So many of us in our lifetime have in some way or another supported a nonprofit organization, but very few of us actually know what a nonprofit is or how exactly they are run. Some of the most popular and best nonprofits around are the ones people don't even realize are nonprofits. Some of these include Goodwill, Girl Scouts of the USA, Red Cross, and YMCA, just to name a few. Since I hope many of you will continue or start supporting one or many nonprofits in the future, it is important for us to understand many of the managerial ways nonprofits are similar to for-profits and how nonprofits benefit our communities. Non-profits must cover many of the similar business expenses that for-profits have to cover.
The most
simplified and basic definition of a nonprofit is an organization that uses
surplus revenues to achieve its goals. Just like for-profit organizations,
nonprofits have bank accounts; own productive assets of all kinds; receive
income from sales and other forms of activity, including donations and grants
if they are successful at finding that sort of support; make and hold passive
investments; employ staff; enter into contracts of all sorts; etc. Just as
important, nonprofits have to meet break-even margins to cover all the expenses
of an organization. Academic Director of Executive MBA Programs at the Smith School of Business at
the University of Maryland, Robert M. Sheehan, was a former CEO of two national
nonprofits. Sheehan gives his opinion on the business organization of
nonprofits and what they must do to meet break-even margins.
A lot of other legal and organizational planning goes into the continual success of a nonprofit. One of the major difficulties and challenges of nonprofits is that they are extremely limited in what they can charge and often provide their goods and services for little to nothing. This is not to say that non-profits don’t make money. Any surplus of funds is redistributed back into the goals of its mission, rather than becoming profits for the owners. According to the 501c3, a nonprofit must (1) serve charitable, religious, scientific or educational purposes, and (2) have no part of the income of which "insures to the benefit of" anyone. This is the main distinction from a for-profit organization. In order to incorporate a nonprofit, you must file a 501c3 status, granting you legal tax-exemption for nonprofit corporations. Depending on your state, there are particular provisions for forming corporations, as well. A lot of paperwork goes into creating a nonprofit. The 501c3 is just a small aspect of all the technical work behind running a nonprofit organization and while I can't say it's easy, there certainly are a lot of benefits that outweigh some of the more tedious dull paperwork.
Nonprofits are driven solely on their purpose to serve the public or some specific cause.
Typically, nonprofits thrive off of awareness building or fundraising. Because it is not the intention of a nonprofit to incur a profit for individual benefit of the owners, the success of the organization is largely driven by the passion of the people providing those services. Being passionate and truly believing in the mission of an organization is key to the success of any nonprofit organization. In fact, some say that nonprofits are more so effective than for-profit businesses because of the individuals there, who are motivated and inspired by their jobs. Peter Drucker, an eminent writer, professor, and leader of management consulting, created the Drucker Foundation for Nonprofit Management on the basis of helping nonprofits develop more innovative ideas, but also, for businesses to learn from nonprofits. According to Robert Sheehan, mission focused can be one of the most difficult aspects of running a nonprofit.
Robert Sheehan's book, Mission Impact, is all about the importance of nonprofits having a clear mission and service goals. We, as a society, are expecting more and more from the nonprofit sector and leaders of nonprofits are trying to learn how to be more effective and innovative in serving the community. Today, it's extremely vital for nonprofits to be creative and original in their efforts to raise awareness and make a difference. This helps them get the resources and support necessary to keep a business stable. Support can include volunteers, donations, grants, and any investors that have felt inspired by a nonprofit. In the end, a nonprofit still functions like a regular business in meeting fiscal needs. There are lots of innovative and new ways nonprofits are generating support. Nowadays, social media is a big one.
Social media marketing strategies are empowering nonprofits with effective community outreach.
Social networking has become an extremely effective advantage of some nonprofits in spreading the word and fundraising. The results of social media use by nonprofits in the UK was shown in the Social Charity Index by Visceral Business. The report showed an increase of 12 million follows, shares, and likes for the top 100 UK charities. Facebook, Twitter, LinkedIn, YouTube, and Google+ are some of the many social medias being used in studies of charities and their social performance. Craig Newmark, founder of Craigslist, profiled the highest grossing nonprofits and their use of social media, and found that 92 percent of them link to at least one social media site from their homepage. Nonprofits have a wide range of social assets, today, with which they can build the impact of what they do. This includes creating mobile, innovative, interactive, crowd-sourced philanthropic experiences, and working with commercial partners in new ways that can amplify the strength of their social vision at a cultural level. Nonprofits are learning that they can convert the loyalty of their supporters on social networks into direct and interactive involvement, and generate cost savings by doing so through their use of social business planning and networked media. Social media is giving nonprofits power to reach far greater numbers in an innovative, yet, easy way.
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