Running a nonprofit organization (NPO) is all about making a positive impact, which is why many people exit the for-profit sector and dedicate themselves to a career that prioritizes social impact over the bottom line. Not surprisingly, some of the most successful nonprofits use the same strategies that big businesses use to not only stay in the black but also grow exponentially. With more money and resources comes the opportunity to make a bigger difference.
Have you considered ways you can run your nonprofit more like a business? We asked two prominent figures in the southern California nonprofit sector for help answering this question:
There are many fundamental differences between nonprofits and businesses, not least of which is that nonprofits' objective is to make a difference, not make money. That said, there are some valuable lessons that can be applied to nonprofit management that can translate into a more efficient, stable and successful organization which can have a greater impact.
At their core, nonprofits operate with two bottom lines: social impact and fiscal success. Impact may trump the bottom line, but when the two work hand in hand, it’s easier to make wider strides toward social good.
Some nonprofits who run their organizations like a business have stopped using the term “nonprofit” altogether. “We have started using ‘social impact organization’ in its place,” explains Melissa Beck, CEO of Big Brothers Big Sisters of Orange County. “I am incredibly conscious of my ‘profitability’ and hold us to being financially sustainable just as I would a business.”
Others are subjected to the kind of heavy scrutiny that accompanies many nonprofit operations. "The accountability for nonprofits increases every single year," says Carlos Leija, the Chief Development Officer for Orangewood Children's Foundation. "You might hear about nonprofits in national news stories that aren’t operated well or where there might be wasteful spending. We are really truly heavily scrutinized and we should be."
Over the next several months we will explore the following lessons from the business world and look at how they can be applied to nonprofits, regardless of size, shape or scope of the mission:
Lesson 1: Manage capital wisely to ensure profitability
A focus on impact over earnings is typically the main reason professionals choose to work at a nonprofit. In reality, financial resources are a big part of being able to fulfill a nonprofit’s mission, so it’s wise to take queues from for-profit businesses in regards to managing capital appropriately and ensuring steady revenue. In short, it takes money to raise the money you need to make a difference.