It is not uncommon for organizations in the nonprofit sector to forget the fact that they are running full-fledged businesses. They focus most of their energies on providing social/community services and spending considerable time on fundraising and pursuing grants. These are all important pieces of non-profit organizations. However, to differentiate themselves from their for-profit counterparts, many non-profit organizations do not use the approach to business that defines for-profit businesses. This is more common in the smaller local nonprofit and faith-based organizations rather than larger national organizations.
To build a successful non-profit organization, it is essential that non-profits realize that they are not simply charities in search of grants and donations; they are actual businesses. Non-profit is simply one sector of business. It is a business type, but it is a business. Implementing sound business practices are not the exclusive domain of for-profit corporations, they are important elements of all successful businesses regardless of sector.
The non-profit sector is a vital part of the American economy. Non-profit businesses provide a great deal of value to our society. Including but not limited to:
- Assisting the federal and local government in serving those needing help more efficiently and effectively.
- Providing individuals with an opportunity to do meaningful and life-changing work, both as volunteers and paid staff.
- Offering those with financial means a mechanism by which they can contribute to work that affects the greater good of society.
- Creating opportunities and environments that enable both individuals and communities to find hope, grow, and develop.
- Contributing to the economy with employment opportunities, and through the purchase of goods and services required to run programs; all of which are important for the growth of the organization.
These are just a few of the many way’s nonprofits play a vital role in American society. The challenge of the non-profit sector is to recognize their value and commit to running their organizations with sound business practices.
Establishing mission and vision are important, but non-profits also need to think about developing and executing both strategic and marketing plans; measuring long-term outcomes and the impact on services provided; implementing sound financial management and customer service principles; generating multiple revenue streams; and establishing technological infrastructures to increase efficiencies. These are all sound business practices that increase the organization’s chances to be successful.
For-profit businesses usually focus on the “Bottom Line” which simply measures net profit and shareholder value. Non-profits need to have a focus as well. The difference is that non-profits focus on what we refer to as the “Triple Bottom Line” which not only includes financials but social and environmental impact as well. Developing mechanisms to measure these outcomes are important for non-profits.
There are many other business practices used in the for-profit sector that non-profits should explore. The key is changing the thinking and recognizing that while the focus of the organization may differ from the for-profit sector, non-profit organizations are still businesses and need to operate like one.
With the challenges we face today, the non-profit sector is in a prime position to provide hope and resources for those facing hardships and play a critical role in helping this country rebound, live up to, and realize its potential for greatness.
By embracing and practicing the sound business practices of their for-profit counterparts, non-profit organizations can increase their chances of being around for the long term and having an even greater impact on the communities they serve.