Nonprofits Do Not Operate to Make a Profit … NOT!!!

An employee of a nonprofit recently shared with me that he’d left the business sector to specfically work in the nonprofit sector. The gist of his reason for the career change was a desire to work in an environment that was less “business-like”. I didn’t ask him for particular aspects of nonprofit work which was less business-like than his work in a for-profit company. Mainly because I didn’t need too. He held and probably practiced a common belief that nonprofit work is different from for-profit work. One of the reasons for this idea is the very name given to organizations in the sector: “nonprofit”. Sadly, this title creates confusion regarding a nonprofit’s economic function.

So, let’s get this misperception out of the way from the start: Nonprofits are not nonprofits! Got it? To extrapolate: a nonprofit is about being profitable. Otherwise a nonprofit cannot consistently produce a quality product. The fundamental difference between a nonprofit’s net income and a for-profit’s net income is who owns these earnings. In the nonprofit’s case they are retained by the nonprofit. In the for-profit’s case they are available to specific persons (shareholders or partner/owners). However, both must make a profit to be, as accountants say, going concerns. Otherwise they are limited in their product quality and eventually become neither nonprofit or for-profit but out of business!

So, let’s drop this unnecessary ballast which we heave onto nonprofits. This ballast limits their effectiveness. Nonprofits are about making a profit. It will be a new day for the sector when in asking about a nonprofit’s impact the question includes a nonprofits … profits!

JRR

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