Video Transcript: "Donor-Funded vs. Non Donor-Funded Revenue Models"

In this video, we're going to look at some of the pros and cons of donor funded  versus non donor funded revenue models for your business. Let me be clear  that we're talking about two separate issues when it comes to Should I start a  non profit or a for profit? We need to make sure that this is a distinct question  from, should I have a donor funded versus non donor funded revenue model, a  non profit versus non versus a for profit. So this is really a tax status. So when  you look at, for example, the medical industry, a hospital typically, is going to be  a nonprofit, even though there is a massive amount of revenue that is coming  through hospital systems. I happen to live in Houston, Texas, where we have the largest, one of the largest, if not the largest, healthcare systems in the entire  country of the United States, and so the money comes in. It's not as though the  money just goes straight back to the government or it just kind of gets dispersed out of the hospital system. No, it most definitely stays in the hospital system. It's  just that because of that non profit tax status, they just can't then turn that profit  over to the two shareholders, per se, because there are no shareholders in a for profit business model. What what happens is they just end up building more  hospitals. They end up just investing into more medical research into more  medical equipment. And then you have for profits, where there are shareholders, where the shareholders can sort of siphon the profit out of the business and so  on. But then we have the question of donor funded versus non donor funded  revenue model. So for your business, for your organization, where is the money  coming from? Is it coming from rendering goods and services in the  marketplace, where you're charging a price that is a non donor funded model,  and then you have other organizations that decide that for whatever reason,  whether it's we don't think that people will pay for our service or pay for our  products, or that they just can't afford it, or whatever the case is, then  sometimes organizations will opt for a donor funded revenue model. Either way,  you have to have revenue coming into the business to the organization, or it just will not survive. But a non donor, funded model is generally more accepted by  the culture, at least here in the United States, donations to tax exempt  organizations in the United States didn't become tax deductible until 1917 and  make no mistake about it, that is one of the major incentives for people to  donate to charities, whether it's to a church, whether it's to, you Know, a  homeless shelter or something like that, that if those donations cease to be tax  deductible, it would be very interesting to see what would happen to that  revenue for those organizations. But this is a relatively new thing in the US tax  code. This did not start until 1917 that you could write off your donation to a  charity, to your church, and make that tax deductible. But a non donor supported model is generally more accepted by the culture. When it comes to a business,  people just kind of assume whether they have negative views about profit or  people making money, or whatever, they are still going to assume that when  they're doing business with somebody that this is a for profit organization. It 

could be different in the education industry, where, oftentimes universities,  colleges, tend to be nonprofits. But either way, even with a hospital or a  university, the majority, in most cases, the majority of the revenue is coming  from services rendered in education, it's tuition, and hospital, it's fees. You know, hospital stays, all of that. We know how expensive medical can be. So what do  you do when your target group can't afford your services? That's an interesting  question. In so in my case, I have a book publishing company. Some of my  authors have written books specifically for inmates who are locked up in prison.  And yes, they do have opportunities for inmates to to make money doing various various things in the prison, but it's very difficult for you know and authors and  what this is your first time. You're a first time author. You've never published a  book, and you're trying to sell a book, they can get very frustrated with the  inability, or just the the barrier of being able to sell that book to their target  market, and in many in those particular circumstances, I will often encourage  them to focus on a donor supported model, so where donors can can provide  the funding for them to be able to provide those books to those inmates, where  those inmates have very limited resources, and the resources that they do have, in many cases, they're sending to their family, they're trying to they're trying to  support people kind of on outside of the of the prison system. And so in that  particular instance, that would be an example of when your target group just  simply can't it's just not feasible for them to be able to to pursue whether you go  with a nonprofit or a for profit, legal status, such as a nonprofit, 501c3, tax  status, or you're going with S corporation or C corporation status. Aside from all  that, the question is, where is your revenue coming from? In the case of the  author, who is whose target market are people who are locked up in prison, it is,  in most cases, an ideal and preferable revenue model to have it funded by  donors, so that the donors can then provide the revenue to print the book, so  that the author can then go and distribute those into the prison systems, donor  supported organizations still have to render services to generate revenue. So in  the case of the author that and I have several authors like this who are writing  specifically for inmates in prison. But if that is, if you're that's your situation  where your target group just simply cannot afford your services. Donor  supported organizations might be the way to go, but you still have to render a  service. What is the service in this case? Well, from the donors standpoint, they  need to. It's like the dip. It's like when you if you're to go to a movie, why do you  decide to go to one movie rather than another movie? Well, the reason is  because you want to experience this story in this movie, over against this story  in this movie. You think you're going to get an experience that in that moment,  on that particular day you think this is going to be more fulfilling to you for for  whatever reason this is a story. Maybe it's because this is what your wife wants  to experience, even though, or your husband, your spouse wants to experience  more than you want to experience it. Either way, that's the story that really you 

know is going to produce the most value for you on a intangible level and and so that's the way it is with nonprofits. And I've worked with nonprofits and donor  development and so on. And so even though you're not actually selling a  service, you are still in and in many cases, even if you're nonprofit, you might be selling a service, but from your donor's perspective, when you're asking  somebody to donate money to your organization, and legally, they can't write  that off if they have received any goods or services in exchange for that  donation. Otherwise it's technically and legally. As far as the Internal Revenue  Service is concerned. Here in the United States, it is not a tax deductible  donation, but you still have to sell the donor on the story that they want to  participate in, the story of your organization. So in the case of an author who  has written a book for inmates in in prison who maybe had drug addiction or  something like that, or they, you know, they're you're just trying to help them to  just. Discover a relationship in Jesus Christ, how they can find freedom in Jesus  and to be able to tell the story that look, I once was an addict. I once was locked up as an inmate. I know how isolated it can be. I know how discouraging it can  be. And then I met Jesus when I was in prison, and when the author is telling  this story about how they encountered Jesus in prison, and then maybe came in contact with and discovered some principles that could help other inmates who  are locked up really get their life back on track. Now the donor is starting to see  themselves in the middle of that story like a movie is playing out. So that is the  service that you are providing to a donor. So when you stop telling that story, if  you're if you decide to go the donor funded revenue model route, when you stop telling that story, your donations are going to dry up because either way donor or donor supported organizations still have to render services to generate revenue. Now this is another interesting field of study, Business as Mission. You may be  familiar with this acronym, BAM, Steve Rundle, and there's an interview that is  part of this course that I would like for you to go and listen to, where I  interviewed Steve Rundle about some of his research, but he did a research  project on do economic incentives help or hinder Business as Mission  practitioners. So these are missionaries going out on the mission field in a  traditional sense, but with the BAM model, it's not. The focus is not on I'm going  to then go and the revenue is going to be donor supported. It's going to be donor provided. But that through a business, a business model, and rendering  economic value in that marketplace, wherever it happens to be, that that that's  the way the revenue is going to be coming in, and that's the way I'll be able to  sustain my missionary efforts, not by being beholden or dependent on the  benevolence of donors, probably back in my home country, wherever that  happens to be. So here is a passage. This is a quote from Steve Rundle's  research, who wrote a wonderful book called Great Commission companies, but he said that the study found that practitioners of Business's mission, who are  fully supported by the business tend to outperform, sometimes significantly, 

donor supported businesses mission practitioners and are no less fruitful in  terms of spiritual impact. This finding holds up even after controlling for things  like geography, firm size and firm type. The moral of this story is that economic  incentives matter, contrary to the mission communities concerned that self  support will take one's attention away from the Ministry goals. The truth is that  only by creating a successful business can a practitioner hope to have a  meaningful and holistic impact on a community. So as a missionary going into a  community, you might, yeah, you might be able to pass out tracts, you might be  able to have Sunday services, but if your interest is in discipling the community,  which is, as business professionals, we are in a unique position to be able to do  which, by the way, we're about 85% of the Christian workforce working in a for  profit business that we are in a position to disciple the community, not just on a  Sunday morning, but throughout the week, on an economic level, on a personal  level, making an impact on their family, making An impact on them holistically.  But this was the finding and and so for the skeptics that would say, as he  pointed out here, that that some the more traditionally minded missionary  community would think that if you're focused on having to run a business, that  that somehow is going to detract or minimize your ability to achieve ministry  goals, of whether it be evangelism or discipleship or whatever it is, that he found that they were no less fruitful in terms of spiritual impact, and that they and that.  And that practitioners of business, admission, who are fully supported by the  business tend to outperform, sometimes significantly, donor supported  businesses, Mission practitioners. I mean, even just on, you know, on a on a  practical level as well. I mean, a lot of times the the donor supported  missionaries, they have to leave the mission field to go back to their home towns or home, you know, their home countries, in order to raise financial support over  a period of months. Maybe it's over a summer, or whatever it is, is called, you  know, furlough to go back and raise support. If you have a business that you  have set up right there in the country, in the community that you're called to  minister to, you don't need to leave, because you have an economic model. You  have the economic system that is in place there in the in the community. So I'd  encourage you to go and listen to that interview with Steve Rundle, and also  read the article where he debriefs some of his research on this topic. And as we  wrap up this particular section of the course, I want to ask a question, Why did  Paul boast the apostle Paul, why did he boast about not accepting donations?  Did you realize that the apostle Paul actually boasted about not accepting  donations? Yes, he did accept donations when he was locked up in prison, and  even still, he was trying to raise money for for poor Christians that were in great  a great time of need. He said, In I Corinthians 9:18, because otherwise he was  absolutely committed to not accepting donations, even though he knew he was  entitled to them. He said, when I preach the gospel, I may offer the gospel  without charge, so as not to make full use of my right in the gospel. So yes, he 

turned he totally had the legitimate right to collect donations, but he opted not to. Why did he do that? And I believe there's several, several reasons for this.  There's at least four. I'm just going to talk about four right here. The first was to  be relevant in the culture, for in the Hebrew mindset. Yes, the very familiar, if  you're familiar with the Torah and the tithing principle, bringing the first fruits and  bringing that and tithing to the Levitical priesthood, and all of that was very  familiar in the Hebrew mind, but Paul was going into a Greco Roman, a Greek  and Roman culture where they were not familiar with this cultural practice of the  tithe and that you're just supposed to give to the person that is. You're supposed to give financially to the people who are preaching the the word to you, who are, deliver, who are, who are, who are preaching in the synagogues, in our cases, in the churches, or maybe, if you're messianic, you're still going to the synagogue,  but, but in the Greco Roman world, they were not familiar, as familiar, if at all,  with this concept that you just give to your priest, and so for him to go into these  brand new areas that had not been evangelized with the gospel, and just  assume that they know that they're supposed to, they're supposed to give their  money to him because he's preaching the Bible to them and he's teaching the  Bible to them, he just didn't buy into that. He understood that that probably  would not be a wise move and and such is the case in most of the places where  we live. And yes, I think in some parts of the world there may be more familiarity  with that, but if you're truly trying to reach the lost world. Believe me, they do not understand this principle that you're just supposed to give your money free of  charge to people who are teaching the Bible to you. And so there did they just  assume that you're supposed to create some economic value and and, yes,  through the way in which, and this is what this course is all about, is through the  way that we produce economic value in the marketplace as business people,  that we are inherently, we are inherently leading people to Jesus and creating  value in that way. So I think Paul did. This, I think that one of the reasons why he did not accept donations was because he was trying to reach people that were  not familiar with even this concept that just because somebody is teaching the  Bible to you, that you're supposed to give, you're supposed to give your money  to them without some other service being rendered. They just didn't culturally  understand that. Another reason was because Paul wanted to provide for other  people's needs. There in Acts 20:33-35 he says, you yourselves know that these hands, he's talking about his own hands ministered to my own needs. Once  again, he's boasting about not accepting donations and to the men who were  with me. So not only through his tent making business, whether he was making  tents for the Roman army or he was making tents for the people that were  coming to the Isthmian games there. In Corinth, which was sort of like an  Olympics type of type of a games, were sort of a tourist attraction. Either way, he was making money making tents. And he goes on to say, in everything I showed you that by working hard in this manner, what is this manner? We just back up 

one sentence, ministering to your own needs and to the people who are with  you. By working hard in this manner, you must help the weak, and remember  the words of the Lord Jesus, that He Himself said, It is more blessed to give  than to receive. So to be able to take the profit from your business and then  invest it back into people who are working alongside you in your business. Paul  is equating this with this principle of it's more blessed to give than to receive. So  I mean these people that were with him, I'm sure that many of them were  working alongside him. They might have, you might consider them his  employees, but in any event, he was ministering to his own needs financially  and to other people. So he was making enough for himself and had enough left  over to help other people. And that's what profit can do for us. And I think the  third reason why Paul boasted about not accepting donations was to teach  personal discipline. He said, If anyone is not willing to work, then he is not to eat either. And and it's right there in within these verses that he says to follow our  example and Acts 20:33-35 I have that in bold there. He talks about working  hard in this manner, same thing, follow our example. What is the example? It is  using your own ability to create value in the marketplace, and that that is, you  know, that is going to be your revenue model, and so relying on donations. Yes,  as I talked about in a previous example, there are some times where some  people just won't be able to afford what the service that you're rendering, but In  Paul's case, yes, maybe some people whether they weren't able to afford the  teaching and the service that he was rendering to them in a traditional ministry  sense. And any event, he still continued to render it. But he had the finances he  was self sufficient to be able to render that service. So in the case of the author  who wants to then provide the books to the to the prison, you know, I would  hope that the author would have the finances to be able to provide and, yeah,  there are probably other people that would love to participate in something like  that in order to donate their finances. Maybe, you know, to boot, they're going to  get a tax deduction off of that, but they're going to be able to participate in that  and that endeavor as well. And the fourth reason here that I would share is why I think Paul boasted about not accepting donations, is to stay flexible and  available to the guidance of the Holy Spirit. And so going back to Steve Rundle's research, so if you're a missionary, as an example in another country. And you  know now you're going to do the traditional missionary thing where you need to  go back to your home country for a period of months, or however long, to raise  support. In other words, to get people to share what's happening on the mission  field and ask them to give to you financially, and otherwise you're not going to be able to minister anymore. I don't think Paul was I don't think this was his model  here, from what I see, when he says, follow our example and working hard in  this manner, he's not talking about going on furlough and coming back and  asking for monetary donations, and that otherwise he's not going to be able to  continue to be flexible and available to what the Holy Spirit is calling him to do. I 

know he had an economic model that was non donor supported, and so he was  at all times going to be flexible and available to the guidance of the Holy Spirit,  just like that missionary that businesses mission practitioner who is not  dependent on what Steve Rundle called the economic incentives to where, if the donors stop supporting That, that's not going to cause and ends to the Gospel  going forth and the discipleship that's happening there in that marketplace. And  so I hope this is helping us to get a more biblical understanding of what the Bible says about the pros and cons of the donor supported versus non donor  supported model, and particularly why the Apostle Paul boasted about not  accepting donations, and I think why we ought to do the same as well.