Venture Investments Fail,” Fred Wilson, founder of Union Square Ventures in New York writes, “Most venture backed investments fail because the venture capital is used to scale the business before the correct business plan is discovered. That scale/ burn rate becomes the cancer that kills the business… capital efficiency and bootstrapping are critical values. You must keep your burn rate low until you can show without a shadow of a doubt that you have a business model that works, can be operated profitably, and is ready to be scaled. Then and only then should you step on the gas.” (Source.)
Despite all the talk about entrepreneurship and innovations, the journalism business still seems largely trapped in a 19th century factory production model. Just as good journalism requires a variety of sources and rigorous fact checking, the organizations working to bring a journalism product to market must have an ongoing conversation with that market about its needs (not for the journalism itself but for how it is packaged) and align their products with those opportunities. What we learn from startups and product companies is that flexibility in how products are packaged, deals are made, and customers are acquired are the ingredients of successful organizations. That knowledge and feedback come from ongoing customer conversations.
One of the most encouraging things we heard repeatedly is that the fundamentals of the craft still matter greatly. It’s not only the quality of the investigations that matters, but also the quality of the writing and copy-editing, the production value of related materials, the documentation, and the fact checking and sourcing. A well-written, well-researched, well-executed (balanced, accurate and fair) piece still matters to partners and the people who care enough about news to be your consumers. To that same end, craft and experience matter in all of your hiring including the related functions of business, technology, marketing, and social media.
It matters by whom and where investigative journalism is done. Credibility is built over time and founded in trust. Opportunities to deliver impact continue to be bolstered by standing relationships with trusted sources, and influencers, and career-long relationships with decision makers at potential partner sites. In building a new news brand, success comes from building relationships with not only your audience but also all of the stakeholders your news product will serve.
Story selection is perhaps the most obvious, but largely overlooked key attribute of nonprofit investigative news. The stories these organizations choose to pursue and how closely those stories align with their stated mission is core to INN members defining and achieving success. Selecting the right story and managing the correct resources to deliver it remain key. If a story is unique, finds an audience, goes viral, and activates public or key figure influence, it is successful.
It takes time for definitive trends to emerge from a disrupted market. What follows is a short list of those that seem most relevant:
Crowd-sourcing: Where once hard lines were drawn between journalists, media companies, sources, and citizens, today’s collaborative opportunities include media working with the public.
Unlocking the value of data: No longer the domain of “computer-assisted reporting” specialists, collecting, analyzing and providing access to large datasets has become easier.
Selling subject expertise: Consumers looking for consistently reliable information on topics important to them have shown a willingness to pay for it.
Freemium model: In a “freemium” model, a product or service is given away for free to the majority of users. A small minority sustains the business by paying for enhanced services that are of value to them.
Packaging and Bundling: The next phase of report once, publish everywhere is optimizing your content for the right distribution channel. Whether that means localizing a national story to a region or creating a video presentation of an investigative piece, repackaging or customizing can be a value-add for distribution partners, allowing a story to achieve an audience of scale and resulting impact.
The basis of a market view lays in an understanding of stakeholder needs and motivations. The group as a whole represents the people, groups, and organizations that make up the commercial market and form the foundation of our civic life, the ultimate customers of nonprofit public-interest journalism.
There are two quick frameworks that can be helpful for assessing the feasibility of your idea.
The first is the well-known “Strengths, Weakness, Opportunities and Threat,” or SWOT, analysis. Usually workshopped using a two-by-two grid similar to this and forcing the following questions for the project team:
Another lesser-known framework, called “Porter’s Six Forces Structural Analysis of a Non-profit Industry,” expands upon traditional competitive assessments by providing a more comprehensive perspective of all of the actors impacting a marketplace.
The framework addresses critical marketplace components including: competitors, funders, audience, suppliers/journalists, barriers to entry, and possible substitutes.
As a tool, the framework is very easy to use and can facilitate a level of specificity that can focus the best of plans.
Try talking through your product and its operations from the perspective of each of these categories, starting from top to bottom, then left to right.
Existing Organizations: Are there few or many in this space? Can you name each of them and begin to think about how your product will exist in the marketplace with them? Will you compete or collaborate?
Barriers to Entry: How hard is it to do what you are doing and what will stop others from entering the market and competing with you? What can you do to raise the barriers to entry and make your product more competitive?
Substitutes: Are there other products that are reasonable substitutes for your product? Is other media doing this work “well enough?” Could another media company invest in its investigative unit and quickly supplant your product?
Audience/Customers: Is your audience concentrated or fragmented? Will it be easy or hard to reach, and how will its concentration impact your product and marketing requirements?
Funders: For nonprofits this framework has regularly been adjusted to address the availability of funding. Are funding sources abundant or scarce for your effort? Have you analyzed your topic and community to understand what funding could be available and sought to expand the pool of possible funders?
Suppliers/Journalists: This input generally addresses your labor pool and whether it is exclusive or non-exclusive. For many investigative journalism shops this is where the market gets made. The number of journalists with the skills to do meaningful investigative work is limited; therefore a “lockup” on suppliers can create additional opportunities in the market.
Whatever approach you use for your competitive analysis, what’s important is that you spend time aligning your mission with the right product and operating tactics to deliver the impact that got you in this business in the first place.
Content distribution may seem like a technical issue but you must also think of it as a key strategic decision.
Most aspects of your business model, how you reach readers, build audience and drive the impact of your journalism will all flow from your strategy of how you get the news to your audience. In addition to funding journalism, distributing journalism has become one of the great, complicated challenges of all news media today. In chapter 4, we will explain the basic revenue sources you have available – money from patrons and foundations, readers donating or buying memberships, sponsorships, ad sales, events, syndication, and payment for training and other services. The mix that works for you will depend on where you fall between or combining two basic structures or strategies for news nonprofits: Are you creating a publication or a reporting service?
If you have determined that you want people to come directly to you for news, you will be building a direct relationship with consumers. You may market to them through social media but your goal is to have them come to your website, get your email newsletters, attend your events, or listen to your podcasts. Your promise is to give them news they can’t get anywhere else. This is the familiar media model. Your challenge is building that audience, and getting them to financially support you. You likely will seek donations or offer membership. Businesses in your geographic or topical area will sponsor or underwrite your coverage. Most local news is done this way, building its own audience, just as a radio station or newspaper might.
A different approach might be better if your goal is to do expert, often specialized reporting. It might be covering health care in your state, water issues, the statehouse, investigative news. With narrow topics or beats, or less frequent stories that take longer to report, it may be challenging to build a big enough direct audience, so you are likely to provide your reporting to other publications or broadcasters that already have built an audience. We sometimes call this a studio model, comparing it to the Hollywood movie studios that create content distributed through other companies in the film industry.
Most nonprofits are hybrids or are trying both strategies. They try to leverage the audience of existing media and digital platforms to build awareness of their work and build a direct following over time. Or they have their own web presence but really do mostly project work for other media.
Whatever mix you decide on, we encourage you to think this through and anchor your business model in one strategy or the other, because it really affects the mix of how you can make money to support the journalism. If you have a direct local audience, your potential for major reader revenue is high. If you produce news that is carried mostly by other media, readers may not recognize your brand and you’re more likely to be successful with major donors and events, for example.
Deciding now on your basic strategy will help you make the most of the audience development and revenue model information in the next two chapters.
Chapter 3: Audience strategy and development: What does it take to fulfill your mission?
This chapter covers market assessment and what it takes to fulfill a nonprofit’s mission. It discusses strategies for building both a direct audience and distributed audiences, which are reached through syndication and redistribution of content. It offers resources on building an email list and creating newsletters to develop an audience willing to support the organization.
This chapter covers market assessment and what it takes to fulfill a nonprofit’s mission. It discusses strategies for building both a direct audience and distributed audiences, which are reached through syndication and redistribution of content. It offers resources on building an email list and creating newsletters to develop an audience willing to support the organization.
“When the old model is broken, what will work in its place? The answer is nothing will work, but everything might. Now is the time for lots and lots of experiments.”
— Clay Shirky
The key to audience development is the theory of the audience funnel. At the top of the funnel you attract as many people as possible to interact with your organization. Ultimately, at the bottom of the funnel, you’ll have a smaller group of people, but they will be the ones who sustain your organization over time. They will be so engaged with your content and such champions of your organization that they will fund your work.
A key aspect of audience development is knowing your potential audience. You can’t assume it’s the whole universe. Not everybody wants your content. To identify your potential audience you must do some market research, which may sound like an unfamiliar job, but journalists know how to do research and the next page of this guide will show you where to start. Whether the market is geographic or topical, figures are available showing how many people the market encompasses. Who are the competitors in that market, and what percentage of the market has supported those competitors? If a publication in the market shut down, why did that happen, and what percentage of that publication’s subscriber base could you reach to expose them to your startup? Are there new competitors coming in to fill the same void you have targeted?
Understanding the size and shape of your funnel must happen early in your business planning because it may lead you to rethink your product. For example: An education writer who has covered the schools in Springfield decides she will start a website about Springfield schools, aimed at the town’s parents and teachers. The population at the top of the funnel is limited, say 20,000 people, and market research shows (hypothetically) that in other towns, only one in five parents and teachers go online to get general news and information about local schools, and only one in five of those readers say they would pay for that news and information. Simple math shows that her organization has 800 possible donors. If they eventually gave her an average of $50 per year, her potential revenue would peak at $40,000. She decides that’s not enough to fund her costs, so she must start thinking about growing the number at the top of the funnel.
There are many ways to increase the potential audience. The organization could target a larger geographic area or broaden its topic. It also could add a product aimed at a separate audience, for example the education writer could repurpose some of her content into a newsletter aimed at policymakers statewide. At the same time, she would have to stay aware of any factors that could narrow the top of her funnel, such as a new competitor or demographic changes in the market.
Successful INN members have followed a target-then-grow strategy:
For example: EdSource targeted the teachers, administrators and officials who needed a more convenient way to access the vast amount of public information that affects education in California. Then it used social media to broaden readership to a much larger group — parents. The Texas Tribune started with statehouse news for political insiders, and its audience gradually broadened along with its coverage.
This chapter will explain how to apply these strategies.
The rest of this chapter goes into depth about all the work you should put into audience development, and it includes many links for further reading. Your guide is Tom Davidson, a journalist and digital-business leader who has worked for Gannett, PBS, Tribune Co. and his own startup. He starts with a question you may not have thought about:
Tell me what job you’re doing.
Nope. Not your “mission statement” (though it’s lovely and inspiring). And don’t try anything as vague as “We serve the information needs of our community!” People are overwhelmed with information – about the places they live, their jobs, their hobbies, the latest horror of reality TV, and especially that silly fundraiser their neighbor is running.
Seriously: What job do you do so well that the right portion of your community will visit you often enough that you can have impact? (Oh, and hopefully turn some of that audience into donors so you can keep your organization alive?)
Turns out that “job to be done” thing is vital to your organization’s future. (Need more motivation? Take a quick gander at these before-and-after readings about an attempt to start a replacement for the Rocky Mountain News in Denver. Spoiler alert: It did not go well.)
Fortunately for all of us, lots of smart people have spent years thinking about this “jobs to be done” thing.
Start with Harvard Business School’s Clayton Christensen, who invented the study of technological disruption (like the kind that has shredded the organizations many of us used to work for – and the kind that allows you to run your news nonprofit).
Or the American Press Institute’s wonderful “N2: A Blueprint for Transformation” project. (Leave aside the irony that API itself was forced to radically transform by changing economics of the media business.)
Or the Knight Foundation and Temple University’s “Table Stakes” project, which defines the things you must do to even have a chance to succeed in a digital-news environment. Rule #1: “Serve targeted audiences with targeted content.”
All of these focus on the same idea: Nobody seeks out a website, broadcast or an app to “fulfill their obligations as citizens.” Their needs are more particular: keeping up with the school calendar, or watching one particular development wend through City Hall, or watching the state Legislature because their next raise literally depends on the state budget.
Once upon a time, news products fulfilled a wide range of “jobs.” Think of a newspaper with local news AND nation/world reports AND the sports scores AND the horoscope AND Charlie Brown. Or think of the 6 p.m. broadcast that bundled together car crashes AND tomorrow’s weather AND some light features AND the hometown sports results.
Those things weren’t bundled together because there’s any natural connection among them (Really: how many horoscope fans also want to understand sub-Saharan Africa?). They were bundled together because of scarcity: Presses and broadcast licenses were too expensive to allow more than a handful of competitors in each place.
Technology has blown apart those economics. So the most successful organizations – think Pro Publica, ESPN or the Texas Tribune – are about very specific jobs to be done.
What’s yours?
Great! Now: How many people are interested in that?
Let’s say (absurdly) that I want to be the premier source of information about … Olympic-caliber luge athletes … from Utah. As of this writing, there are two of them. Even with their families, that’s not much of an audience.
So how many people are in your potential audience pool?
Don’t say “everyone who lives in my city!” Because you’ve already picked a more-specific job to be done, right? (Maybe even more than one.)
Not everyone who lives in your city is going to be interested in public affairs … or in-depth investigative coverage of government contracts … or the statehouse. (Yes, they should care. They should also eat more vegetables, and call their mothers more often. We’re dealing with reality, though, not “shoulds.”)
A real-life example: Nearly 28 million people live in Texas.
The Texas Tribune, however, declares that its core audience comprises those people who care passionately about public policy, politics, government and statement issues. Sure, the Trib will gladly take traffic (and donations) from any of the 28 million … but it focuses on reaching and serving the 4 million or so who fit their target “job to be done.”
Marketers call that the “total addressable market.” (You can read more about it in the customer research chapter of “Media Innovation and Entrepreneurship,” an excellent, and free, textbook.)
The Texas Tribune got to that 4 million number through looking at its current audience; U.S. Census and other public data about population and demographics; and finally by conducting some private market research. You don’t need to go to those lengths – at least not at first. But start by pulling together any and all information you can get about the number of people who have that job that you can do.
If your organization is built around a community of geography, start with the basic population data you can find at the American FactFinder, part of the U.S. Census. Grab any information you can get from your city, county or state about retail sales or other economic indicators, too.
If you’re serving a local or national community of interest – say, public education in Philadelphia – look to trade associations and licensing boards for more. In addition to the number of kids in Philly schools, for example, you should know how many licensed teachers there are in the district. (Pro tip: Find the research librarian at your local public library – or at a local university should you have access as a teacher or a student. Libraries often have pro-level statistics and research databases, like Factiva, Data Planet. Looking for directories of foundations or philanthropies? Check the Foundation Center and GuideStar data at Candid.org, and with your local community foundation.)
Finally, there’s one last piece of this “market assessment” – who is willing to pay for you to do that job? In other words, what local foundations or philanthropies share your interest in the issue you’re covering?
To recap: Your goal is to write a one-page market assessment that:
With this first cut at a market assessment, you’re ready to take the next step – developing an audience development plan.
RESOURCES:
Media Innovation and Entrepreneurship book
Community Information Toolkit (The Knight Foundation produced this systematic approach to finding out how neighborhoods get their news, what type of information is lacking, and how communities can go about filling those gaps.)A Path Forward: How to fill the gaps in local news (Northwestern|Medill Local News Initiative, 2022 report by Penny Abernathy)
(continuing with Tom Davidson’s contribution)
Do it right, and you’re on a solid path to sustainability. Don’t bother with it at all and you’ll forever be scrambling to achieve your goals. Your organization might fail. Sounds daunting, and in fact, developing and implementing an audience development plan involves continual work. The one-time research you conducted to decide the “job” you’re going to do for your audience was just the beginning.
This section is about making a constant effort to recognize that all your community/audience members aren’t the same, and understanding those differences will be your job month in and month out. You or someone in your organization will be devoting time to that task instead of writing or editing content. It’s a job that legacy news organizations assigned to marketing and circulation departments, but in the digital news era, newsrooms should understand the audiences. In fact, they may be uniquely positioned to do so.
The reality? Many people who could benefit from your work have never even heard of you. Only some of those who have heard of you have ever consumed your work. Most of those people visit only sporadically.
But a handful – a vital handful – are loyal users. They are your biggest fans, the ones who spread the word about your awesomeness and the ones most likely to provide other support you need. A common way of thinking about that progress is as an audience development funnel. (Some of you might want to turn it upside down and think of it as a ladder. That’s OK. We won’t judge.)
The key stages are:
Awareness: The portion of your community that has heard about you – but hasn’t sought out any of your work yet.
Sampling: They’re part of your audience – but the fickle part. They’ve visited. Once or twice. And not for long. Analytics people call these “one-and-dones,” as in people who visit, read one piece of content, then disappear.
Habit: Those people who visit you a couple of times a month – more than average, in other words. But you probably don’t know who they are.
Loyalty: The heavy consumers of your work – people who can’t do without you. Collectively, they’re probably only 10 to 15 percent of your total visitors, but they’re generating half of your content views.
Advocacy: Your BFFs. The people who forward your work to friends, cajole others into checking you out, and maybe even give you money.
At every step, the pool gets smaller, but the engagement increases dramatically. And if you’re thoughtful – and take the right steps – you can move people down the funnel (or up the ladder) to greater engagement. Think about steps you can take to move a portion of the audience to the next stage.
This list isn’t meant to be exhaustive – and there’s no “one size fits all” playbook. But here are some techniques worth testing:
To build awareness: Participate in community events – yes, physical ones if you can, but don’t ignore the virtual ones. Every community out there has a message board or Facebook group. Participate in them – and not just as a promoter: (“Read our lovely content!”). Instead, be an active force for good – offer advice, make connections, genuinely engage and be part of the community. It builds awareness of your project – and also persuades people to sample your work.
To build sampling: Promote your work where it makes sense. Social media, for sure. But also make sure your work is easily discovered and shared. That means search-engine optimization, and making sure your page designs include other stories. (Don’t be like a public-media site that once featured a design in which every article page was a dead-end with no obvious link back to any other part of the site.) The right partnerships make sense, too – if they’re designed in a way to get people to visit your digital presences (not just read everything somewhere else).
Loyalty and habit are about making it easy for people to return to you – and email newsletters are an effective method.
To envision the what your funnel will look like, consider what it will take to move some of your audience members through it. Your starting point is your Market Assessment – that research you performed about the total size of the community you seek to serve. (You remember – this module? Oh, you didn’t do it? Go back. We’ll wait.)
Start with your Total Potential Market – the largest possible group of “community members” who might ever be interested in you.
Now get realistic: How many of them can you reach? What other competitors are competing for their attention? That’s your Total Addressable Market. (It’s smaller than the Total Potential Market. A lot smaller. Especially when you’re starting. Deal with it – it’s better to be conservative at this stage.)
Now: how many are you reaching TODAY if you already have launched? That number is easy to find, in Google Analytics or other metrics software. (Just keep in mind: Unique visitors means devices. A visitor who sees your work on a desktop computer, laptop and phone counts as three unique visitors – but just one human.)
The total unique visitors for the past month is probably a lot smaller than the total size of your community (that potential audience). That’s OK. Think of it as your growth potential.
Now’s where the real digging starts: Let’s say you have 50,000 visitors in a month. What portion of them are loyal or habitual users?
The sad truth: Something like half of your visitors came once, then left and didn’t return. (That’s especially true if you had a piece of content that went viral.) It’s great that your work was exposed – but those “one and dones” aren’t an audience you can easily monetize – and if you fixate only on growing that number, you’re on the Path to the Dark Side of Clickbait.
Instead, do some math: Take your unique visitor number. Divide it by the number of visits. (You’ll find that in your analytics software, too). That’s the average visits per unique. It’ll probably be two to four visits per month. Now: Look at the portion of your visitors who came more than average. It’s probably a small percentage – certainly less than 25 percent – but that small fraction of your audience was likely responsible for half or more of your total content views. Those are your loyal and habitual users. And a subset of them are potential subscribers / members / donors. (Ken Doctor’s excellent “Seven percent solution” outlines this phenomenon brilliantly.)
Once you know these stages – and the rough proportion of your audience in each – you can develop the guts of your audience plan. Those are a series of steps to grow the total audience and move some of them through the process toward becoming loyals and advocates.
That brings us back to the warning at the beginning of this section that we would be talking about continual work, which can be summed up as “Build, measure, learn.”
It’s really just applying the scientific method to your audience efforts. Don’t go into new projects saying “Let’s try this new thing to, ummm, see if it works!”
Instead, chart out specific goals that you can measure and test against reality:
“We theorize that a weekly email newsletter of our top stories will increase repeat visits by recipients. We will promote and launch that newsletter on (Date), and compare return visits by subscribers 90 days later. We’ll deem this a success if we have 2,500 newsletter subscribers by that time, AND those subscribers’ average visits per month are at least 15% higher than non-recipients.”
Those goals help you to understand what’s working – and, just as important, stop doing things that aren’t.
Did our weekly email newsletter hit its goals?
Yes: Keep doing it! Think about expanding!
We missed by a mile: Stop! Spend your time, effort and money elsewhere!
No, but we were close: These are the tough ones. What tweaks could you make to improve performance? Did you promote the effort enough? Is your email signup process too clunky? Is that new content initiative really doing a “job” that the audience wants done – or are we simply publishing for ourselves?
You’ve probably figured out the hidden secret in this by now: Your audience plan isn’t an act, because it never ends. One test leads to another. Each deployment of a new feature or project is measured – and whether it works or fails, you learn something that informs the next set of experiments and ideas. In other words, your audience development plan is a mindset as much as anything else: Build. Measure. Learn.
RESOURCES:
A Tale of Two Newsrooms: Lessons on Accurately Assessing Your Audience (Tom Davidson via INN, 2018 video)
Harvard Business Review on “Lean Startup” Method (2013)
Mediashift Tip Sheet on Email Newsletters (2018)
Ken Doctor on the 7 Percent Solution for Digital Audience (2017)
American Press Institute on Converting Subscribers (2017)
Doing Journalism … Is an Act of Community Organizing (2010 – Ignore the date. This is a gem from Robert Niles, a former Los Angeles Times reporter who runs sites as varied as Theme Park Insider and Violinist.com. If you like it, I strongly encourage you to pick up his follow-up book (available in electronic formats or paperback), “How to Make Money Publishing Community News Online.”)
BetterNews.org: Use Mini-Publisher Approach to Drive Growth (2017)
BetterNews.org: Four Measures of Success (2017)
— Tom Davidson
(Continuing with Tom Davidson’s contribution)
You’ve done lots of work to get to this point – defining your “job to be done,” researching the potential and actual size of your audience, understanding the intricacies of the audience funnel. It’s all useless – and your vital mission will go unmet – if you can’t build and grow an audience for your work.
How?
There are many methods – and no set formula that will work for your project. But here are some quick idea-starters. Look through them, brainstorm your own, and then apply the measuring and testing process described in the previous section (The Audience Development Plan).
Sites that cover a geographic community can use in-person events much more easily than sites that cater to a community of interest that may be spread over an entire continent. But assuming you can meet your community face to face, what is the best way? Community newspapers learned long ago that they could not only cover the local parades and little league season openers, but could participate with sponsorships. Their people could set up booths, hand out promotional products such as T-shirts, meet new customers and remind others that they are part of the community. As the old saying goes: News ain’t in the newsroom. So find ways to meet your community where they are.
INN members run elaborate events such as the Texas Tribune Festival, which has drawn thousands of attendees over three days in downtown Austin. But INN member Mississippi Today makes a point of hosting more intimate events – open conversations in bars – with a Newsroom in the Taproom series. Other variations could be coffee-shop meetups with your editors or receptions with your donors where their “price of admission” is bringing someone who doesn’t know your organization.
You don’t have to organize all these events yourselves. Offer to do a meet-and-greet at community events, share your expertise on a conference panel, or help promote a community concert in exchange for a table in the lobby to promote your organization.
The keys: Be authentic. Make sure your presence enhances the event, rather than interrupting it. And – if you can – collect email addresses of interested people!
Why the focus on email addresses? Because you can do so much with them. Eventually, your development director can ask them for money. But not at first; that would be like a speed-dating marriage proposal.
Instead, you should have a templated series of emails you send to new acquaintances, explaining your project, discussing some of your successes, and asking for help in getting the word out about your work. Your goal is not to ask for money (yet) but to get these new friends to read and watch your work, and hopefully to build a habit of usage.
Maybe your audience problem is that people sample you but don’t come back often enough. Your metrics may show a high percentage of unique visitors who come to your site only once a month. Even the best sites have “one-and-done” rates of 50 percent – thanks, social media. But if your rate is pushing 70 percent or more, you need to do more to build habit.
Email newsletters are a terrific tool – one of the best – for building loyalty. They remind people of the value of your work, and they put them only one quick tap of their phone away from your work.
For proof of this concept, look at Current.org, the INN member that covers the world of public media. In the metrics of site traffic by day of the week, a spike appeared every seven days following the Thursday publication of a weekly email newsletter.
You can start, as Current does, with a weekly compendium of your best headlines. But look for other newsletter ideas, too – are there other jobs you could do for specialized audiences? Those might make worthwhile newsletters, too.
Email addresses have another – and powerful – use: You can use tools like Facebook lookalike marketing (and Google’s “retargeting” tools) to cheaply advertise to specific email addresses (those people you met at a community event, say) – and to others whom you don’t know but should.
Here’s how that works: Take a list of known fans of your work. (Maybe they’re loyal subscribers to an email newsletter, or steady donors). You can upload that list to Facebook and ask Facebook’s algorithms: “How many people in this geographic area (or who share this set of interests) look like the people whose emails I just uploaded?
In other words: If you have a list of just a couple hundred known fans, Facebook can use that trove of information they know about all of us to find other people who likely have the same interests – and thus would be interested in knowing about your project.
For a more detailed explanation of the techniques involved, see the free classes on audience targeting at Meta Blueprint.
This used to be a lot easier: Build a base of Facebook fans. Post content. Watch your audience build. Nearly a third of Americans regularly get news on Facebook.
What Facebook giveth, Facebook can taketh. That doesn’t mean your social media presence is useless; it just means that you can’t rely on Facebook automatically showing your stuff to all of your followers for free anymore.
Instead, be strategic: Yes, encourage sharing. Yes, post your best stories (and get your staff, board and friends to post, like and share). But also pay attention to how others use the tools. Notice, for instance, how The New York Times uses sponsored posts – yes, paid ads – to promote great stories and to promote subscriptions. You might want to test how similar techniques can help you build newsletter signups or donations – both from your current followers as well as those “lookalike” audiences mentioned above.
These are just starting points for a true audience development plan – or, more accurately, your audience-development process. The key is to relentlessly focus on ways to grow your numbers – and then persuading some of those users to make your project part of their news habit. Test those ideas. Keep doing the ones that work; discard the ones that don’t and move on to the next.
RESOURCE:How the Biggest Consumer Apps Got Their First 1,000 Users (Lenny’s Newsletter, 2020)
We cannot solve our problems with the same level of thinking that created them.
— Albert Einstein
At the end of Chapter 2, we introduced the Basic Strategy Decision Tree and asked you to decide whether your business model will be anchored in one of these two strategies:
News nonprofits often end up doing a mix of both strategies, so this section on redistribution or syndication is relevant even if you have your own platform (website, newsletter, podcast, etc.)
In Chapter 1, you asked your community what they needed from you and how they wanted to get it, and in the previous sections of Chapters 2 and 3, you formulated your mission and targeted an audience, deciding whom you are serving. Your thinking about your potential audience may have been expansive: Everybody needs your news. But as a startup, you need to be tactical about building your audience. Unless you have an enormous bankroll and dozens of staffers, the more specific you are in your targeting, the faster you will be successful and the more successful you will be.
Determining your distribution strategy is the next logical step, because it will affect the crucial decisions you make in Chapter 4 regarding how you will earn revenue. As noted before, a direct local audience increases your potential for major reader revenue, but if you mostly distribute your news through other media, readers may not recognize your brand and you’ll need other sources such as major donors and event sponsors.
Free distribution: Almost all nonprofits give away content or syndicate it at fairly low cost for one reason or another. How you do so should be based on the decision you have made whether or not to anchor your business model on building your own direct audience. In the publication model, the free distribution is a form of marketing, and your end goal is to get those readers back as a direct audience. In the reporting service model, you give away content to increase your journalistic impact, which is tied to your grants and major donor funding.
Putting content out on social media is a classic example of free distribution for the marketing effect: You want people to discover your brand, find your website, become regular visitors, convert to subscribers, attend your events, or become members. INN’s member resources include social media support.
Paid distribution: Some nonprofits focus on paid syndication. Journalists who are well-known statewide can market their brand, and those who are expert in a subject area can fill coverage gaps for established publications. This business model is often called redistribution because the originator of the content puts it onto a website or into a newsletter, but the primary distribution method is through others. We also have called it a studio model, because it’s like the movie business where film creators rely on distributors and theater companies to put their product in front of viewers.
INN has negotiated licensing agreements allowing its members to distribute their content via several third-party platforms, most of which pay the member a small fee.
Mixed models: A reporting service that relies on paid syndication might offer free content as a loss-leader to get distributors used to carrying it and to prove its value to readers. A publication might use free distribution for coverage of a topic for which it has a patron or grant funding that wants a wider audience. Or free publication might result from a partnership or collaboration. Many nonprofits provide content in exchange for something of value besides cash.
Five things to ask for:
Analytics — data on who is reading your content is valuable and worth arguing for. You need it to understand the value of your content and communicate it to funders.
A free advertisement during your fundraising season
Invitations to events at which you can network with potential advertisers, donors or patrons
Your branding and a link to your website appearing with your content
Help with the coverage, such as bartering your reporting for their photos or multimedia
When another outlet republishes or otherwise distributes your content, knowing this is happening and analyzing the resulting engagement helps you and your funders understand your reach and how you are fulfilling your mission.
A Republication Tracker Tool originally developed by INN Labs allows publishers to share their stories via other websites and then track engagement of those shared stories with Google Analytics.
Simple metrics include page views and total unique users. Sites offering paid subscriptions or asking users to contribute or become members measure those “conversions” similar to how an e-commerce site tracks sales. Publishers are increasingly using time on site, time spent with particular content and frequency of visits to measure engagement.
Ample background on metrics is available online, including this 2018 article from Mediashift.org.
Our friends at the Shorenstein Center on Media, Politics and Public Policy at the Harvard Kennedy School have researched how nonprofit, single subject news sites can engage, grow and monetize their online audiences. If your organization is focusing on a single subject, such as health or education, we recommend you follow the Single Subject News Project blog on Medium.
Chapter 4: Explore your options: Revenue models for nonprofit news
This chapter introduces the most common revenue streams for nonprofit news, with examples. It offers templates for forecasting revenue based on the kind of revenue a news organization chooses to pursue.
Lisa Williams, INN’s former director of digital engagement, wrote this in 2015 for NetNewsCheck, which allowed INN to republish it. The following version is slightly updated.
Online businesses – and I include in this any organization that has to bring money in the door to keep the lights on – can be divided roughly (okay, very roughly) into two types:
Those of us in the media industry understand pageview-based business models: create content that a lot of people want to look at, and then make money running ads against it.
However, most web-based businesses are conversion businesses: give something away in the hope that some small fraction of the visitors to a site will “convert” – to being members, donors, customers, ticket holders at an event – you name it.
There’s a very simple test to figure out which of these two kinds of business you are. Ask yourself this question: “If I doubled my traffic, would my revenue double?” If the answer is “not even close,” you’re probably a conversion business. You may also breathe a sigh of relief at opting out of the pageviews arms race, leaving it to folks like Vox and Buzzfeed.
But now that you know you’re not in the race for pageviews – a race to the bottom, since the value of those pageviews is going down every year – are you doing what conversion businesses must do to grow and be sustainable?
In my world, too often, there’s a disconnect between what nonprofit news organizations see as the product – publishing journalistic work online – and revenue – how the organization brings in money to pay salaries, rent and the light bill.
How about we work toward reconnecting those things?
Take a look at any article page on your site and ask yourself: what am I asking visitors to this page to do besides read, watch or listen? Maybe you’ll notice that you’re asking them to share a link on Facebook, or follow your work on Twitter or leave a comment.
When visitors do the things you’re asking them to do, does your organization become more sustainable in the long term? How about asking them to cross the line from being consumers to being supporters of your work?
Successful organizations based on a conversion business model know that not every visitor will “convert” to a supporter, member, donor or customer right away (in fact, only a tiny fraction of visitors ever will – which means that you can’t ignore traffic growth just because you’ve opted out of the pageviews arms race). That’s why so many of them prioritize asking visitors to sign up for email newsletters instead of trying to get them to be Facebook or Twitter followers.
Why? Email is still king when it comes to conversion. People are much more likely to “convert” – become a donor, buy a ticket to an event you’re running, or support a Kickstarter – from a message they see in their inbox than from looking at a Web page in their browser or seeing a call to action on a mobile device.
So most effective conversion-based organizations think through their approach to their audience with a mix of direct calls to action (“Support our Kickstarter!” or “RSVP for our exclusive event!”) and asking visitors to sign up for email newsletters.
Want to steer your news organization in the direction of greater sustainability? Take a look at any page on your site – and resolve to ask a visitor to do just one more thing besides read, watch or listen.
Revenue models are dependent on the basic strategy of a nonprofit news site as discussed in the previous chapters. The publications that build a direct relationship with consumers are most likely to rely on reader revenue, which can come from these sources:
Reporting services that distribute more through other publications or broadcasters that already have built an audience may rely more on these revenue models:
Both types of nonprofit news organizations also may get revenue from:
RESOURCES:
A Case Study on Revenue Models
News Giving Roadmap – INN members have access to this program that provides customized tools, training and resources to help them advance from wherever they are on the fundraising spectrum to the next level.
Many established nonprofit news organizations ask their audience to support their journalism. This tends to involve some reader education because people are no longer accustomed to paying for news. With that in mind, it’s important to have a plan in place as you form your organization as to how you will engage and educate your audience to financially support you.
The education process begins as soon as you launch. Individual donors are those readers whom you will appeal to on an ongoing basis to support your work whether passively through a “Donate” button on your website or through email solicitations and social media appeals. Many newsrooms use social media to build their email list.
Building an email list is critical to a individual donor strategy for several reasons: email offers a nonprofit newsroom direct communication with its audience about the mission and the organization; email solicitations offer the highest return on investment (ROI) of any donor solicitation strategy; email can be used to distribute news content that is timely or targeted. Individual donor programs tend to work best for newsrooms with a direct audience since there are direct communication channels.
RESOURCES:
Nonprofits Need an Individual Donor Plan
3 Ways to Grow Your Email List
7 Emails for All Year Engagement
Many newsrooms consider membership to be the ultimate indicator of an engaged audience. A nonprofit can employ both individual donor and membership strategies in a sequenced process – a membership program is usually built from a base of individual donors.
How does a member differ from an individual donor? In some newsrooms the terms are synonymous or donors at a certain level of giving are considered members and are treated as such. Both donor and member giving can entail a predictable gift on a recurring schedule – weekly, monthly, yearly. The general distinction is that donors give but receive no tangible, ongoing benefits for their donations while inherent in a membership is a benefit exchange: a t-shirt, access to events, special communications, etc.
Additionally, most nonprofits use the recurring nature of the gift vs. a one-time donation as the differentiator for membership. The important benefit of a membership program for a newsroom is that it creates a predictable revenue stream that helps with operational planning and determining annual fundraising goals. Readers, especially those who join membership programs that offer minimal benefits, are sending a strong signal that they buy in to the organization and its mission. Knowing who these readers are is quite beneficial to the newsroom since these individuals can be cultivated to champion your mission, attend your events and connect you to potential donors.
RESOURCES:
The Membership Guide from the Membership Puzzle Project
Guidebook on how to build a membership revenue model to support local journalism
How nonprofit media can build a strong membership base
Tapping into the membership economy
The subscription economy is alive and well. The success of Amazon and Netflix have shown publishers that users are willing to pay for digital content. In 2016, The New York Times saw a 60 percent increase in digital-only subscriptions over the prior year. What’s the key to that kind of growth? An election year didn’t hurt, but according to The New York Times 2020 Report, the key to their success is strong, high-quality content.
How can a nonprofit news startup adopt a subscription model? A startup may have a significant and loyal audience that it ported over from a defunct newsroom. Because of the previous relationship, that audience may be willing to pay for content at the start. A more likely scenario is a freemium model where the content is initially free, to build audience. Once the newsroom has an established audience it may venture into creating specialized, high-value content for a subscription premium.
RESOURCES:
Guide to Audience Revenue and Engagement
Advertising vs. Subscription
The Membership Puzzle Project
(Video) Tow Center: Guide To Audience Revenue and Engagement
Events offer large and small nonprofit news organizations many ways to achieve impact goals. They can generate revenue, provide a vehicle for community engagement and create awareness of your organization and mission for potential audiences. If you are a digital newsroom, events bring you to life and can help you build trust with your readers.
In terms of revenue generation, beyond ticket sales, events lend themselves to sponsorship revenue. Several INN members with an investigative news focus have shared that it’s easier to get sponsorships for events because potential sponsors are less fearful of being associated with an event, which is generally viewed positively, vs. being associated negatively with hard news content on their website. Events allow for face-to-face interaction with your audience – they get to know you and you get to know them and how to communicate with them if you are strategic and capture email addresses. As noted above, email solicitation is a powerful fundraising tool with the highest return on investment. Building your email list at events will support your fundraising efforts long term.
RESOURCES:
Best Revenue Generating Strategies from Events
Boost Event Revenue Using Technology
Nine Benefits that Events Offer Your Organization
The John S. Knight Journalism Fellowships at Stanford University posted these tips written by one of its fellows, investigative journalist Djordje Padejski. The blog item was republished by INN with permission in 2015, and the advice is still current (with minor updates made to avoid broken links).
Many journalists trying to advance their innovation ideas look for grant money. Even though it is a writing task, crafting a proposal for a grant officer can be a tough job for a journalist. We have a tendency to use our charismatic storytelling skill, but grant writing is not creative writing. It’s not poetry. Ideas need to be presented clearly and concisely so it’s easy for grant funders to quickly know exactly what you want to do. Here are 15 tips on how to prepare effective grant from a journalistic perspective.
1. Be a reporter.
Research the issue you are addressing. Act like this is your reporting job and you are covering a story for your news organization. Find similar projects, look for their pitfalls, failures and successes. There are some really great tools you can use beyond Google to research grants and funders, such as the Pivot alert (subscription) and from Candid, the Foundation Center search tool (subscription) or Guide Star (free). Understand the funder’s perspective – learn and take notes!
2. Read the grant guidelines.
Carefully read the instructions before you even submit a proposal. Maybe the funder you are looking at is not a good fit for you. Get a better sense of the funder through the projects it has previously supported. Sometimes you can tailor the idea to fit the specific requirements; sometimes you cannot. It’s like working with different editors in the newsroom: There always will be ones who don’t like your stories.
3. Word of mouth.
Do you know someone who won a grant from the foundation you are thinking of approaching? Talk to them. Ask for an interview. Maybe you can even get advice. Grantees will always have insights on the funder’s dos and don’ts. People like to talk about their work, especially with a journalist.
4. One-sentence rule.
Keep your project description to one sentence no longer than 15 to 20 words. Think of it like the lead of your project. Even the most innovative projects can be defined briefly and described clearly. What exactly do you want to do or to develop? Do you plan to produce an iPhone app, launch a series of events or grow your audience in Europe?
5. Define a problem or a need.
Clear definition of the problem being addressed is the key to explaining any great proposal. However, don’t take up more space discussing the problem than your solution. Funders like to hear what problem inspired your idea, but they are also very interested in how you are going to tackle it.
6. Link your solution logically with the problem.
It sounds so simple, but not connecting the problem with the solution is a common grant proposal flaw. Think about how your proposed solution answers the problem you defined. Don’t emphasize issues you won’t address with your proposal. You don’t need to present the whole picture and that’s very different from journalism.
7. Clearly identify the competition.
There is no harm in mentioning organizations and projects that are similar to yours. Demonstrate you are familiar with the challenges. Make sure to explain how your approach is different from what already exists. If you are building on previous ideas or others’ work, that’s OK. You’re not expected to reinvent the wheel. Also, it’s highly advisable to refer to a similar project funded by your targeted funder.
8. Examples, examples, examples.
Refer to things people are familiar with. The tagline for my crowdfunding campaign on Kickstarter was: “FOIA Machine is like TurboTax for government records” — and it was clear that the project guides users in filing FOIA requests like TurboTax guides people through filing their taxes. Usually, you will be presenting abstract ideas, so it helps to illustrate with concrete examples.
9. Include visuals & links.
Attach visuals whenever you can. Add links to wireframes or illustrations that will help the reader to get a better sense of your project. Now, instead of footnote you can add hyperlinks to backup your points.
10. Key activities plan.
Break your idea into phase, be realistic about what is possible for different stages of your project. Naturally, every project has a beginning, middle and end, like a journalism piece. Leave enough time to kick off the project and, for example, hire a developer for the project. The end phase should include collecting and reporting feedback. If you are building a prototype, thoroughly explain the phases. If you are putting on an event, think about all of the things you need to do beforehand: book a room and speakers, draft an agenda, send out invitations.
11. Resources.
Be realistic about what you really have and what you really need to execute your project. Do you need five or 10 people on your team, full-time or part-time? Your friends may be a great asset, but don’t be too optimistic that they will all come to help you at the end. Find the balance to ensure you can deliver on your promises. Do not overpromise, do not underpromise.
12. Budget.
The funding you’re requesting should match the activities you are planning and resources you will need. And it should add up! Don’t forget to include all the costs, but double check work; budget exaggerations and math errors will undermine your position. If you are the principal, make sure to pay yourself, but do not spend half of the budget on your salary.
13. Details
Be as meticulous and exact as possible. Use strong and active verbs. Write in simple language. Avoid phrases such as “could become” or other ambiguous language and abstractions. Use facts, data and straightforward language.
14. Best person & team
You need to convince reviewers that you and your team have the necessary skills and background for the project. Some funders are very clear that, as the Knight Foundation once put it, they “won’t fund a proposal to build a tool for journalists or reinvent the government procurement process if no one on your team understands those spaces.” Therefore, make sure to note your related work or references. Attach letters of support; ask your supporters to discuss why your idea is important.
15. Vision
Try to integrate your overall vision into the proposal. Be careful not to overpromise. Few projects are likely to “start a revolution,” or “change the world” all by themselves.RESOURCES: Local News Lab: Unlocking the Secrets to Foundation Funding
Media Impact Funders (The Knowledge Network for Media Funders, maintains a searchable database)
Getting a Grant: How, Where and Why to Apply for Journalism Funding (News Media Alliance links to Guidebook and continuously updated Grants Directory)
Racial Equity and Philanthropy: Disparities in Funding for Leaders of Color Leave Impact on the Table (The Bridgespan Group, 2020)
Overcoming the Racial Bias in Philanthropic Funding (Stanford Social Innovation Review, 2020)
Advertising is a call-to-action from the advertiser to the publisher’s audience, usually to stimulate traffic to the advertiser’s business. Advertising rates are based on quantifiable metrics: CPM (cost per thousand impressions), page views, audience demographics, etc. Although there are similarities to advertising, sponsorships seek to establish a deeper, more holistic relationship between an advertiser and a publisher. Sponsorships tend to fall under the branding umbrella, which provides more options for placement than advertising, i.e. a sponsor could get ad space on your site, have their logo on your program and/or pay for the lunch at your event.
Compared with advertising, sponsorships are relatively easy to deploy as a revenue strategy. There are fewer infrastructure (website and back office) needs, however, both advertising and sponsorships require a solid execution plan regarding product or service offering, pricing, placements, etc.
As noted in the earlier section on Distributed Audiences, some news nonprofits focus on paid syndication. The extent to which this can be a revenue source depends on the mission, expertise and reputation of the outlet and the nature of its content. In the INN Index survey of 88 member organizations in 2018, only 24 reported syndication revenue, mostly in the single digits as a percentage of total revenue, and 17 of the 24 were investigative or explanatory organizations that have the capacity to produce stories other publications are not doing. Some organizations forgo syndication revenue because they are getting philanthropic funding to distribute their work widely and free as a public service.
RESOURCES: Knight Foundation article about how the Center for Investigative Reporting turned content distribution partners into paying customers.
Many nonprofit organizations outside the news business earn revenue providing training and other professional services. For example, you might know someone who paid the Red Cross for CPR training. Training and professional services currently make up a tiny share of news nonprofit revenue. But if you have an idea for earning such revenue, be sure to read the section ahead about the tax implications.
INN believes nonprofit news organizations have an enormous, largely untapped opportunity to dramatically grow their earned revenue. We provide resources on how to grow revenue from sources such as display advertising, event sponsorships, and sponsored content, and how to recognize the tax implications.
A nonprofit is organized for a particular mission, and the revenue related to that mission is nontaxable. But there are instances when a nonprofit does something the IRS deems to be not part of its mission. That revenue is classified as unrelated business income and subject to tax.
For example, if your nonprofit news site sells advertising, you may see that as supporting the mission, but the IRS can rule it as unrelated income. The distinction could be based on the ad’s content. If it is about the goods and services of the advertiser, or a company’s current special offers, it is not supporting the nonprofit mission. But if the ad space showcases a company as a proud sponsor of the nonprofit, then that revenue would more likely be recognized by the IRS as supporting the mission and therefore not subject to the unrelated business income tax (or UBIT). It is best to check with your accountant or tax adviser as you pursue an earned income strategy.
Other examples of unrelated income:
Some nonprofits may also owe state or local income tax on unrelated income. These jurisdictions generally follows the same IRS guidelines, but nonprofits should check with a tax preparer familiar with both their local laws and Form 990, which tax-exempt organizations must file each year with the IRS.
In late 2020, Google News Initiative and INN released the Nonprofit News Guide to Earned Revenue — a comprehensive “playbook” showing nonprofit newsrooms how to grow revenue from display advertising, event sponsorships, sponsored content, and other earned revenue sources.
The impetus for the guide came out of data from INN’s 2020 Index indicating that earned revenue made up, on average, just 11% of reporting members’ total revenue. But some statewide outlets (such as Texas Tribune and NJ Spotlight) had grown earned revenue to about one-third of their overall revenue.
OTHER RESOURCES:
IRS Publication on Unrelated Business Income Tax, What Nonprofits Need to Know about Form 990
INN Case Study: How Madison365 Stays True to Its Mission While Earning More than Half Its Revenue from Businesses
INN Case Study: Rivard Report; How a Local News Organization Managed to Generate 3X More Earned Revenue than the Average Nonprofit Newsroom
Some INN members, including Adirondack Explorer and Nonprofit Quarterly, have print products that provide them with significant revenue from advertising. Print publications also may have promotional value and maintain loyalty from legacy subscribers and supporters. Some INN members launched online and added print publications, such as The Highlands Current in New York State. Most of the smaller INN outlets that are publishing in print also are posting news online daily.
So what role should print play in a startup business plan? INN believes there is no one answer. Instead, startups should look at what has succeeded at outlets serving similar geographic regions, covering similar topics or otherwise sharing common characteristics.
When we surveyed 88 newsrooms for the 2018 INN Index study, 14 had print products (16%). The total circulation of the print products was nearly 740,000. (That number did not include Mother Jones, an INN member that began as a national magazine in 1976, has embraced digital-first publishing but maintains a paid print circulation of 190,000.)
Even among news nonprofits that have a print history, donations and grants often remain the biggest source of revenue. A member that has been publishing a regional magazine in the West since 1970, High Country News, reported in 2019 that it was getting a little over 4% of its $3.5 million in revenue from advertising, sponsorships and events, compared with 68% from donations, grants and other contributions.
Henry E. (Hank) Scott, a media consultant with wide-ranging experience in publishing, explains below the print strategy he used as founder of West Hollywood Media Company:
When I launched WEHOville.com as a hyperlocal news site in 2011, I was told by a good friend, Alberto Ibarguen, who runs the Knight Foundation, that it’s impossible for a digital news site to be profitable without a print component. At that time, WEHOville, wasn’t a nonprofit (and didn’t have an affinity relationship with one) and couldn’t solicit foundation or local tax-deductible donations.
I believed Alberto, in part because of my earlier work as part of a group turning around the Creative Loafing alternative newspaper group. I worked with all the papers — Chicago Reader, Washington City Paper, and Creative Living Atlanta, CL Charlotte, CL Tampa, etc. But I lived for a year in Atlanta and focused closely on that paper. We had great web traffic, but I remember that most local advertisers, while they felt they should embrace digital advertising, also wanted to advertise in print. “My wife loves to see the ad in the paper,” was a quote from one business owner that I will never forget.
I also remember hearing about the importance of print from managers of major brands such as Yves St. Laurent when I was working as a consultant for The Wall Street Journal, which was working on a plan to launch a Saturday edition with more of a lifestyle focus. The YSL manager told me it was important, given the quality and reputation of the brand, to have its ads printed on high quality paper and published adjacent to quality content, which he told me was something he couldn’t count on digital media platforms to provide.
So WEHOville launched West Hollywood Magazine, a high-end publication focused on art, style, architecture and design and the people involved in all of that in West Hollywood. Unlike other “city” magazines on the Westside of Los Angeles County, we did not engage in a “pay to play” process. That iteration of West Hollywood Magazine was very expensive to produce, with elaborate photo shoots, well-paid writers and printing on quite expensive paper.
We later reduced the print quality of the magazine and changed its focus to less upscale topics — WEHOville’s annual Best Of contest, etc. We continued to publish every two years a tabloid newspaper election guide to educate local voters about City Council and L.A. candidates and issues on the ballot. Both are quite profitable, although also are a lot of work.
Scott sold the company in 2020 without fulfilling his dream of launching a weekly print edition, which he said he thought would work because a city survey shows 50% of West Hollywood residents would like to get their news in print. And one is able to get a much higher profit margin from a print ad.
Foundations are investing many millions of dollars in nonprofit news. This seed money is fueling the fast growth of the field, but nonprofit news organizations must determine what revenue mix will be successful for them over time. In February 2019, INN hosted a town hall that provided an overview of where nonprofit outlets were getting their revenue and what they would need to do to sustain themselves in the future. The hourlong video also reinforces many points made so far in this guide and provides answers to common questions: youtube.com/watch?v=qMiGjrl39Ls&source_ve_path=OTY3MTQ&embeds_referring_euri=https%3A%2F%2Finn.org%2F
Chapter 5: How to think about fundraising and partnerships
This chapter explains a philosophy of fundraising well-suited to journalists and nonprofit news called “the partnership approach.” We’ll cover making a funding pitch and two things you must have before you launch your organization: a policy regarding ethics and transparency in funding and startup capital.
Approaching funders can seem like a transactional business that journalists are not comfortable with. But it actually can be equated with what a reporter does in approaching sources. People who take a call from a reporter don’t talk because they want to make the reporter happy and help the reporter meet a deadline. Talking to the reporter serves some greater need. The source and the reporter become partners, in a way, in getting news out to the public. They both have different needs, but their needs align.
Fundraising is similar, although not confrontational in the way reporting sometimes can be. We encourage an approach captured very well by Jennifer McRae, a Harvard researcher who writes about the alignment between philanthropists and social change leaders. It is not begging for money, putting your hand out. It is asking for someone to invest in you, but that investment is made around a common value, in which your patron, investor or donor is a partner with you in accomplishing something.
You go in conveying your story and the impact you have or hope to have, but you also need to explore and understand your prospective donors’ values and what they want to accomplish. Your fundraising depends on finding a shared goal, although it may be something you and the donor value for different reasons.
This may sound theoretical, but the partnership approach is an important way for nonprofits to frame their relationships with funders to successfully develop revenue streams. The previous chapter explained the various revenue streams that can pay for your reporting. The initial work you do understanding your audience and your community needs will help you determine what revenue models will work for you. It is important to have more than one revenue stream, and not be overly reliant on the interests of benefactors that may shift over time. But each revenue stream takes time and effort to develop, so rather than chasing every type of revenue, you may have an anchor and some secondary revenue streams. The advice in this section applies to all philanthropic giving, whether from a foundation or an individual of high net worth, and it applies to reader revenue, whether it involves membership or individual donors. The only revenue stream it may not apply to is earned revenue, which may be more transactional.
RESOURCES:
“The Generosity Network: New Transformational Tools for Successful Fund-Raising” book by Jennifer McCrae and Jeffrey C. Walker
Searchable database of foundation, charity and nonprofit tax filings from Candid: 990 Finder
Your pitch to different funders should vary somewhat, but you should not change your core values and accomplishments to meet the interests of your funders. You need to know and communicate to all possible funders your mission, what you are good at, and how you are serving the public. You don’t want to be pulled wildly one way because there is funding there and then wildly another way because there is different funding next year.
Nevertheless, your mission and work will probably have different aspects that you can emphasize when talking to prospective funders. Finding out what in your work excites or resonates with your perspective donors should shape your funding pitch. Suppose a news organization’s core mission is to cover environmental issues. Communicating with a journalism foundation about what in that work is important to them might be quite different than what’s said to an organization that wants to build public awareness of an environmental issue. Your pitch will vary with institutional donors depending on their needs and what they hope your work will accomplish.
Individual donors also have different interests in what you are doing. One might really love reporters, think they are doing heroic work, and want to support good journalism. Another might be motivated by a desire to have community members become well-informed voters. Both those individuals may support you, but your conversations with them should be different, reflecting what in your work appeals to them. The first conversation might be a behind-the-scenes look at who your reporters are and how they covered a story. The second conversation would focus on stories that had never been told before, the extent of readership, and the civic impact of the journalism.
Resource: Solutions Journalism Network’s Learning Lab, Revenue Playbook
Nonprofits should be as open as possible around their sources of funding for several reasons: Research shows that when people know where support for a newsroom comes from, they have a greater sense of ease around their relationship with the news source. With technology companies providing so many platforms that push out news from a mix of reliable and shady sources, people really have to pay careful attention to know where their information is coming from. Nonprofit news organizations help restore trust in fact-based media by building a relationship and creating engagement with readers, listeners and viewers who feel they know the newsroom team producing the reporting they are consuming.
The financial reports of nonprofit news organizations are public records. Most people are not going to go through the trouble to find your 990 tax returns, but you can make it easy for them by posting your financial records, and any audits if you are audited. Publishing the information demonstrates your sense of responsibility to your audience and supporters. Being open about funding helps differentiate nonprofits from for-profits and positions them as a community asset. Nonprofits don’t pay taxes because they are a public trust, so they should be transparent to reinforce that idea.
Some nonprofit newsrooms have been unsure what to do when offered a truly anonymous donation. They feel that can’t be influenced by a donor when they don’t know who the donor is. But the lack of transparency has risks: It is difficult if not impossible for the public to know and trust that you don’t know or at least have a good idea who the donor is. And you could find out too late that the money came from a problematic source. Another challenge to maintaining transparency involves donor-advised funds. When a newsroom lists such a fund as a donor, it may have a name but obscure who is behind the fund.
INN recommends that its members publicly declare any gift above $5,000 per individual, and for the most part they do so. INN advises startups to avoid taking any significant amount of anonymous funding, to establish trust. Over time, exceptions may arise where a small foundation demands anonymity and a nonprofit agrees, but only after careful consideration. Established news nonprofits have worked out processes for deciding when and how they are going to decide to take such funding.
Having a written ethics policy at the time a startup launches is not difficult and will save trouble and heartache. Put it on your website and on your grant acknowledgments. It is important to make clear to funders and to the public that donations are never tied to involvement in the editorial product. Many honorable people who are upstanding citizens and not out to corrupt you may simply have never thought about editorial independence. They may be business people who are used to getting something in return for their money. Having a clear ethics policy and discussing it when you first go out and start asking for money will strengthen your relationships and prevent misunderstandings. To be diplomatic and not accusatory, the discussion should be framed around the value of news and what readers gain from your editorial independence.
Sample ethics policies are on our website, and on our members’ sites. The policies vary as members adopt wording from each other, from the Society of Professional Journalists and from nonprofits outside the news industry.RESOURCE: Using campaign contribution data in your fundraising
Later in this guide we will discuss how to project your revenue and expenses in your business plan, and deal with your overall finances. Here we address the earliest stage of financing a startup, the capital also known as seed money. Across the country, the nonprofit news sites that have grown rapidly and become powerhouses within their states, and those that have become influential and had impact in their topical journalism, often started with a substantial bankroll before they even began publishing. The Marshall Project, Texas Tribune, Voice of San Diego, MinnPost, rapidly gained a foothold because they were backed by investment capital upfront.
Many journalists come to INN saying they are planning to start a nonprofit by bootstrapping it. They plan to just start writing to show people what they can do and then raise money. Jumping into publishing that way creates a very challenging route to success. We have found that you are going to be able to do more journalism with more impact more quickly if you have funds upfront—raised even before you formally organize as a 501(c)(3) nonprofit.
Our recommendation is that whenever possible you gather enough capital to cover a minimum of two years of expenses before launching. We advise startups to spend equally on the journalism and on building audience and support. If you are starting with one person leading the newsroom and another on the business side, your expenses include two salaries plus whatever you have outlined in your business plan as the professional services and equipment you need to get registered and develop your mechanism of delivering news. If you have enough funding to start with more staff, you can expect to have more impact more quickly, and that in turn will help you raise more funds.
As you are planning your publication, you should be out talking to your local community or the community of people who really care about the topic you will be covering. As you do that, you will develop and refine a summary document or slideshow (often called an investment pitch deck) that communicates what you intend to cover and why you are qualified to do so. You will want to leave behind with them a presentation about what you are intending to do and what part they can play. The same points should be very clear in your mind so you can talk simply and compellingly to inspire excitement about participating in your venture as a key donor.
The terms partner and investor are sometimes used interchangeably to refer to the key donors who provide our members’ upfront capital. But while an investor in a for-profit company typical expects a financial return in the form of shares or a cash payback with interest, the payoff for the investor in a nonprofit news organization is the coverage that results and the strengthening of the community in which you and they live and participate. Your pitch therefore focuses on that outcome, the change they can expect to make, and what they can accomplish with their money and your effort.
Many sites start with one key donor who is the catalyst and brings in other investors. If you have not found that wonderful person, go out into your community and ask people about their needs. Then ask, “Do you know anyone who would want to support and invest in our meeting that need?” You gain multiple benefits from one conversation by using it to introduce yourself and your venture, learn your community needs and also get leads on sources of funding. If you are meeting with a community or family foundation, they may not be a direct giver but may be a connector to donors whose interests they know or represent.
In some cases, foundations will provide seed money for your venture. They may call it a planning grant or a pilot project grant. Crowdfunding is another way to build startup capital in some communities and for some topics. But it takes a lot of marketing to get enough people to make the small donations that characterize crowdfunding, so it is considered a supplemental revenue source.
INN conducted a grant-funded pilot program with eight members to test strategies and tools for improving major donor giving. Among the findings: A major donor program builds on skills many journalists have.
“The curiosity and persistence that journalists bring to their investigative work are exactly the skills required for major gift work. What is missing are the tools and training that journalists need in order to have the confidence to go talk with their donors — and ask for a gift,” said Diane Remin of MajorDonors.com, who coached the news nonprofits in the pilot program.
Journalists have the ability to explain their newsroom’s story and priorities to potential funders. But news nonprofit founders often have put off setting up major gift programs until they could employ a development specialist. That delay could be short-sighted. Major gifts are a crucial potential revenue stream for news nonprofits, particularly those focused on investigative journalism.
The INN pilot program findings suggest that with the help of outside coaches, members can set up systems and build significant revenue even before they have full-time development directors. Seven of the eight newsrooms said the most valuable outcome of the coaching was learning to transfer skills from journalism to fundraising.
RESOURCES:
How Bay City News raised major donor revenue in a time of hardship (INN, 2021)
Former INN Development Director Lawrence Horne, who has more than three decades of fundraising and nonprofit management experience, offered this advice to startups.
Thousands of resources exist to help nonprofits find and keep track of prospective funders, leaving many startups unsure where to begin. First you must realize that fundraising has no magic wands or silver bullets. You must come up with a methodical, organized approach appropriate to your own situation. It’s a three-step process:
Evaluate your potential sources of support
Make lists of all the possible financial supporters in your own space, working from your inner circle outward. Approaching well-known national foundations is not a realistic starting point. Readily available donors are more likely to be found in your own community or state. Once you have a robust list, you can evaluate which prospects are most available. That research and vetting process, which journalists are well-equipped to perform, will help you prioritize your development efforts.
Decide how to track your development work
A Google search for “basic fundraising tracking form” will give you a wide variety of choices, many of them free. If you are adept at developing your own databases, you can peruse the forms you see online to decide what data fields to include. If you have only basic spreadsheet skills, and decide to download a template ready-made to use in software such as Microsoft Excel, it is wise to customize it to your needs. Thinking like a journalist, ask yourself what information you’ll need to get out of your records in the future. For example, your current funders may all be local, but you may soon wish you had a “state” column in your spreadsheet, because of legal requirements to register for accepting donations in other states.
You will find plenty of advice online suggesting that you need to buy or license database software to manage your development. Companies such as Salesforce, a software service provider worth more than $20 billion, provide powerful tools for customer relationship management (CRM) that are beyond the needs of a startup. Blackbaud Raiser’s Edge and DonorPerfect are examples of fundraising and relationship management software designed for nonprofits. Startups may find themselves investing in CRM software at some point when basic lists and spreadsheets are no longer doing the job.
Even if you have only a few funders now, plan ahead to break your lists into types of donors. Our section on revenue models explained the different sources such as membership, subscriptions, grants and major gifts. Decide how to segment and label these resources in your spreadsheet or database. For example, you may set the cutoff between “individual donor” and “major donor” at $250 per year or $5,000 per year. Many organizations decide that $500+ or $1,000+ should be considered major gifts. You should list foundations and community sources of support in ways that help you prioritize your outreach to them, for example, dates that grants expire and deadlines for applications.
Institute your tracking system
Once your tracking process has been established, use it systematically to expand your development efforts. The minute anyone expresses any interest in your work, the contact should be recorded and placed into your fundraising tracking tool. You’ll want to have a process to follow up with possible new supporters and to contact them through their preferred channels.
Some prospects identify themselves to you by following you on social media, signing up for your newsletters, registering on your website or attending your events. If you are a news nonprofit that distributes content through other publishers, you should always seek opportunities to make your funding needs known to the audience you reach. You can embed links to your own website or social media channels.
Try to work out mutually beneficial exchanges of donor or subscriber lists with similar organizations to grow your pool of funding prospects. Nobody is likely to hand over a list just because you ask. But the more systematic you have been in making your own tracking tools, the more likely you are to have something worthwhile to exchange. Your tracking prowess also will give you data to show institutional funders and major donors why you are worthy of their support.
Startups often rely on spreadsheets and open-source database software to keep track of their donors, potential funders, subscribers, etc. but then reach a point at which they need a more sophisticated customer relationship management (CRM) program.
Some tips from a 2018 playbook published by the Shorenstein Center on Media, Politics and Public Policy in Collaboration with News Revenue Hub:
RESOURCES:
Salesforce nonprofit cloud software
CRM Integration for Nonprofits, 2018 report from Tech Impact
An effective donation page is essential to acquiring and retaining financial supporters. It should be specific to the organization and show donors how their contribution makes a difference.
In a 2018 study, INN found that about six in 10 members used a donate button or tab to lead their readers from their homepage to their donation pages. Because this referral is so important, INN recommends testing different advertisements or graphics on the homepage to direct visitors to a donation page. That page, in turn, must have a strong pitch, more than a couple of sentences, but short enough to keep readers engaged.
Specific examples, visual storytelling, and easy navigation are signs of a strong donation page. A visitors should not have to click though multiple links. Consider embedding a form on the donation page or finding a payment processor that has an embed option.
RESOURCES:
Comparison chart of commonly used donor platforms that INN members shared they used.
Donor management software that INN members shared their experiences with: Little Green Light (Simple, good for small shops, great customer support, relatively affordable, lots of built-in integrations)
Bloomerang (user-friendly), Paybee (simple to use, very affordable), Network for Good (Doesn’t support newsletters.)
Sample pages explaining how to donate, using various platforms and including from stock funds, from a statewide site and from a local site.
Explanation of credit card updater services.
News nonprofits around the country, especially the recent startups, have been working to diversify their revenue streams. The INN Index in 2020 found for the first time a majority of nonprofit news outlets reported that foundation funding made up less than half of their total annual revenue the prior year. Nonprofits still get most of their revenue from philanthropy, but are tapping more into individual giving.
Age and type of organization correlate to different mixes of revenue streams as organizations refine models that match their missions and their communities. Older organizations often have a higher share of foundation funding; local and state organizations generate more revenue from individual donations. This pattern may reflect the concentration of foundation funding in a few national news operations, which was one finding of a 2018 report by the Harvard Kennedy School’s Shorenstein Center and Northeastern University professors.
Developing revenue streams from multiple sources is critical to the stability of an organization, so that the loss of one stream is not catastrophic, as it would be if only one or two sources were available.
(This section was written by fundraising consultant Emily Goulding-Oliveira.)
Managing grants is multifaceted, from ensuring that deliverables are completed on time and on budget to writing grant reports. But the one core focus is cultivating an ongoing relationship with a funder. When done correctly, every step in the grants management process is an opportunity to build trust.
Completing projects on time and on budget signifies that your organization is reliable, and comprehensive grant reports give funders an equally reliable and consistent framework with which to understand your program. Share with them how you’re measuring success and what the stakes are. Every word and number should build the story of why your funded project advanced your organization’s goals, the funders’ goals, and the broader field. Remember, grantmakers are keenly interested in the results of the programs they invest in. They want details, so share them! Before you start reporting on a grant, ask:
Integrating these relationship cultivation practices across your grant portfolio will help your organization build positive and sustainable funder relationships.
RESOURCE: 10 Top Tips for Grant Management from fundsforNGOs.org
An annual fundraising plan is a key component of successful fundraising. Your plan ensures that your staff and board of directors are in alignment about priorities, strategies and roles. Without a plan, reaching goals can be difficult – with no plan, you may not know when you are successful.
Overall, organizations with a fundraising plan generate more of their revenue from individuals, have more donors, and record a higher average gift.
INN has created the News Giving Roadmap — a comprehensive program including templates and samples designed to help our members improve their fundraising. The program offers members a Fundraising Plan Guide that includes a step-by-step outline for:
Our Fundraising Plan Guide helps you to gather and analyze your data throughout each step of the planning process. As you organize and analyze your fundraising metrics, it is advised to work with your board, fundraising committee and staff as appropriate while planning.
With a fundraising plan in place, according to the Individual Donor Benchmark Report by Third Space Studio, each donor meeting yields more than $5,000 in increased donor revenue.
And with a fundraising plan that engages board members, for every board member active in fundraising there is an increase of $11,686 for individual donor revenue.*
* Individual Donor Benchmark Report 2015, Third Space Studio
INN Network Philanthropy Director Jeffrey Woolverton offers these best practices:
No practice is more important in the fund development process than stewardship. As competition for donor-investment has increased and the expectation of organizational transparency and reporting becomes routine, so has the need for a commitment to real stewardship.
Many nonprofit organizations may not have a long-term commitment or vision to donor development. Oftentimes it’s quicker to just ask for money without involving and re-engaging people. But in the long run those same nonprofits may not build relationships with donors, and will not maximize the potential for their organization in terms of dollars raised.
Stewardship is a process where you care for and protect your philanthropic support – gifts and the donors who give them – in a way that responds to the donors’ expectations and respects the act of giving.
Examples of stewardship best practices are:
In spite of its importance, this vital function is often neglected. In an urgent need to fundraise, and in the relief and joy in securing a gift, organizations may forget that the real relationship begins once the gift is made. If donors only hear from you when you are asking for money, they will not feel valued or motivated to give again or at a deeper level.
To be effective you must be intentional about stewardship and have a written plan that describes how staff and board members will be involved in taking care of your donors. Start operationalizing your stewardship efforts by developing a really simple stewardship plan for each donor giving level that is prescriptive.
To help our members with creating stewardship plans, INN has created the News Giving Roadmap — a comprehensive program including templates and samples designed to meet our members where they are and take their fundraising to the next level.
Stewardship should be as routine at your organization as planning for events and applying for grants. With the recognition, gratitude and appreciation of your donors, your overall fundraising efforts can become sustainable.
Chapter 6: The Business Plan
You have researched your audience, written a value proposition, determined your revenue strategies and developed a business model canvas. Now it’s time to write a business plan.
What is it? A business plan is the story of how you plan to create and sustain the news organization you are starting. It shows funders that you’ve have carefully considered all of the key aspects of the business and how they work in concert to deliver on your value proposition, or “theory of change” as foundations call it. An effective business plan also
Don’t be intimidated. Because you have completed a business model canvas, you already have a broad vision of what it will take to deliver your value proposition to your audience. You know the work you’ll have to do behind the scenes, what your key activities will cost, and your potential revenue streams. Business plans should not be excessively long or repetitious, but must convey that you have thought through all aspects of the business and understand the interdependencies.
Telling a story with numbers. Journalists know how to tell a compelling story, but may find it challenging to develop financial projections. It’s important to understand that the numbers are also telling your story and those numbers should match the narrative. We recommend that you utilize resources in your community to help with this aspect of the business plan. We included links to business resources that have offices in every state and U.S. territory.
A business plan takes time, it requires research, careful analysis, a solid value proposition and great storytelling. We’ve provided you with the tools and resources to create a solid plan for success. Dig in.
RESOURCES: America’s Small Business Development Centers, an association offering no-cost business consulting and low-cost business training
The Service Corps of Retired Executives
Many resources are available in books and online for formatting a business plan, and you should use whichever one you find appealing and relevant to your operation. Below is one example, and in the pages ahead we will elaborate on some sections that are not self-explanatory or have not already been covered in this guide.
RESOURCES:
One Page Business Plan books
SCORE business plan template
Be objective. While your tone should be positive and confident, don’t exaggerate your experience or resources. Be factual about the strengths and weaknesses of both your operation and potential competitors.
Keep it simple, focused and easy to read. Brevity is crucial if you want others to read your business plan. But include explanations of terms and trends that may be unfamiliar to potential benefactors who are new to supporting nonprofit news. Anticipate their questions and refer briefly to the most important research, data and trends that support your plans.
Get a trusted outsider to read and provide feedback.
Review and revise as assumptions change. Your business plan can be written with an eye towards the future, but it must accurately describe where you are now. When you make strides such as signing major distribution deals, update the plan.
As in any story you write, you should start with an introduction summarizing your plan, and end with a conclusion reiterating the feasibility of the concept. Depending how far along you are in your planning, you may also attach a detailed tactical plan outlining activities planned during the startup years.
When you address business operations in your business plan, you should provide an accurate picture of where you are starting from, even if you are working alone from your home or in a coworking space. Potential benefactors will find it reassuring that you are not wasting money on an expensive lease. They want to fund news, not a fancy office.
If you have not performed necessary legal paperwork or secured nonprofit tax status, you still can begin presenting your business plan. It should specify that the legal work is in process and whether there is a fiscal sponsor.
A fiscal sponsor is an established 501(c)(3)-certified organization that accepts funds on behalf of the sponsored program and ensures the funds are spent to advance the program’s mission. This allows new nonprofits to receive tax-deductible donations while they are ramping up or their status is pending with the IRS. Some nonprofits may be sponsored for a short time. Others stay under sponsorship for years as an efficient way to operate. INN offers both short and long term fiscal sponsorship.
RESOURCE on INN.org: Fiscal Sponsorship
The preceding pages of this guide took you through the process of creating your business model and mission statement, so you already should have those elements written. You already must have a clear vision for what market and audience you intend to serve, and how you can market yourself and compete for that audience. If you cannot restate this information clearly and concisely at the beginning of your business plan, you are not ready to proceed. You should go back and do the groundwork before writing a business plan. Funders are looking to see how well you have thought through your concept and your plan to start and sustain your news organization for the long term.
Your business plan must provide at least a rough accounting for your startup costs and ongoing business costs. These costs include anything you need to buy or pay for to carry out the activities that must be done to deliver on your business goals.
Some terms you should be familiar with and include in your narrative:
Journalists are well-equipped to explain their financial assumptions and projections in a narrative, but the business plan should also include a projected balance sheet that matches the narrative. Journalists may not be equipped to build financial projections and should seek help. In every state there are small business resources available at no cost. We also discuss building a budget in the next chapter.
RESOURCES:
Business and financial planning support from America’s Small Business Centers
Even if you plan to start your operation working by yourself in your home, your business plan must envision and describe your support team. These could be professional consultants or unpaid helpers, ranging from volunteers you train to experts who volunteer to train you.
Strength in numbers: You not only need extra help as your operation grows, you need it while writing your business plan. Journalists used to working on tight deadlines must realize this is not a “let me just write something and get it in” situation. It requires research, analysis, contingency planning, and an understanding of how numbers work. As you are telling your story in words, you must also tell you story with numbers, and they must match your narrative.You can’t say, “By Year Three, we will have a staff of five reporters,” and project a budget of $75,000 that year. The numbers must jibe. Wealthy donors tend to evaluate the financial statements before deciding whether to read the narrative. If financial projections are not your strength, include that strength in your management and board structure.
Accountability: INN recommends that founders plan to spend in the first year half of their total resources, both time and money, on fundraising. To ensure the money is well spent, the roles, duties and responsibilities of the management team should be outlined in the business plan. No matter how small the operation, an organizational structure must exist to show funders there is accountability. A startup founder should be answerable to a board of directors. The founder may find such a board by partnering with an existing nonprofit in the community, or can assemble a group of people who have complementary skills and knowledge.
Diverse skills: It can be tempting to fill a board with prominent journalists to gain credibility with foundations. But a board of eight members should have no more than four journalists, and the other members should fill gaps in the management team’s skills. It can be valuable to recruit a lawyer, an accountant, a fundraiser, a marketer and a social media expert, because those board members (all independent of any firms paid by the operation), bring needed expertise. People with deep pockets and extensive networks can be excellent board members even if they are too busy to attend many meetings.
A business plan can tactfully state that the organization has recruited board members who are well-connected to open doors to funding, or can identify board members as philanthropists who have a passion for civic engagement. A news site devoted to education should have educators on the board. If a board member brings expertise or community connections that are important to the mission but not obvious from the person’s name or job title, make it clear.RESOURCES: America’s Small Business Development Centers, an association offering no-cost business consulting and low-cost business training
The Service Corps of Retired Executives
We covered revenue models for nonprofits earlier in this guide. Before you can write a revenue model statement for your business plan, you must have determined what revenue sources are realistic for you to pursue and rely on in your first year or two of operations.
Your business plan will list the potential revenue sources and project conservatively how much income you expect and when you will receive it.
INN has surveyed its members and studied their revenue sources and found the following:
To add credibility to your assumptions and projections, and to confirm that you have a marketable plan, ask a sample of your target audience what they are willing to pay for a subscription, membership or sponsorship. Individual donors and particularly major donors are relatively undeveloped revenue sources for news nonprofits, making up one third of total revenue for the organizations in the INN Index. By comparison, individual donors provide more than 70 percent of charitable revenue for all nonprofits across the U.S., according to Giving USA.You can find reference points on averages for small donor giving in the NewsMatch 2018 Learning Report. But nothing beats sampling your intended audience.
Your business plan has roughed out a cost structure: what assets you need and what activities must be done to deliver on your business idea. Now you need to quantify those specifics. What will it cost to run and maintain the operation that delivers your value proposition in a way that keeps your audience coming back?
The startup and ongoing costs of website development, hosting, and metrics can vary widely depending on how complicated your needs are.
What are your one-time start-up expenses? These may include:
What are your recurring costs to cover ongoing business needs? These may include:
The following sections will cover the “how-to” of projecting costs and building a budget. But first, you’ll need to think about how to translate into dollars the narrative you’ve created about the business. They should match.
You have established your budget in terms of what you expect in total revenue and expenses for a designated period, such as one year. The cash flow projection goes a step further by identifying when your expect the money to come in and go out, by month or by quarter, so you know whether you will be able to pay your bills on time and not overdraw your bank account.
Including a cash flow projection in your business plan gives you a realistic view of what revenue you need to pay your expected expenses for people, fixed costs and recurring costs. The projection shows the cash you have begun with and it breaks down expected revenue and expenses in enough detail that you can easily update it as you go along.
The cash flow projection will remain a valuable and important management tool for the organization. If you are seeking foundation grants, donors may ask to see your past cash flow projections.
Free templates and expert advice are widely available for creating these financial reports.
RESOURCE: Sample Cash Flow Statement from legal guide publisher Nolo.com
Chapter 7: Making the Go/No-Go Decision
“Don’t settle for anything other than your passion – if you’re lucky enough to find it.”
~ Warren Buffett
People start nonprofit news organizations for a variety of reasons; getting rich is not one of them. The two main considerations in deciding to move ahead are the meaning you find in journalism and the reality of what you need to do to support yourself and your family. No matter how important to society you see your plan as being, you must be realistic about whether it is viable and sustainable.
Look ahead five years and envision where you would be if you met your highest level of anticipated success. Would you have spent your savings getting to that point or would generous donors have gotten you there? If you would have exhausted those savings or that generosity five years out, would you have a replacement stream of revenue to fund your costs? Are there enough readers in your community to sustain a successful subscriber or membership model?
What if realistically you doubt you will be able to continue to cover your costs and produce meaningful journalism five years out? It doesn’t necessarily mean you have to give up your dream. You may just need to refine your concept. Can you partner with another publication or become part of an existing nonprofit? Take a look at the INN directory and see if you can team up with similar outlets to share back-office expenses. Such partnerships are common and reasonable in the nonprofit world.
If you are planning to serve a rural area or disadvantaged community, your audience may never be able to provide you financial sustainability, and you will have to find support from philanthropists. Some founders, particularly from the baby boom generation, are in a fortunate position where they have a traditional pension, a supportive spouse, and a legion of retired volunteers so they can get by on limited revenue. We don’t advise people to risk their personal livelihood and sacrifice their futures to start a nonprofit news organization in the absence of sustainable revenue. But time and again we have seen people start with a business plan we were not sure was viable, and yet they gradually survived and grew because of their passion. They donated a lot of time and effort the first couple of years, and had enough luck and pluck to succeed. The failure rate of sites that actually launch is low.
In this guide, we have drawn from patterns of success through the industry, but each startup is different and the whole field of nonprofit news is highly experimental. INN members are continually taking new approaches and finding new ways to meet challenges. We encourage you to reach out directly to INN members covering similar places or topics, see what they are doing and make a go-no go decision based on your circumstances and community needs.
Chapter 8: The Board Is Your Strategic Partner
The board is not a nicety or an auxiliary thing — it is the both the soul and the backbone of your nonprofit, and absolutely critical to its success. It is more central to the operation of a nonprofit than boards are for most for-profit companies.
The functions of the board: A board is an ensemble, and boards vary quite a bit in their function. In most nonprofits, board members are critical fundraisers. They typically are expected to “give or get” — to directly donate or get others to donate to the cause. Other boards may have more policy orientation, guiding the direction of an organization.
Check state requirements: State law may set a minimum number of board members, often three people, and we recommend that number not include the executive director. Some states do not even allow the executive director to be an ex-officio board member. Regardless of the requirements, it is useful to have more than three board members because you need the expertise, guidance, financial support and connections of a larger group. In a nonprofit, the founder is not the owner because the organization is responsible to the public, and the board serves as the trustees for the public. The founder, executive director or CEO is the leader but the board ultimately holds the legal and financial responsibility for the nonprofit. The buck stops with the board if the nonprofit fails to meet its social purpose or misuses its funding.
Mapping what you need on your board: Journalism boards have traditionally included strong journalists, leaders of whatever community the publication is serving, individual philanthropists and representatives of partner organizations. News organization boards typically have conflict-of-interest policy statements that include the understanding that board members do not and cannot have any input on editorial decisions. Some boards also have guidelines on whether board members can be politically active as individuals; they should not be active in partisan politics in any way connected to their nonprofit roles.
Give and get: Most board members either are giving financially or getting money for the organization by enlisting other financial supporters. Board members are your strategic partners in helping guide you to meet and execute your mission, helping you think about your field and where your mission fits into it. They make introductions to help you scale up and form partnerships. They drive the overall arc of the organization but should not be involved operationally especially as time goes on. Early in an operation, board members may be volunteers who provide services, but as the organization grows they become less hands-on.
RESOURCES:
More general information on setting up your nonprofit board of directors is available from the Foundation Group, which provides tax and compliance services to nonprofits: Setting up your nonprofit board of directors: Foundation Group.
Management Help offers resources about how boards operate, best practices, defining board member roles and more.
Fiduciary Responsibilities of a Nonprofit Board (Chazin & Company, 2021)
BoardSource offers tools for mapping your board’s role and functional needs, and recruitment, and on building a diverse and inclusive board.
How Can I Find Board Members for My Nonprofit? (Candid)Five Fast Ways to Recruit New Board Members (Compass Point)
Bylaws: The initial advisory board that helps a founder start a nonprofit should create bylaws, which address how the board is set up, how the organization operates and how it regulates itself. The organization should post these bylaws publicly. As a result, you have many fine examples of bylaws of similar organizations to study and draw from. More information is available from Candid.org.
Funders will look at the bylaws, and conforming to the bylaws is the organization’s legal responsibility.
The executive director relationship with the board: If you are founding a nonprofit organization, you are the one who recruits and builds the initial board, but after a transition period, you report to that board or to a more permanent successor board. BoardSource, a foundation-supported resource for nonprofits, provides this explanation: Forming the Nonprofit’s First Board. Much more detail on board roles and responsibilities is available from the National Council of Nonprofits.
Community connector: In addition to its legal responsibility for overseeing the organization’s budget and operations, the board represents the public’s interest in ensuring the nonprofit is serving the role it was formed to serve. Having the board include people who understand your community and mission will help you think through how to apply that mission throughout your operations. For example, if the nonprofit’s mission is to cover city government, what happens if a potential funder comes along and offers to pay for an expansion of coverage to the county or the rest of the state? Would that strategic shift be mission-aligned or would the expansion dilute the mission that other funders have supported? Thinking through such a decision is really hard to do alone and becomes easier with the help of a board rooted in your community.
Chip Potts is INN’s director of finance and operations and oversees our fiscal sponsorship program and business services for members. He offers this advice based on his more than 30 years of accounting experience:
Nonprofit founders must deal with the reality that they will have to pay some professional expenses and filing fees to gain legal status to solicit charitable donations. Before you can apply for nonprofit status from the IRS, you should consult with a lawyer or a very good accountant who is familiar with nonprofit incorporation in your jurisdiction.
Laws vary by state (or province, country, etc., but the material below applies mainly to the United States). Some jurisdictions, such as Delaware, provide favorable regulations that attract for-profit business incorporations, but these tax benefits don’t affect nonprofits. Incorporating where you live and work will most likely save you an extra layer of complications.
What do you need to begin?
You must name your entity, keeping in mind that changing the name later would entail refiling with the state and IRS. The name will apply to the corporate parent of whatever publications or websites you will be doing business as (DBA) — should this apply.
Depending on your state requirements, you may incorporate with as few as one person, known as the incorporator (most probably the founder). Remember, nonprofits have no owners or shareholders. The incorporator(s) file the Articles of Incorporation with the state along with the appropriate filing fees. Once incorporated, the incorporator(s) appoint an initial board of directors, as defined by state law.
The first act of the board should be to approve a set of bylaws by which the corporation will operate. The board should also approve a mission statement that will ensure your entity is clearly defined to support your educational purpose to qualify for tax-exempt status.
What happens next?
Your next order of business is to obtain an Employer Identification Number (EIN) with the IRS and to file any other licenses or permits you will need to operate in your state and local jurisdictions. Your accountant or lawyer should advise you on what next filings/steps you should undertake. An EIN can be filed online with the IRS by you or your accountant or lawyer. You’ll need that federal tax number to establish a checking account.
A new nonprofit corporation can start accepting donations immediately, but if it does not receive fiscal sponsorship or its 501(c)(3) application is not approved by the IRS, it would either have to return the money to the donors or those donors would lose any tax deductions from those donations. Depending upon your available resources, you can go one of two routes toward gaining tax-exempt status:
You can file IRS Form 1023, and any applicable state forms, to seek recognition as a tax-exempt corporation, under section 501(c)(3) of the Internal Revenue Code (IRC). This application process can become complicated and expensive. Additionally, 41 states and the District of Columbia require nonprofits to register if soliciting charitable donations from residents of their state. Registration fees and procedures vary from state to state and could be a drain on resources for a new organization.
Alternatively, startups can seek fiscal sponsorship, meaning they embark on their fundraising under the wing of an established 501(c)(3) organization. INN’s program of fiscal sponsorship for members is explained here. INN is registered to accept donations in all jurisdictions (states and D.C.) that require registration, which in turn covers organizations accepted into INN’s fiscal sponsorship program.
It is possible for startup founders to get fiscal sponsorship without incorporating first. Some members started as programs or projects of local foundations, for example. Some nonprofit organizations specialize in assisting freelancers with raising money for educational projects, such as Film Independent for documentary producers. While most INN members start as nonprofit corporations, some for-profit news organizations have launched projects that would qualify for INN fiscal sponsorship at least for a set period of time.
New nonprofit corporations can start the process of seeking 501(c)(3) status while under fiscal sponsorship. A good rule of thumb is that once yearly revenue reaches $500,000, a nonprofit can afford the various expenses of maintaining tax-exempt status — state registrations, audits and other professional fees. Even with a fiscal sponsor, you will have reporting requirements, confirming your information online annually or biennially and filing tax forms showing where your revenue came from and went to.
Less common situations
INN often gets questions from members who have some unusual situation that affects their incorporation. Because laws vary so widely in different jurisdictions, we generally must refer you to local authorities for those questions.
RESOURCES:
The INN member website has information about legal services.
The next chapter covers how to get tax-exempt status.
Chapter 9: Setting Up Operations
This chapter offers practical information about charity registration and taxes, the fiscal sponsorship option, financial controls, insurance, legal support, and human resources and employment issues.
INN Executive Director and CEO Sue Cross offers this advice.
If you are actively seeking donations in any way in a state, you need to make sure you meet its charity registration requirements. Whether through Twitter, an online donation button, events, phone or mail outreach, if you are soliciting gifts, 41 of the 50 states require you to be registered.
For more information:
Guidestar on State Charity Registration
National Council of Nonprofits has a terrific section to walk you through this.
State by state links are available from the National Association of State Charity Officials and a Harbor Compliance state requirements grid
If you are fiscally sponsored, your registration probably is covered by your fiscal sponsor. Check where your sponsor is registered.
Many nonprofit news organizations depend upon receiving a federal tax exemption through fiscal sponsorship or directly from the Internal Revenue Service under Section 501(c)(3) of the Internal Revenue Code. Because the IRS does not recognize journalism itself as a purpose for tax exemption, a newsroom seeking 501(c)(3) status should seek help from an attorney familiar with IRS rules.
The IRS Form 990, which nonprofits must file annually if they raise over $25,000, asks two questions about your compliance with registration laws in states where you solicit. The 990 is signed by an officer under penalty of perjury. CPAs filing your state 990 often file your own state registration as well, for the state where you’re based. Check if that is part of their service.
If you are national and accept gifts from the public, INN strongly recommends registration in all states that require it. If you are specific to one state or location and don’t actively seek donors in other states, you should consult with your attorney specializing in nonprofit law. Even passive solicitation in some states can require registration. And if your aunt six states away hits your DONATE button, you should be registered in her state. Again, consult with your attorney specializing in nonprofit law.
Charity registration costs vary, but they can be a significant budget item.
For many nonprofits, it is most cost-effective to outsource this to a specialized service because each state has slightly different forms and deadlines for both registration and then annual reporting. Outsourcing firms charge several thousand dollars a year on top of the actual registration fees, but that outsourcing cost may well be cheaper than the salary you’d burn doing it yourself, and it is a major bureaucratic headache to track various state deadlines and forms. There are a number of online do-it-yourself services. However, for multistate registrations, you risk costly fees if you miss deadlines, so DIYers should make sure they have someone clearly assigned to track and handle this who has the bandwidth to stay on top of it year-round.
Some firms and links:
Labyrinth. Established firm. INN has used them and found them reliable, but it pays to cost-compare and shop.
Charity Compliance Solutions. Competitive, good client service. INN recommends CCS, and the INN Services web page explains how to get a group discount.
Affinity. This offers several levels of help. Have heard their service levels can help control costs, but INN has no direct experience with the company.
Harbor Compliance. Large firm with informative marketing materials.
For DIYers:
NOLO, the online legal resource, offers a $125 annual subscription product for DIYers. We haven’t seen any reviews of it.
In order to start up programs more quickly, many nonprofits – both startups and commercial companies converting to nonprofit-status – seek a “fiscal sponsor.” A fiscal sponsor is an established 501(c)(3)-certified organization that accepts funds on behalf of the sponsored program and ensures the funds are spent to advance the program’s mission. This allows new nonprofits to receive tax-deductible donations while they are ramping up or their status is pending with the IRS. Some nonprofits may be sponsored for a short time. Others stay under sponsorship for years as an efficient way to operate.
For information about INN’s fiscal sponsorships of news organizations go here.Resource:
5 Tips for Choosing a Fiscal Sponsor for Your Newsroom (LION Publishers, 2021)
Financial controls will be needed to account for your revenue and expenses. To help you understand what financial controls may entail, here is a sample from another organization.
Tax-exempt nonprofits face certain public disclosure requirements by law. They must provide copies, upon request, of their three most recently filed IRS Form 990s and their application for tax-exemption. The National Council of Nonprofits provides further explanation and resources.
Nonprofit newsrooms that are members of INN pledge to be transparent about the funding of their news operations and maintain editorial independence from all revenue sources to ensure news judgments are made in the interest of the communities they serve as journalists. They may post their 990s online and make public a list of their donors as part of a donor transparency policy (example).
Three types of insurance coverage are highly recommended for independent news organizations:
INN has established relationships with multiple leading providers of insurance for media and nonprofit organizations, leveraging the size of our network to obtain preferred policies for our members and allied journalism organizations.INN’s how-to guide to Buying Media Insurance is available to INN members; email info@inn.org to get a copy. See also: Buying media insurance – webinar.
Seeking legal assistance to ensure that you are safeguarding your organization is always a good idea. For those who do not have a lawyer on staff or on your board, INN has resources for its members to find pro-bono or low-cost counsel. Please see the Legal page in the Resources section of our website.
More general information about legal best practices, working with lawyers and reducing legal liability is available here under Operations Resources.
RESOURCES: How to Work with a Media Lawyer
Many resources are available to help you decide whether to hire staff, outsource work or use volunteers.
Advice about the many issues surrounding employment is available from the National Council of Nonprofits.
It’s important to know the legal difference between employees and volunteers and why it matters. The Nonprofit Risk Management Center has a detailed explanation.
For startups planning to hire a staff, INN offers a sample organizational chart. We also can provide you sample job descriptions that have been posted by our members. This Sample Development Director Job Description comes from MinnPost. Others are at INN.org/jobs.
For supporting and managing staff, INN provides this sample employee handbook. Additional advice that’s useful for online newsrooms is in this Sample e-Workplace HR Policy from the Nonprofits Insurance Alliance Group.
Startups that become members or are provisional members of INN (defined as organizations launched in the past 18 months) can obtain low-cost access to our Compensation Study. It’s a survey of compensation and benefits data for specific job roles at newsrooms across the INN network. INN also offers options for offering employee health insurance and other benefits.
Chapter 10: Trust and Ethics
Flagging public trust in news media has become an increasingly prominent issue in American civic life and an urgent priority for news leaders. Where distrust and suspicion of the press is a problem, nonprofit news startups can be part of the solution.
Typically nonprofit news outlets are rooted in a community through their geographic and topical focus. The better known you are in your community, the easier it is to build trust. Being a nonprofit also comes with some built-in immunity from the time-worn charge that journalists sensationalize their storytelling to make more money for their owners.
Founders of news nonprofits still must take precautions to make sure they are perceived as trustworthy. Adopting a policy of editorial independence is an important first step, and INN provides an example. Organizations also must maintain transparency about their funding and connections with community organizations. Finally, those in nonprofit news should always keep in mind that their degree of engagement with the public is as elemental to their success as is the quality of their journalism.
RESOURCES:
Ethics and News Nonprofits (The writer of that piece, Dean Miller, included his email address and welcomes inquiries from startups.)
Work on the Startup Guide began in 2016 under a grant from the John S. and James L. Knight Foundation and has continued with support from funders including the Democracy Fund, the Ford Foundation, the John D. and Catherine T. MacArthur Foundation and the Open Society Foundations.
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