I’ve been talking about it for years. Nonprofits are great, but I think people who begin or work for these organizations need to understand two things:
- Nonprofits are a business. The fundamental difference between a for-profit business and nonprofit is that nonprofits are tax exempt.
- You can’t start or continue an organization on a wish and a prayer. Sustainability is crucial to being able to accomplish your mission.
Nonprofit Business ModelOne of the things I always remind people about with nonprofits is that the 501(c)(3) designation is for taxes. I think a lot of individuals in the social sector, such as people who volunteer, donate or even work for nonprofits, sometimes have a misunderstanding about a nonprofit business model.
Unlike a for-profit business which takes its profits and disburses it to its shareholders (even small businesses), a nonprofit “reinvests” it back into the nonprofit. Any surplus revenue is supposed to go toward the mission; meaning, it’s okay for nonprofits to make more revenue than their operating expenses. I think that’s a point that sometimes gets lost on people, especially board members. Nonprofits can make a profit, but when they do, it has to go back to the social cause. We’ve got to stop starving nonprofits.
The primary thing to remember is that a “nonprofit” status is an IRS tax exemption given to the organization so it can accomplish its social mission.
Sustainability Has to be a Concern
I’ve been a businessman for a long time and even as a social entrepreneur, I’m always looking at sustainability. I have the opportunity to work with nonprofits each day, and when I speak to some executive directors, they’re focused on the mission, they complain about not having enough money (always), but they don’t plan for sustainability. Or, they’ll tell me that they keep on trying to get the board to work on a sustainability plan, but it just doesn’t happen.
Sustainability is not something that comes out of nowhere. For any for-profit or nonprofit endeavor, there’s got to be planning to become sustainable. One of the reasons I think there’s so much churn of professional fundraisers is because there are unrealistic expectations. Fundraisers aren’t magicians, and they don’t come to organizations carrying a contact list of high-end donors that will rain dollar bills on nonprofits. They don’t shop around their contacts, and if they did, they’d be going against the ethical principles of the Association of Fundraising Professionals.
Strategies to Become Sustainable
- Operate your nonprofit business well. Let’s face it; there are differences between nonprofits and for-profit businesses. The biggest contrast between is that profit is not the motivating factor for nonprofits-social change is the core of the work. However, executing all the work should come from a position of excellence. Programs, operations, and financial sustainability should always be viewed from a lens that seeks to be the absolute best.
- Stop chasing money. It may be counterintuitive, but you have to be smart about the money you’re chasing. You can’t be all things to all people and all donors. That means you have to be smart about how to raise funds. Create a development plan about who you’re going to approach and why. Are donor interests and past giving history aligned with your work? If not, look elsewhere. It takes too much time and effort to raise money. Be smart in how you approach the task.
- Not your father’s charity. Times have changed. You don’t want to think and run your charity with 20th Century thinking. Those days are done. Organizations that are growing and becoming sustainable are those that are adapting to change, innovating and moving with the times. Change happens at an unprecedented pace these days. We’re in a new era, and it’s important to be flexible and adapt to the new environment.
Author of “Not Your Father’s Charity: Grip & Rip Leadership for Social Impact” – Free Digital Download at http://www.notyourfatherscharity.com
© 2017 Wayne Elsey and Not Your Father’s Charity. All Rights Reserved.
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