Written by Katie Townsley
Nonprofits are very different from for-profit businesses because they are guided by their mission and causes to provide for society’s needs instead of being driven by revenues and profits. 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 to achieve the greatest impact, nonprofits must invest in their companies – just like a for-profit business would. Businesses anticipate and react to market demands, and those that don’t evolve with the times, risk becoming obsolete. The same is true for nonprofits that are unwilling/unable to react and plan accordingly.
That poses the question of what are some things that nonprofits can learn from their for-profit counterparts and run their organizations like a business?
Think Strategically
Create a strategic plan and long-term vision that allows for future growth. Consider new and innovative means of marketing and generating ways to generate revenue. Be sure to diversify your revenue streams instead of solely relying on donations and grants.
Utilize Technology
Nonprofits can look at how businesses use technology to help improve their operations such as using a customer relationship management tool to manage customer and donor information. If your nonprofit is not taking advantage of available technologies, you are missing out.
Spend Differently
For-profit businesses use budgets to support strategic priorities, putting greater resources behind higher priority projects. Your nonprofit probably has already developed an annual budget, but how closely does it mirror your strategic plan? Businesses also routinely carry debt on their balance sheets in the belief that it takes money to make money. In contrast, nonprofits typically avoid operating deficits. Unfortunately, nonprofits can operate so leanly that they no longer meet your mission. Applying for a loan or even creating a for-profit subsidiary could provide your nonprofit with the funds to grow. Building up your endowment also may help provide the discretionary cash essential to pursue strategic opportunities.
Promote Transparency
Although nonprofits must disclose financial, operational, and governance-related information on their Form 990s, for-profit companies are subjected to the Sarbanes-Oxley Act and other regulations are held to higher standards. Consider going the extra mile to promote transparency. Consider retaining an outside expert to perform an annual audit to help assure stakeholders that your financial data is accurate and that you follow correct accounting practices and internal controls. It also allows you to apply for larger grant opportunities.
Invest In Your Team
Every business and organization should invest in hiring and retaining the best team possible. Just because a nonprofit does not operate with the sole aim of making money, doesn’t always mean it cannot afford to hire the best staff. Apart from hiring, nonprofits should also offer competitive salaries and benefits so they can invest in better hires and talent.
Providing a great company culture can also go a long way in helping your team do its best and enabling the nonprofit to serve its mission and reach its financial goals.
