This One Common Mistake Keeps Your Organization From Thriving
We hear it time and time again: “We can’t do that! We’re not a business, we’re a nonprofit.”
When someone in a board meeting or strategy sessions says, “We’re not a business, we’re a nonprofit,” we hit the brakes. Time and time again, we hear the staff of well meaning, competent, mission driven organizations proclaim, with pride, that they are not a business; as if admitting to being a corporation would clash with their mission (it doesn’t).
Without rehashing the “beggar mentality” conversation (there’s plenty on that you can find through a web search), it’s important to note that there’s a lack of investment for nonprofits when it comes to infrastructure and overhead; all of which is perpetuated by an imbalance of power between funders and nonprofits.
Nonetheless, you really need to stop saying your nonprofit isn’t a business. Here’s why:
Legally, you are a business…
Laws differ from county to country, but if your organization has a 501 designation, the first step was to file articles of incorporation. Meaning, in the simplest terms, your organization is a business. The differences between nonprofits and for-profit organizations may vary, but as a consultant I break it down like this:
Nonprofit – fiduciary responsibility to the mission, tax exempt
For profit – fiduciary responsibility to shareholders, not tax exempt
A nonprofit still has revenues, cash flows, wages, rents, property, equipment, accounts payable, account receivable, human resources, and marketing just like a for profit.
There is no ban on making a surplus as a nonprofit.
There is no ban on having a positive cash flow.
Employees can be paid well.
It re-frames thinking across the entire organization
While it helps to have stakeholders at all levels supporting the effort, organizational culture and change both come from the top. Whether in strategic planning sessions, management meetings, board meetings, or impromptu conversations about cash flows, recognizing that your nonprofit is a business, and speaking intentionally about that fact, changes the mindset of those in the organization. It’s not always realistic for a nonprofit to charge a fee for services, but it’s also not always unrealistic! Have the conversation, just because you don’t distribute the profits to shareholders doesn’t mean your organization shouldn’t be able to support reasonable overhead, wages, professional development, and have a reserve for a rainy day.
Thinking and talking like a for-profit leads to better partnerships
Millennials are just starting to come into their (our) peak earning years and they (we) often want to do business with organizations who reflect the values they (we) hold. This means those for-profit organizations which make an impact in their community and for the environment are better positioned to make a profit… sustainability is for people, planet, and, profit. That said, those same organizations look to nonprofits to help, not all of them have the knowledge or the reputation to realize their vision for impact.
Thinking like a for-profit, and speaking the same language, opens the door for partnerships with for-profit organizations who bring big dollars, robust infrastructure, far reaching networks, and influence to the table.