Why You Should Run Your Nonprofit Like a Business
Nonprofits are critically different from corporations because they are driven by a mission and aim to provide for society’s needs. Nonprofits are organizations that have a social impact.
However, all corporations, whether “for profit” or not, need to solve a problem and create value for others. This value created could be a product or service for potential customers, as seen in the realm of business. But this value can also be in the form of programs and services that benefit hungry children, put a stop to the mistreatment of animals, or preserve the environment, as addressed by the work of nonprofit organizations. From the donor’s perspective, their “purchase” of investment in a nonprofit’s work results in the gratification of being a part of the solution to a societal problem.
With the common goal of creating value in mind, businesses have wisdom from which nonprofits can make a greater impact and perform at their most effective. When nonprofits “profit” by running their organizations effectively, the profit gained does not have to end in increased financial margins – the profit, ultimately, is the social impact. But in order to achieve the greatest impact, nonprofits must invest in their companies – just like a business would.
What can your organization do to succeed and make real strides toward accomplishing your mission? Read on for key ways in which your nonprofit can learn from time-honored business practices.
Invest in your team
You should invest in your staff, bringing the best talent possible onto your team. This entails having a high-quality company culture, benefits, and decent salaries for employees. Your staff should feel valued and satisfied so that there is a long-term investment in your nonprofit that leads to the highest value output from your employees. You have to take care of your organization in order to change the lives of the community for the better. Your employees are the people making the difference – they need to be taken care of.
Invest in technology
You also need to invest in quality technology to facilitate your communications, analyze your data and impact, and raise the funds and support necessary for your work. While there are plenty of free tools to get your organization started, your nonprofit needs to grow, and these can only take your organization so far. By investing in the right technology for your organization, even at a cost, you are allowing your organization to utilize the tools it needs to succeed. Sign up today for an all-in-one fundraising and community engagement platform that won’t break the bank.
Invest in marketing
You should invest in marketing and the public face of your nonprofit, which includes having a solid brand, advertising, a social media presence, a well-designed website, and a network with whom to share your campaigns. This will also help ensure that your nonprofit continues to get resourced.
treat donors as customers
For both nonprofits and businesses, meeting customer expectations is critical to the survival of your organization. Once you have created something of value (by identifying a problem to be solved, and the programs and services needed to address that problem), you must also deliver on your promise. A good rule of thumb is to under-promise and over-deliver so that your donors will be exceedingly satisfied with their investment. Set appropriate expectations, and deliver above and beyond what your donors expect. If your donors experience a problem, provide them with assistance as a business would customer service. Donors and customers alike will experience greater satisfaction resolving an issue with your staff than if they had no issue in the first place.
“The best performing organizations and their partners smartly evaluate short- and long-term opportunities to integrate, reapply, and scale.”
– Mohan Sivaloganathan, Chief Development Officer of ESS of NYC
Focus on both short-term and long-term ROI
Look to successful startups in the for-profit world to see the importance of taking risks. As a nonprofit, you are still in the business of disruption – but major social impact changes don’t happen overnight. According to Mohan Sivaloganathan, Chief Development Officer of ESS of NYC, “The best performing organizations and their partners smartly evaluate short- and long-term opportunities to integrate, reapply, and scale.” Quality innovation happens as a result of smart investments, which are not necessarily lean. Risk is necessary for the innovation required to solve social problems.
According to Dan Pallotta, author of Uncharitable: How Restraints on Nonprofits Undermine Their Potential, “philanthropy is the market for love”.
See Pallotta’s TED Talk: “The Way We Think About Charity is Dead Wrong”
He argues that nonprofits and for-profits have many of the same goals, yet are held to different standards that end up hurting nonprofits who do not invest in their own organizations. He believes that nonprofits should be measuring their success based on how they scale, rather than how low their overhead is.
What is your nonprofit doing to generate long-term ROI? What other business tips do nonprofits need to know to make the greatest impact? Tell us in the comments!
My friend and I want to start a nonprofit to help deaf kids get access to tutoring and translating services by selling sign language books, and I agree that if we’re going to get far with this, running things like a business is probably the best method. We’ve been having trouble gathering necessary funds and we don’t have the budget to expand to get any employees yet, and as you said, we need profit to be able to do that. Being able to create value both monetarily and also in the world is important to us, and your tips like investing in marketing campaigns and “under promise, over deliver” to donors are great ways to do that.
Hi sirs,thank you for this information I’m trying to start up one for kids.
Awesome— glad to hear that, and excited for you!
I am the Founder/Executive Director of Sophie’s Companions For Veterans Foundation. Our organization has done great things in 7 years, but since the pandemic, it’s obviously killed out projected events for the 2020 season so far and then of course any budget. PLEASE any input on how to survive after this challenging time would be appreciated.
Hi Janet, thanks for all the good work you do for veterans and animals! We’re so sorry to hear that the pandemic has impacted your organization negatively. We’re sharing our blogposts/resources on funding, loans & grants, leadership, going virtual, and more— for coronavirus nonprofit relief, here: https://themodernnonprofit.com/category/covid19/. We hope it helps!
Hi Olivia,
We are wanting to start a Sexual Assault Healing Center. My struggle is some of us are very concerned about meeting the needs of a diverse community, while others are very focused on the business side. I’m an MSW and this feels like people wanting to have a legacy, rather than helping others. How can I have a better understanding and share that other side in a positive way. I think your information is very helpful.
Hi Carol. It’s awesome that you are starting up your mission already equipped with a team of people that are concerned with both meeting the needs of your community and running an organization with good business practices in mind. While it seems on the surface that they are not aligned, both mission-driven and scaling focuses are the necessary ingredients you need for a sustainable revenue vs costs structure to be able to serve your community long-term. Creating networks, growing credibility, building capacity, running lean business practices, staying adaptive, marketing, managing cash flow— these are all puzzle pieces of longevity.
Start by getting everyone rallied and clear around the ultimate goal and mission (here’s how to write a strong mission statement). You’ll also need a fundraising plan, which requires an approach similar to creating a business plan. Then, use that to come up with objectives and a plan of action. From there, you can assign roles so that programmatic people can work on the ground serving community, and business-oriented people can be assigned to more administrative roles.
Ultimately, the key is to get everyone clear on your shared goal so it can feel complimentary and exciting rather than in conflict, as you are all working together. Work with your varying skills and talents and benefit from a team united with a shared mission and passion for healing. I’m excited for the future of your healing center and the impact you and your team will make!
Npo need more in depth guidance in terms of organizational development especially the smaller emerging ones. Accessibility to funding as emerging organizations is major stumbling block
Hi Ronelle, we totally agree that there need to be more resources for nonprofits on organizational development and accessing funding in the early stages of development. Let us know if there are any specific topics that you would like us to write about.
First, thank you for a great blog.
I am io interested in setting up a business helping vulnerable women grow I also would like to open a food shelter for the vulnerable and needy signposting them to relevant services if needed.
So I run these as none-profit? Or could I make a profit from helping women and how would I generate the income?
How do I get started as my head is pooping with confusion and so many ideas. Thank you in advance
Hi Amanda,
I’m excited to hear about your vision to provide access to food and shelter for women in need, as well as help them thrive! There are many approaches you can take to get started, while having to consider compensation and sustainability, so I understand the overwhelm.
Here is an article on some of the key differences between running a nonprofit and for-profit: How is a Nonprofit Different From a For-Profit Business?
Here is another, on determining which is right for you: “Should Your Business Be Nonprofit or For-Profit?”
And if you’d like to dive deeper, we’ve shared a list of Essential Nonprofit Leadership Reads. The book, The Lean Startup, may be of particular interest to you as you develop your budgeting plan.
I hope this helps, and I am excited about the impact you will make!
Two yrs later, just another reser wondering if you took off with your np? I share similar ideas..are you around, will this be seen?
Shirley Morris, Good day we’ve started our NPO in 2018 by teaching, feeding and giving support to under privilege kids in the locations in South Africa in Soweto, Eldorado Park and Kliptown. The kids has been affected, cause I don’t interact much with them since the pandemic with Covid19. We need a bigger space to practice social distancing, cause the place we used is very small. Our pockets are effected cause we using our own funds to look after them and difficult even now to get funds due to to the pandemic we facing. I need ideas how to continue to run my NPO in this times.
Hi Shirley, thank you for all the important work you do to support underprivileged youth. I’m sorry to hear of how COVID-19 is negatively impacting your organization’s efforts. If you haven’t already, check out our COVID-19 resource library. Particularly, our blogpost on How To Fundraise For Nonprofits During Coronavirus may be useful for you, with tips & resources for navigating funding during this challenging time. I hope these resources prove useful and that you’re able to get support with the work you are doing with the kids.