Earned Revenue? Contributed Revenue?

I continue to be puzzled, or is it defensive about the question of whether contributed revenue can be considered sustainable, especially as opposed to earned revenue.  Perhaps because of my not-for-profit background, I see both types of revenue the result of sales (although we cloak the contributed revenue domain in flowery language and avoid sales language). 

This puzzlement has become a problem, as I have come to know colleagues on the for-profit side of business development, who mostly discount contributed revenue as unsustainable, soft and risky. 

It seems to me that the same number equations that drive estimates of sales can and should drive estimates of contributed revenue.  The same can hold true on reasonable year-to-year estimates.

One organization that I led relied heavily on contributed revenue, too much so.  However, the internal discussion concerning contributed revenue was not whether we would receive any or not, but how much over our reasonable estimates we could raise.  In other words, we knew that $10 million was secure, but needed $13 million.  The internal craziness was around how we could or should close this $3 million gap. 

I would think the same discussion takes place in the sales offices of for-profit businesses as they make their projections for the upcoming quarters and year.  They know that a certain number of sales is secure, but need to stretch to a higher number.  The internal discussion is all about how to close this gap.

My defensiveness on this topic grows from having had my students enter a number of business idea and plan competitions, and having had them judged negatively because their revenue plans included contributed revenue.  In many cases judges simply said, I’m sorry, but contributed revenue is unsustainable…

What am I missing? 

One response to “Earned Revenue? Contributed Revenue?”

  1. […] The 9/11 museum has decided to charge a mandatory admission fee when the museum opens next year, citing high security costs and questioning whether a donation-only model would support them after the first year. Not directly in response, but on-topic, Jim Undercofler wonders aloud why contributed revenue is considered less stable or predictable than earned revenue. […]

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