Imagine Canada

Strong Charities. Strong Communities.

How Important is Earned Income? Very.

Monday, September 16, 2013
Sector Research

Imagine Canada has just released a report about the earned income-generating activities Canadian charities. Among many other findings, it demonstrates just how key earned income activities are for the charitable sector. Over three quarters of charities surveyed (77%) reported engaging in at least one earned income activity and said that earned income activities accounted for almost one third (31%) of total revenues, on average.

Major findings

  • 77% of charities surveyed report generating some form of earned income.
  • Most charities engage in two or more specific types of earned income activities.
  • The range of earned income activities ranges from charging membership fees (38% of charities) to providing consulting services (2% of charities).
  • Typically, charities derive a minority of their revenues from earned income (31% on average).

Earned income activities are even more common than the raw percentage of charities reporting them would lead us to believe. A majority of charities (55%) report that they engage in more than one earned income activity (see Figure 1). In fact, nearly one quarter (23%) engage in four or more. Collectively, earned income charities report an average of 2.7 individual activities, with a median of 2.

Figure 1. The majority of charities engage in more than one earned income activity.

Figure 1. The majority of charities engage in more than one earned income activity.












The specific earned income activities that charities report are extremely varied. The most common activities were charging membership fees (38% of charities) and user or program fees (30%; see Figure 2). Many activities are quite well known, such as charging admission or performance fees (23% of charities) or selling used or donated goods (12%), but others are much less commonly associated with charities in the public mind, such as sale of information products (5%) or providing consulting services (3%). The range of activities neatly demonstrates both how important earned income is to charities, but also the tremendous and often publicly under-appreciated range of areas in which charities work.

Figure 2. Charities are involved in a tremendous breadth of earned income activities.












Earned income clearly plays an important financial role for many charities. Collectively, among charities that report generating earned income, it accounts for an average of 31% of total organizational revenues (with a median value of 20%). The majority of organizations (60%) say that it accounts for less than one third of total revenues, though a non-trivial number report a larger role (see Figure 3).

As one might expect, some charities derive more of their revenues from earned income than others. Interestingly, charities that have engaged in earned income activities for longer periods tend to derive more of their total revenues from these sources. Charities that have engaged in the earned income activity that brings in the most revenue for less than five years report deriving an average of 19% of total revenues from earned income, as compared to 52% for charities that have engaged in the activity for more than 50 years.

Figure 3. Earned income accounts for one third or less of total revenues for most charities.












These findings are only a few of those contained in the full report, which can be downloaded from Sector Source. I would encourage anyone interested in this crucial topic to download it and read it.

As always, if you have any questions or observations about this post or other contents from the report, please leave a comment below.

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