If You Don’t Control Your Leads, You Don’t Have A Business.

This is a lesson I had to learn the hard way. When I got started in the network marketing industry, I got plugged into the marketing system I was using that revolved around purchasing recruiting leads.

Although I was able to build a business rather fast, I built a 1/2 a million dollar a year business in 6 months thru using this system, something just didn’t sit quite right as I was spending more each month that I was earning.

After 2 years, I had to take a step back and evaluate what I was doing, and that’s when I determined that this was no way to build a business long term.

And when I left that marketing system, guess what happened to the $20,000 worth of leads I had bought- I lost them because they were being controlled by the system, not me.

And all that money, all that time and energy spent and I was left to start from scratch.

So one of my top lessons I learned, was you don’t really have a business if you aren’t in control of your own leads.

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Today's charities face an increasingly competitive environment. With challenges like government funding cut backs, an aging donor base, increase competition and more marketing directed at ones disposable income is it any wonder more charities are scrambling to stay a float? In order for non profits to succeed, they need to embrace emerging ways or marketing to their current and future donors. Here are 5 tips that will help!



Action Steps
The best contacts and resources to help you get it done

1. Start a Blog

Blogging is a powerful way to show your organization is up to date on current events and issues related to your cause. A blog will also allow your supporters and donor base to engage with your work on their time, rather than having newsletters and mailers sent to them when they may not want them. If you create and set up your blog properly, you can take advantage of the online social marketing and have your readers promote your content for you. Consider adding tags for Del.icio.us, Digg and Reddit to each post.

I recommend: Some examples of good non profit blogs are:
One Campaign
Invisible Children (check out the "share this" under each post)

Facebook

If your organization wants to stay current and interact with a younger audience, you need to be on Facebook. Start with creating a Facebook group and inviting your staff and volunteers to join it. A Facebook group will allow you to post current events, message members, post photos and videos and inform your membership base of upcoming events. As more and more people join the group, others will see this activity on their "news" feed, a great place for free promotion. The trick to Facebook is to keep it fresh and relevant. Message users once a week, post something on the group wall regularly. Once your group is established, make sure you encourage your group members to invite their Facebook contacts. This will allow the group to grow! GuluWalk is an organization that has harnessed the power of Facebook to raise money. They have a "Facebook It" tab where users can add their personal fundraising page to their Facebook profile - effectivly reaching thousands of individuals who have never

I recommend: See example: GuluWalk Fundraising Page
GuluWalk Facebook Group Example

Google Ad Words, Yahoo Search Marketing and MSN Ad Centre

Advertising on Google, Yahoo and MSN can be a very cost effective way to bring qualified traffic to your webiste. Why is that traffic qualified? Simply because you are in control of who sees your ad and when by selecting the keywords and geographic areas your ads show. Depending on the industry/cause, you may be able to advertise for a few pennies per click. Make sure to define your overall goal for these campaigns and track your performance. All too often, charitable organizations want people to click their ad and donate money and seem to forget the concept of building a relationship with their potential donors. Relationship building works in the offline world and is important in the online world also. Set a goal that is realistic like users registering for your newsletter or viewing a key page of information. Give them something (like an white paper) in exchange for the permission to market to them in the future.

I recommend: Google Ad Words
Yahoo Search Marketing
MSN Ad Centre

YouTube and YouTube Not for Profit

Does your organization have videos? I am not talking about your promotional commercial necessarily, rather some video highlighting some of your projects success. Do your run an event? a run? a golf tournament? If so, assign someone to take video at the next one and post it on YouTube. Encourage those who attended the event to go online and see their video. This is a great way to keep participants engaged in your cause. Videos also allow your supporters to virally market you to others and send those videos to their friends. Be sure to put your YouTube videos on your blog too (see item #1 above). If you are creative, consider running a contest where users can submit a video of their best fundraising idea, top event site, etc etc, and win a prize from your organization. YouTube for non-profit is another great resource. Apply to have your organization featured there (you must be American with the proper 501 to be accepted).

I recommend: YouTube Non Profits

Search Engine Optimization

How does your website rank? Is it visible on search engines for keywords that are relevant to search engines? If not, you have work to do. Being on the first page of the three major search engines is so important to promoting your cause to potential donors. Optimizing your website takes time and energy but the pay off is worth it. Consider hiring an organization to consult with you or do the work on your behalf. There are many right ways to optimize and a lot of wrong ways that could jeopardize the future success of your search engine rankings. Breaking the guidelines that Google, Yahoo and MSN have written can be extremely damaging for your organization.

I recommend: Search Engine Optimization Companies and Resources:
Spark Internet Marketing
SEOMoz.org
SEOBook

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The Internet has revolutionized the way nonprofit organizations conduct their day-to-day operations, and has permitted entirely new ways of keeping in touch with members, reaching new donors, and communicating a message. This resource list contains citations to selected works on this topic from the Foundation Center's bibliographic database, the Catalog of Nonprofit Literature. For a more readings in this area, search the catalog by using the following headings in the subject field: Internet, Internet-directories, Fundraising-computer aided, or Computer technology.

* General Resources
* Blogging and Podcasting
* Digital Divide
* Fundraising
* Legal Aspects
* Marketing
* Volunteerism
* Web Design and Technology
* Links to Internet Resources


General Resources

Ghidotti, Natalie; Hrywna, Mark. "Turbo-Charged Web Use: Embracing Technology to Tell stories, Raise funds, and Create loyalty." NonProfit Times, vol. 21 (1 April 2007): p. 1, 4, 6.

Nonprofits are utilizing MySpace, mapping tools, and other emerging technologies to help expand the reach of their Web sites. Organizations profiled include Life Rolls On, American Cancer Society, New York City Coalition Against Hunger, Heartspring, Arkansas Repertory Theatre, Generations United, and March of Dimes.

Hart, Ted; Greenfield, James M.; Johnston, Michael. Nonprofit Internet Strategies: Best Practices for Marketing, Communications, and Fundraising Success. Hoboken, NJ: John Wiley & Sons, 2005. xiv, 345 p.

Covers the multiple aspects of utilizing the potential of the Internet, including developing a strategy, planning, staffing, building an online community, enhancing the brand, and creating an integrated fundraising plan. One chapter deals with legal issues, while appendices include a code of ethics for online practices. With glossary and index.

Waters, Richard D. "Nonprofit Organizations' Use of the Internet: A Content Analysis of Communication Trends on the Internet Sites of the Philanthropy 400." Nonprofit Management & Leadership, vol. 18 (Fall 2007): p. 59-76.

The author reviewed web sites of nonprofits listed in the Chronicle of Philanthropy's Philanthropy 400 to study online communication and fundraising practices of top charities. The content analysis explored various features, including online annual reports and shopping carts, with results broken down by organization size and type.

Westcott, Scott. "Face Time." Chronicle of Philanthropy, vol. 19 (25 January 2007): p. T-2-3.

Nonprofit organizations are using social networking sites such as MySpace and Facebook to connect to volunteers, promote awareness, and increase membership. Westcott stresses the importance of understanding the culture of these sites and maintaining fresh content in order to sustain online relationships.
Blogging and Podcasting

Hrywna, Mark. "Blogging From the Top: Donors--and Everyone Else--Get Access to the Boss." NonProfit Times, vol. 22 (15 May 2008): p. 1, 4.

Describes the blogging experiences of two nonprofits, Soles4Souls and Humane Society of the United States.

Williams, Scott. "What's in Podcasting for Nonprofits?" Nonprofit Quarterly, vol. v. 14, n. 3 (Fall 2007): p. 69-74.

A discussion of how podcasting works, how it has been used by both for-profit companies and nonprofit groups, and why it may or may not be useful for particular nonprofit organizations. The article examines four nonprofits – Planned Parenthood, the Multiple Sclerosis Society, Volunteer San Diego, and First Book – and how they have used podcasting in effective and innovative ways.
Digital Divide

Cohen, Todd. "Despite Years of Discussion, There's Still a Digital Divide." NonProfit Times, vol. 19 (1 November 2005): p. 1, 42-3.

Treuhaft, Sarah, et al. Bridging the Innovation Divide: An Agenda for Disseminating Technology Innovations Within the Nonprofit Sector. Oakland, CA: PolicyLink, 2007. 66 p.

Technology plays an important role in enabling nonprofits to respond to social needs, and to perform fundamental functions—research, communications, public education, advocacy, fundraising, program development, and service delivery—with ever-greater speed and efficiency. But unequal access to the newest technologies has created an “innovation divide,” according to the authors. Therefore, adoption of many newer applications remain concentrated among a handful of organizations with high technology capacity. The report offers a plan for addressing the issue.
Fundraising

Hall, Holly; Panepento, Peter. "Donors Take Control: Grass-roots Fund Raising Flourishes on the Internet." Chronicle of Philanthropy, vol. 19 (22 March 2007): p. 25, 27-8.

In a growing trend, nonprofit groups are using Internet campaigns to collect small donations from large numbers of people. Bypassing professional fundraisers, these groups rely on word of mouth and social networking technologies such as blogs. The online campaigns also offer new ways for donors to get engaged beyond traditional one-time gifts.

Grobman, Gary M.; Grant, Gary B. Fundraising Online: Using the Internet to Raise Serious Money for Your Nonprofit Organization. Harrisburg, PA: White Hat Communications, 2006. 189 p.

Information about the options currently in use for online fundraising, with an emphasis on resources that are available to assist in decision making. The process begins with a fundraising plan, and may include electronic newsletters, podcasts, online stores, and other techniques. Practical advice is accompanied by numerous illustrations. With bibliographical references and index.

Hart, Ted; Greenfield, James M.; Haji, Sheeraz D. People to People Fundraising: Social Networking and Web 2.0 for Charities. Hoboken, NJ: John Wiley & Sons, 2007. xxv, 262 p.

Explains how to use the latest Internet tools and approaches to fundraise and develop support for your cause. Topics discussed in the volume include social media, advocacy, special events, Web site evaluation, integrated campaigns, widgets, and other technologies.

Wallace, Nicole. "After the Flood." Chronicle of Philanthropy, vol. 20 (12 June 2008): p. 7, 12-5.

An analysis of the Chronicle of Philanthropy's survey on the rate of online donations for charities in 2007. While online giving slowed in 2007, and comprises a relatively small portion of most organizations' fundraising totals, some charities have found that online donations are becoming an increasingly substantial part of their overall fundraising. Includes a chart tracking online fundraising at 203 charities.
Legal Aspects

Hopkins, Bruce R. The Nonprofit's Guide to Internet Communications Law. Hoboken, NJ: John Wiley & Sons, 2003. xx, 332 p.

Hopkins elucidates the relationship between laws affecting nonprofit organizations and their use of the Internet. Focusing on fundraising, lobbying, political activity, management of charitable giving, he explains and footnotes with case citations the relevant legal precedents. He also cautions that development of new laws in this area is fast-paced, and advisors to nonprofits need to remain current with the changing regulations. He notes that there are three paramount issues from a legal perspective: the cost of Internet use; essence of hyperlinks; and record keeping. Includes a table of cases.
Marketing

Bhagat, Vinay; Hauf, Brian; Donovan, Quinn. The Online Marketing (eCRM) Nonprofit Benchmark Index Study. Austin, TX: Convio, Inc., 2007. 17 p.

The first annual report on which aspects of online marketing nonprofit organizations should emphasize. Analyzes web site traffic, online registrations, and response to fundraising e-mail appeals from 30 Convio clients of various sizes and missions. Data is meant to provide a scale against which other organizations can measure themselves.

Krautzel, George. "Social Media: Marketing Myths and Universal Truths." FundRaising Success, vol. 6 (June 2008): p. 39-40, 42.

Gives an overview of social media and how groups can use it to increase their presence and fundraising ability online. Lists a series of myths and realities regarding marketing with social networking sites.
Volunteerism

Cravens, Jayne. "Online Volunteering Enters Middle Age." Nonprofit Quarterly, vol. 14 (Spring 2007): p. 65-8.

The author demonstrates why online volunteering is a management issue rather than a technological one. Beginning with an overview of how online volunteering has emerged, Cravens gives tips on how to successfully integrate online and face-to-face volunteer programs.

Ellis, Susan J. "Address It WWV: An Update on Technology and Volunteers." NonProfit Times, vol. 21 (1 May 2007): p. 20-1.

Topics covered include volunteers and the digital divide, virtual volunteering, and new technologies (Podcasts and blogging).

Tomaselli, Kathleen Phalen. "Kids, Volunteering and the Digital Age: The New Way to Recruit Youth Volunteers." Volunteer Leadership, (Winter 2007): p. 14-20.

The article provides examples of how organizations can promote youth civic participation, especially with the help of online technologies.
Web Design and Technology

Beveridge, David. "Why You Need a Content Management System." Nonprofit World vol. 24 (March-April 2006) p. 16, 18-9.

Explains the virtues of a using a content management system (CMS) for keeping an organization's Web site up to date. With a CMS, new content can be checked and approved, presentation can be consistent, and updates can be scheduled.

Burton, Heather; Gonzalez, Daniel. "Web to the Max." FundRaising Success, vol. 6 (June 2008): p. 45-6.

Instructs beginners on how to make the most of their nonprofit's web site in order to engage donors. Offers a brief overview on Web 2.0 strategies, design and content, tracking web performance indicators, and methods of increasing a site's visibility.

Dysart, Joe. "Analyze This: Let Web Analytics Software Be Your Guide to Dynamic Web Site Redesign." Association Management, vol. 57 (September 2005): p. 58-60, 63-5.

Four specific software products are compared.

Links to Internet Resources

General
The Foundation Center's Links to Nonprofit Resources

E-Philanthropy and Online Fundraising
The Foundation Center’s FAQ’s on E-philanthropy

Volunteerism
The Foundation Center’s volunteering FAQ

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Network marketers should not overlook a golden opportunity to promote sales through nonprofit or charitable organizations. The distributor makes money and so does the organization.

The network marketing industry has become attracted to nonprofit organizations (NPO), their members and friends as a vast potential source of distributors. Handled correctly, the benefits of a networker's involvement with an NPO are mutual and substantial. The tax-exempt organization receives a source of funds that are necessary to carry out its functions and to support the causes that are deemed worthy enough for tax-exempt status. The network marketing company gains access to a potentially large and motivated customer base.

In recent years, nonprofit organizations have played a growing role in network marketing sales. Overnight, the membership of a charitable organization may become an instant sales organization of hundreds of thousands. The charitable organization raises these funds for worthy causes and a network marketing company finds a new market for its products, all in all, a very sound match.

We have all seen pancake breakfasts, spaghetti dinners, dances and car washes for fundraising purposes. Such activities are generally sporadic or one-time events, which for the most part, have no legal ramifications. A charitable organization, which signs on as a network marketing distributor and sells products through its membership, is conducting a business activity, however, which may trigger some important legal questions affecting the group's tax-exempt status.

Use of charitable organizations for network marketing distribution typically works as follows. The charitable organization signs on as a network marketing distributor. The charitable organization in turn sponsors its membership as independent distributors. The charitable organization sells products and derives profit. The charitable organization also receives override commissions on sales of products by its downline, its membership being the first level of its downline. Another approach is for the organization to allow access to members for recruitment and sales, and to encourage voluntary contributions back to the group from members' discounts and overrides. A third approach which may be more complex to establish, but which may yield the most favorable of tax results, involves the establishment by the nonprofit organization of a wholly-owned "for profit" corporation for network marketing activities - see a future article on this approach.
Tax-Exempt Status

An important question raised by network marketing distribution through charitable organization goes right to the heart of the tax-exempt status of the charitable organization. The extent to which a tax-exempt organization may engage in income-generating activities without jeopardizing its exempt status has never been clarified by the courts or the Internal Revenue Service. The fact that there are so few cases that clearly define the scope of permissible business activities is perhaps resolved in the number and diversity of exempt organizations that have little or nothing in common with one another. Consequently, an activity deemed proper for one category of organization may result in the denial or loss of exempt status by another organization.

There are two possible consequences to an organization conducting a trade or business. First, the organization may be subject to unrelated business income tax. In addition, the organization may be denied tax-exempt status entirely if the trade or business is carried on to such an extent that it constitutes the primary purpose of the organization.
Unrelated Business Income

The Internal Revenue Code imposes a tax on the unrelated business income of otherwise tax-exempt organizations. "Unrelated business income" includes income derived by an organization from any unrelated trade or business regularly carried on by it. However, the first $1,000 of "unrelated business income" is not subject to tax. It ought to be noted, however, that an exempt organization is entitled to only one $1,000 deduction regardless of the number of unrelated businesses in which it is engaged.

The IRS has been fairly generous in terms of exempting unrelated business income of charitable organizations when the business activity is engaged in only discontinuously or periodically, for instance, for a period of a few weeks per year. For instance, the IRS regulations specifically provide:

"[c]ertain intermittent income producing activities occur so infrequently that neither their recurrence nor the manner of their conduct will cause them to be regarded as trade or business regularly carried on. For example, income producing or fund raising activities lasting only a short period of time will not ordinarily be treated as regularly carried on if they recur only occasionally or sporadically. Furthermore, such activities will not be regarded as regularly carried on merely because they are conducted on an annually recurrent basis. Accordingly, income derived from the conduct of an annual dance or similar fund raising event for charity would not be income from trade or business regularly carried on [emphasis added]."

The whole point of the IRS taxing unrelated business income is to eliminate unfair competition by placing unrelated business activities of otherwise tax-exempt organizations on the same tax footing with other businesses that do have to pay income taxes. In addition, the IRS recognizes that it will not tax business-type income if the sale of the goods or the performance of the services contribute importantly to the accomplishment of the tax-exempt purpose of the organization, for instance, musical organizations that put on concerts, educational organizations that sell educational books, or churches that sell Bibles are likely engaging in "substantially related" activity and thus will not be taxed for their profits.

IRS cases and rulings indicate that a good method, for tax purposes, of avoiding taxable income to a nonprofit organization is to approach the organization, gain access to its members through use of the organization's lists or a meeting. (It is important not to compensate the organization for the list of members as this may result in taxable income.) The direct seller would then offer the members the opportunity to participate in its program in their own right. Any payments to the organization must be voluntary contributions by the members. This could be achieved by offering each member the choice of either receiving any payments from the direct seller or assigning the payments to the organization. A one-time assignment is probably sufficient; however, assignments on a regular basis would provide a more solid case.
Caveat for Tax-Exempt Organizations

A tax-exempt organization, acting as an actual distributor of products or services, disseminated through a network marketing arrangement, is clearly engaged in a trade or business. In general, there is little relationship between the tax-exempt purposes of the organization and the products that are being sold. Finally, the duties of the charitable organization and its distributor are typically ongoing rather than sporadic. Therefore, income of an exempt organization derived from network marketing distributor activities will be subject to unrelated business income tax. Network marketing companies' distributors who sign up charitable organizations should be careful to point this out to the charitable organizations when they sign up as distributors.

The charitable organization should also be careful not to allow the network marketing distribution activity to endanger its tax-exempt status altogether. Under § 501(c)(3) of the Internal Revenue Code, tax-exempt organizations must be organized and operated "exclusively" for nonprofit purposes. The IRS has interpreted this provision to mean, however, that an organization which engages "primarily" in activities that further its exempt purposes will be considered to be operating "exclusively" for exempt purposes. However, the operation of a particular activity may jeopardize the organization's exempt status if the activity is more than "insubstantial" in comparison to overall organization activities. Unfortunately, few cases discuss or define "substantial" in quantifiable terms. In one recent case, the Tax Court held that a tax-exempt organization, which derived more than 25 percent of its revenue from a business activity, was "too substantial" and thus it was denied its tax-exempt status. It is unclear from the opinion whether 25 percent is the "high water mark" to be applied in all cases or merely the line applicable to the particular facts in the individual tax case. Without further guidance, charitable organizations, which are engaged in network marketing activities, must carefully monitor their activities to assure that the activities do not become "too substantial," although just what constitutes "too substantial" is as yet unclear.
Wholly-Owned Profit Making Subsidiary

The least risky method of collaborating with an NPO is through the establishment of a wholly-owned subsidiary corporation to engage in business on the NPO's behalf. This corporation could be signed on as a distributor in the same manner as any individual. The corporation would be taxable on its income. Dividends paid by the subsidiary to the tax-exempt parent, however, would not be unrelated business income to the parent by virtue of § 512(b)(1) of the Internal Revenue Code.

IRS letter rulings to tax-exempt organizations desiring to do business, indicate the appropriate business structure for such an arrangement. In the private letter ruling, a tax-exempt organization began operating as a distributor of a food product and enjoyed some success in the next year. The organization did not want to jeopardize its exempt status. Therefore, it set up a wholly-owned taxable subsidiary to act as distributor of the food product, and the exempt organization would be paid through dividends. The IRS stated that for federal income tax purposes, a parent corporation and a subsidiary are considered separate taxable entities, so long as the subsidiary has a legitimate business purpose and the parent corporation does not completely dominate the day-to-day management of the subsidiary. In that § 512(b)(1) of the IRC excludes dividends from the definition of unrelated business taxable income, the dividends would not be taxable.

Use of tax-exempt organizations for network marketing activities can clearly be a bonanza for all of the parties involved. The most important advice that can be given, however, is that the company, the distributors, and the tax-exempt organizations should be fully briefed by professional tax, accounting and legal advisors on the network marketing legal requirements as well as the tax ramifications of marketing through the network marketing format.

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