Why nonprofits need for-profit business mentality

Sitting on many nonprofit type boards and running my own nonprofit, I’ve changed some ways of thinking in the past six months.
You see, anyone that has been paying attention to the financial sector, and world markets would understand that the economy seems to have taken a turn here in the States. It’s hard for anyone not to see that actually with gas prices running sky high (technically that’s another story altogether, but we’ll visit that sometime else).
So what happens to nonprofits? The ones like my own do not carry salary for its staff and thus are purely volunteer based and non-fund driven. There really isn’t anything that you must do since we do this because we wish to do it. But there is another type of nonprofit. Those that actually work in the sector and is their livelihood. What about them?
Well, first we need to understand how most nonprofits operate. For the most part, nonprofits are either supporter driven, or foundation money driven, or a combination of the two. Unfortunately, if your nonprofit serves a pretty distinct niche, then either or both of those sources of funding can dry up very quickly when times are tough. And believe me, the whole grant writing, and asking money from foundations thing is a weary act.
That’s why nonprofits need to quit thinking in the old school fashion of holding out the hand and asking for money, and instead start thinking like businesses structures. Yes, the budget is tight, but think of grant funding as your VC or seed capital. Once it’s gone, you can definitely go back for a second or third round, but the idea is to use it to drive a recurring business, not one that is a one pop wonder.
Think about it. If you had grant money that was used purely for a project by project basis, then you would have to operate like my own nonprofit (pure volunteer). But if you could create recurring business from the initial funding? Then not only are you creating a recurring income, but you’re also abiding by your mission. This also frees up foundation money that you would have been going back for, so that the foundations can give to some other charitable organization. Let’s be frank, there are more charitable organizations out there than actual money givers.
There are a lot of reasons why operating like an actual business can pull a nonprofit through the hard times. Heck, most of these nonprofits already have a Board and instead of a CEO, you have an Executive Director. But either way, most of the planning and actual management team is already in place. There just needs to be a change in the school of thought.
Believe me, when times are good, it’s not such a bad thing to just ask for the green. But when times are tough? It’s more prudent to batter down the hatches and hold out until the storm is over. And nonprofits usually are one of those ships that are thrown wildly in the storm.
Photo Credit: (dbking)