The Business of Non-Profits

Posted: December 9, 2012 by Bill Cunningham in Ecosystem, Money, Non-Profit, Social Entrepreneurship

Bill Cunningham BioThink of all the great works that non-profit organizations give to our communities. They embody a lot of the characteristics of startups – passion for an idea, deeply held beliefs by the founders and impact on the region (market.) Although the term social entrepreneurship is relatively new, the process has been around for centuries. Instead of making a return on investment measured in terms of profit, social entrepreneurs measure their positive returns to society.

However, for-profit and non-profit organizations probably have more in common than differences. The distinction between the two really lies in how the Internal Revenue Service treats the taxability of each group. The 501(c)3 non-profits are exempt from income tax, sales tax and property taxes. In return for this benefit, they must meet stringent requirements so that society and not an individual is personally benefitting from this tax exemption.

In just about every other way, the non-profits look, smell and act like a for-profit business. Non-profits must take in more money than they spend. They must market their services and goods to their constituents (customers.) While often associated with volunteers, many non-profits have payroll for workers who make their living doing these good works. In order for non-profits to succeed, they must run like a for-profit business.

One of our first customers to test our service was Homestretch Hounds, a dog rescue shelter in Hillsboro, Ohio that provides a second chance for dogs whose time has run out at other facilities. This started as a small home operation and grew to accommodate the demand of the marketplace by providing a great environment for the dogs or by a great adoption network they have built. Like any other business, they have to buy supplies and services and as a donation-centric entity, they like to spend their money effectively. To maximize the impact of donations, they negotiated a great deal with a dog food manufacturer. Just like other small businesses, getting a great deal on the product doesn’t necessarily mean you will get a great deal on the shipping. In fact, the market charges premiums for small loads versus using an entire trailer. Keeping an eye on the budget, the founder caught wind of our service in Soapbox and Homestretch Hounds stretched their budget to save 33% on shipping. The lesson is that non-profits need to run their organizations like a business.

Many non-profits get started by non-business people. So how do you acquire the skills and knowledge to become a sustainable business in the non-profit world? Follow the paths of many non-profits by forming a board of advisors or directors that have different backgrounds: financial, marketing, governmental and more. Don’t appoint your people who all have the same background — build diversity on your board in multiple ways. Seek out the advice of other successful non-profits – they all had to start somewhere and like entrepreneurs, most are glad to help others along the way. If you are just getting started, ArtWorks offers an 8-week boot camp called Springboard, which provides you with the basics of starting your organization (for-profit or non-profit.)

Seek out these resources and you will increase your chances of success.

Find out more about Homestretch Hounds at https://www.facebook.com/HomestretchHounds

Find out more about Springboard at http://www.artworkscincinnati.org/springboard/

Bill Cunningham is the CEO of OneMorePallet.com and shop foreman at the Greater Cincinnati Venture Association.

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