According to the National Center for Charitable Statistics (NCCS), there are more than 1.5 million nonprofits in the U.S. The NCCS also estimates that nonprofits represent 9.2% of annual American wages and salaries. Nonprofits are serious business, which is why I have partnered with NetworkPeninsula to offer business training sessions to nonprofit leaders and staff. I am also answering questions about nonprofit operations over the next several weeks on the blog.
Q: Why should a nonprofit run like a business?
A: Let’s face it – we are in a saturated market and competition is fierce. Consumers, as well as donors, are very cautious about how they spend their money. Because people compare nonprofits to businesses, nonprofits must impose businesslike standards if they want to remain relevant and current in such a tight market.
Like a business, a nonprofit has a board of directors, marketing and human resources departments, and executives all geared toward making day-to-day choices with the intent of making (or keeping) the organization competitive and successful. Businesses and nonprofits both develop strategic plans, keep financial records and audits, and monitor compliance. So why treat these functions differently just because you aren’t in it to make a profit?
The rules are the same for businesses and nonprofits. If you want to grow and prosper, it’s important to invest in key aspects of the organization. When a business does well, consumers immediately see the value of purchasing its products or services. When a nonprofit does well, donors immediately see the rewards of contributing to the group’s mission.
However, nonprofits inevitably have fewer resources and less capital to invest, and this is where the business senses diverge. Dan Pallotta said it best in his TED Talk called “The Way We Think about Charity is Dead Wrong.” He was right when he said the nonprofit sector has “to do more with less,” from staffing to resources, and that nonprofits have to “think differently and be more creative and innovative.”
Investing more in staffing and planning may seem helpful in the short term, but in the long term, quality investments that promote the organization’s goals and values are more sustainable. Nonprofits should not be judged by what they put into administrative costs, but by how these investments help them raise more funds and do more good. This requires a different set of standards, including transparency, leadership, and a focus on results.
You’ve got questions, I’ve got answers! Drop me a line at email@example.com and I will answer your questions on my blog for FREE.