May 18, 2024

Nonprofits and For Profits Have a Lot in Common

3 min read
There is a common perception that there is an enormous difference between starting and running...

There is a common perception that there is an enormous difference between starting and running a nonprofit organization and launching a for-profit business. Some see nonprofits as less work, since the money just rolls in from grants and donors and allows the key players to focus on their philanthropic work. Some see nonprofits as double the work, because finding “free” money to run the programs that make a real difference is far harder than it sounds and you have to market to and please at least two distinct groups of people (donors and clients). But the fundamentals that bring success to either a nonprofit organization or a for-profit company are essentially the same. Here are the basic factors that both types of businesses must focus on, and what they mean to each.
Good planning is an essential key to success no matter what type of business you are starting. The only way to know if your idea is viable is to work through the details before launch. For-profits need to ensure that the true profit margins make sense, that the products or services offered will turn a profit under various possible conditions. Nonprofits don’t need to mess with profit margins, but they do need to know where the money will come from, how much fulfilling their stated mission will cost, and whether the benefits of the program ideas make economic sense. In either case, it is absolutely essential to break down the idea, do the research to ensure viability, and create a clear roadmap to turn the idea into reality.
Marketing is another critical key to success for either type of business. In the for-profit sector, marketing is accepted as the primary effort required to sell products or services. In the nonprofit sector, marketing is often undervalued or worse, considered distasteful. In fact, marketing is every effort you put out to let others know about your organization, from social networking to business cards. Successful nonprofits acknowledge the necessity of quality marketing plans and realize that their marketing requirements are twice those of for-profit businesses. Nonprofits have to convince both donors and clients that their organization is the one to support. And, with nearly 2 million other nonprofits in the US alone seeking donor dollars, a solid marketing plan is the only thing that will help your organization stand out in the crowd.
Financial Management
The basics of financial management are the same, regardless of the type of business. Accurate accounting and solid financial planning are absolute requirements for any business that wants to succeed. Of course, there are some details that differ between for-profit and nonprofit financial management, but the applied principles are the same. In either case, you need as much or more money coming in than going out, and you need to know what’s going on at any given time and plan ahead to keep the organization afloat. Sure, some terminology and ratios are different, but the fundamentals are the same. Money in, money out, rules to follow, math to do. Without truly managing the money, there is just no way to succeed in any type of business.
While it is absolutely true that there are some important differences between running a nonprofit versus a for-profit venture, the fundamental keys to success are the same. Planning the work, marketing effectively, and controlling the finances will put you on the road to success, no matter which path you choose.

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