You may be of the belief that nonprofits cannot make a profit. Well, I am here to tell you otherwise. This is the furthest from the truth.
Nonprofits can, and should, make a profit. By being financially sound, and in the black, this ensures the more financial resources are available to meet the demand of the community. Simply put - the more money you make, the more you can serve your community, pay your staff competitive salaries, and invest for a rainy day. Maybe even an office renovation or upgrades, and provide staff retreats to help build morale and boost culture.
Here’s a funny story that I like to share. And hopefully you will find it as humorous as I still do. Many moons ago, I was out on a date and during the appetizers and small talk, my date asked me what I do. When I told him that I am a nonprofit consultant, he asked (with a straight face), “so how do you make money?” I grinned from ear to ear and jokingly replied to him by saying, “I don’t, you are buying our dinner, right?”
That was our one and only date. It was clear to me that he isn’t unlike many others in our community that have the mindset, albeit the wrong mindset, about nonprofits. Over my career, I have been invited to attend many networking meetings and when I get a chance, I always like to end my introduction (or elevator speech) by saying, I help nonprofits put profit back into nonprofits.
This is when the room inevitably makes an audible reply in unison. It’s almost as if the clouds have parted and the angels are singing.
Being a nonprofit is a tax-exempt status, not your business model. The nonprofit sector accounts for 10 percent of the American workforce or 11.4 million jobs. Making it the third largest workforce in the U.S., behind retail and manufacturing.
Currently, the US has roughly 1.8 million nonprofit organizations, including 501(c)(3) public charities, private foundations, and a variety of membership and professional organizations (Independent Sector 2020) and I genuinely hope that most of these organizations are focused on making a profit.
Nonprofit corporations, unlike other forms of business, are not designed to make money for owners or shareholders. Instead, nonprofits are formed to serve a government-approved purpose and are accorded special tax treatment as a result. The key difference between nonprofits and for-profits is that a nonprofit organization cannot distribute its profits to any private individual (although nonprofits may pay reasonable compensation to those providing services).
So, if you are like my date in my earlier story, and think that nonprofits cannot, or are not allowed to make a profit, please rethink the way you see this business sector.