Unlike many of their for-profit cousins, the main goal for NFPs is usually to contribute to societal needs as opposed to simply making a profit. Now that’s not to say NFPs don’t need to also generate profit, after all they wouldn’t be able to achieve their goals without it, the difference is they go about it in different ways.
For those new to the NFP and fundraising sectors, it is easy to assume that the same principles that are used in traditional business can simply be replicated in NFPs, but our Salesforce Consultant Wyan Carter knows this isn’t the case. Wyan has years of experience working in the NFP sector and knows all too well the battle NFP and fundraising organisations face when it comes to process complexity, achieving more with less, and the ‘non-profit vertical’ myth.
In for-profit businesses, the work and the income are the same thing. They provide their product or service and customers pay for these which generates income. Their internal functions and processes are geared towards continuing this cycle and growing their business to, hopefully, increase profits.
Non-profit businesses however need an entire set of functions that deal with income in order to get to the starting line of doing their work, whether that’s advocating for more marine national parks or supporting people living with a disability. Fundraising is often a key part of a NFP strategy but, unlike for-profit businesses, is a lot more complicated than simply selling products.
Imagine if you were a business that made alarm clocks and sold them online. You might have someone ask you if they could sell your clocks in their brick and mortar shops, but would you be able to oblige if they asked you to change your entire process and start making fridges?
The same is true when it comes to receiving donations. While it may be easier for the organisation, a fundraising nonprofit can’t just accept donations online; you will also inevitably be asked to accept cheque donations or bequests which you need to be able to say yes to as well.
Nonprofits that fundraise must generally be able to deal with all types of fundraising, even if they only have a fundraising team of two people. All this means that for a nonprofit and a for-profit business that are comparative sizes, the nonprofit will inevitably have more complex business processes.
Achieving more with less
While businesses are trying to maximise profits and reduce costs, nonprofits are trying to have as big an impact as possible while still being financially viable. This means nonprofits are always pushing the limits on doing more with less.
A normal business may not bust a gut to squeeze an extra $10,000 profit for the year, but for a nonprofit this could mean building another well that can provide clean water to an entire community, for example. This means that a nonprofit with a similar income to a business will generally be trying to stretch every dollar further and convert all their opportunities to achieve more with their income.
The ‘Nonprofit Vertical’ Myth
I’ve heard so many consultancies and agencies talk about nonprofits as a vertical, alongside other verticals like financial services or manufacturing. However, the reality is that nonprofits cut across all these verticals.
There are nonprofit magazines, nonprofit power companies, nonprofit banks and nonprofit schools. Almost any industry you can think of will have a nonprofit version of it. On top of this, there are many nonprofits that can’t be run as a business. Fundraising organisations that provide tax receipts for donations, for example, must be registered as Deductible Gift Recipients, which is not something that’s available for business. So while there are nonprofits that are unique to a ‘Nonprofit Vertical’, there is also a ‘Nonprofit Horizontal’ that cuts across all other verticals.
For some people the principles of business are the same regardless of their profit status, however, this isn’t the case. Nonprofits often have to undertake an invisible obstacle course of challenges before they even make the starting line with many of these continuing in order to simply stay viable. Acknowledging these differences and working with those who understand these challenges are vital for ensuring nonprofits can continue to make a difference long into the future.