Fee-reliant SPOs

Earned income plays a major, often dominant, role in the financing of many nonprofit organizations, and even more so in some of the new forms of social enterprise such as for-profit social businesses. Indeed earned income is the mainstay of nonprofits in the U.S. in health care and a principal financial pillar in sectors such as education and the arts. Following benefits theory, one would expect the missions of earned income-reliant SPOs to be centered on the provision of private goods. However, important nuances to this connection, especially links between earned income and public, group, redistributive benefits and exchange benefits, are also explored in this chapter. VARIETIES OF EARNED INCOME Earned income is a broad concept that includes many variations of revenue derived from exchange in the marketplace. It is thus important to examine the varieties of earned income in order to analyze basic issues such as the pricing of services, use of an SPO’s assets to generate earned income, and the different ways that earned income impacts an SPO’s mission and overall income. In addition, examining these variations allows an appreciation of both the purposes of earned income generation, and the blurred boundaries between earned income and other sources of funds such as philanthropy and government support. Broad subcategories of earned income include fees for services, memberships, commercial sales, royalties and license fees, rental income, and special events.