As counselors, we are often faced with clients requesting guidance in starting a nonprofit organization. Keep in mind that the impact of the Nonprofit Economic Sector nationally is significant. It provides over five percent of the nation’s entire GDP. Employees of nonprofits account for over ten percent of the nation’s private sector workforce and over nine percent of all wages paid. In 2013, 62 million Americans volunteered to contribute almost eight billion hours for an estimated value of $173 billion. In Arizona alone, there are over 21,000 registered nonprofit agencies. Their revenue totals over 26 Billion and their assets exceed $43 Billion. Competition for board members, staff, volunteers and money is overwhelming.
Some SCORE clients are truly altruistic; they genuinely feel that they have a concept that will benefit the larger society that will enhance all our lives. Others appear to have the erroneous idea that they can more effectively benefit themselves by creating a nonprofit rather than by going the route of developing a for-profit business.
As noted in the SCORE Business Planning Tools for Non-Profit Organizations – Second Edition…
“In our democratic society we ask non-profit organizations to fulfill several important responsibilities, from providing public benefit and serving the underprivileged to advancing education and science and reducing the burden of government. We also expect non-profits to operate on a higher more noble plane than other organizations, and we insist they focus on public good rather than private gain in accomplishing their goals.”
With the above standards in mind, initially, at least, we should take our usual approach, have the clients carefully explain their concept. Remind them that operating a nonprofit is, in fact, operating a business. We should take them through a thorough examination of their organization’s business plan, including their business model, their mission, vision, values, the environment they will be operating in, both external and internal, their goals and action plans. We should make them think through their management plans and their leadership skills, their personnel plans, their marketing plans and their financial plans. We must not let clients overlook the challenge of finding sources for start-up and operating funding. We should make them think through the inputs, activities, outputs and outcomes required for success. Today’s funders want to see value, measurable impact for dollars contributed.
If initially, at least, we treat both nonprofits and for-profits, in the same way, the question then becomes how do they differ? While making a profit is not their primary motivation, nonprofits must generate revenue in excess of expenses (in fact make a profit / surplus). This means that nonprofits do not exist to make money for owners or investors. Instead, they are dedicated to a specific mission.
Copyright © 2023 SCORE Association, SCORE.org
Funded, in part, through a Cooperative Agreement with the U.S. Small Business Administration. All opinions, and/or recommendations expressed herein are those of the author(s) and do not necessarily reflect the views of the SBA.