by Jerry Mooney
Image from: https://www.pixabay.com/ (CC0 Licence)
Over the past 10 years, non-profit organizations have become popular choices for entrepreneurs looking to start their own business.
What is a non-profit businesses?
The primary goal of non-profits is to further a cause or provide a specific benefit to society. This usually means that non-profits are organizations that seek to conduct one of the following:
Charitable work
Literary or artistic work
Scientific work
Educational work
How do non-profit businesses differ from standard businesses?
Standard businesses - known as “for-profit businesses” - are businesses that exist, essentially, for the purpose of making money. While they may have environmental or social goals as part of their company plan, their primary intent is to generate income and thus turn a profit. These profits may then be reinvested back into the business, but this is a choice; if the business owner chooses to do so, they can simply collect the profits for themselves.
Non-profit businesses, on the other hand, have an entirely different focus. Similarly to for-profit businesses, non-profits do seek to generate income, but the money they earn is used to further a particular cause or need. For example, non-profits conduct scientific research, provide educational opportunities, or open rescue shelters with their income. The general expectation is that non-profits will seek to spend every cent that they earn in furthering their particular goal, which means there is no true ‘profit’ generated as a result.
This use of profits aside, there is another significant difference between non-profit and for-profit businesses: the amount of taxation they pay. As https://smallbusiness.chron.com/ notes, non-profits tend to qualify for tax exempt status.
To help with the running of their non-profit, so that it is effective and can provide for the community as it needs, they will look toward organizations such as Evalcorp to produce needs assessments, capacity building, and program evaluation to study the impact that their programs are having. Whilst for-profit business will do this, they are mainly focusing on what it can do for their business to help them gain money and growth, whilst non-profits are doing so to help the community.
Do entrepreneurs make money from non-profit businesses?
Yes. While the entrepreneur behind a non-profit does not collect a percentage of the overall profits, they can still draw a salary from the business.
Are non-profit businesses ‘easier’ than standard businesses?
No. It is important to note that starting a non-profit business is not a simple, lighthearted, tax-free alternative to a non-profit business. Non-profits need to account for many things, including specialized nonprofit tools to manage volunteers, specialized nonprofit accounting, and fundraising. After all, a non-profit is still a business and needs all the preparation and organization as a for-profit business.
It’s important to remember that non-profit businesses are still businesses at their core. This type of business still has to be run effectively; the right staff have to be hired, IT needs to be managed by the likes of https://www.houkconsulting.com/services-solutions/it-for-non-profits/, and marketing and advertising campaigns have to be designed. It is therefore vital that non-profits are always approached in the same way an entrepreneur would approach a standard for-profit business endeavor.
Why should you start a non-profit business?
Non-profits represent an opportunity to run a viable business while also “giving back” at the same time. If there is a cause you are passionate about, starting a non-profit to raise funds or develop helpful initiatives can be a wonderful way of achieving two goals with a single venture.
In conclusion
When considering their options for starting a business, most prospective entrepreneurs focus on standard for-profit business ideas. However, as we have seen, non-profits are a beneficial alternative, and are therefore well worth considering by all would-be entrepreneurs.