Non-Profits Are Businesses Too
Non-profits are typically charitable organizations that serve a social cause They have some tax advantages over for-profit businesses, 501-3C, for example, refers to a section of the IRS tax code. Some are very large, and well funded whereas others are small and struggling. They all have a passion for what they do.
Frequently, however, they are not run like regular businesses. They should be.
They face the same challenges as a regular business and need to understand all the major business components including planning, marketing, funding, operations, cash flow, and business development. Non-profit does not mean no profit.
As a non-profit, you must market to differentiate from others. Who exactly do you serve? What is your mission? How good is your customer service, market research, marketing materials, promotion program, development plan, and yes, even your sales capability? Most people that work in the non-profit sector are in there because their interest in social cause and this is important. But business skills are needed to make the organization economically successful so that it can continue to serve these needs and grow.
Non-profits typically have two different customers, the clients that are served, and the donors who fund the organization. You must market to both.
Heather Logan is the owner of Solutions Planning Group, on Bainbridge Island. Her company specializes in consulting to non-profit organizations and she believes there are two important issues.
First, is funding. You must understand the funding cycle of donors. Do they give during the year in which case funds might be available in as little as 2-3 months? Some, however, have an annual cycle with a long evaluation period. Here, funds could take 18 to 24 months to secure. Because of our compassion for social issues in the Pacific Northwest, there are a lot of non-profits in our area. This makes the competition for funds very competitive. She recommends networking to find local businesses and donors that have a similar interest in your cause. For example, if you are providing housing for the poor, consider mortgage bankers and others in the housing field.
Heather, who also volunteers as a SCORE counselor, believes that the structure of your Board of Directors is crucial. You need to have a combination of private and professional people who will get things done. They need to take responsibility and work hard for your organization. You need also to have your constituency serving on your board. If you serve the disabled, then have a person with a disability on your board.
Just like a regular business, your employees need to be well managed. If you have volunteers as well, try to find out what motivates them, let them participate with their ideas, and keep the micro-management to a minimum. Employee training must be done.
You must be on top of your budgeting and cash flow. You need a business plan.
Some non-profits have a social enterprise as part of their organization. This is a side business to provide jobs for their clients and funds for their organization. Goodwill Industries and the Salvation Army do this. This of course, is a real for-profit business and must be run as such.
Americans love to donate and volunteer their time. There are many wonderful non-profit organizations that serve thousands of constituencies. We need these organizations in our society but they must be run well to survive. As they provide social services, they must be run like a regular business.
This article was written by Seattle SCORE Chapter member Fred Parkinson for the Kitsap Sun in Bremerton.