Can a Nonprofit Make a Profit

Tuesday January 14, 2020 comments Tags: nonprofit, accounting, mission, vision, profit

Any accounting business or tax advice in this podcast is not intended as a thorough in depth analysis of specific issues nor substitute for a formal opinion, nor is it sufficient to avoid tax related penalties. If you need any help with that, please reach out.

Today I want to talk with you about can a nonprofit make profit. Yeah. Yes. While an organization might be called a nonprofit or a not for profit organization, it's not because you're not expecting this to make any money. It's because that's not why you exist. You didn't go into the nonprofit arena, you didn't decide to found an organization or lead an organization because you were focused on the dollars. You are focused on the impact. And that is the big difference between a for profit and a not for profit organization, is where is your focus?

Is your focus on how much money can we bring in or is your focus on this is the good I want to do in this community. When you are looking at that good, you do have to make money though. I like to compare it with how you run your day, like how you run your daily life. If you went day to day and didn't make any progress, it would be hard for you to say, oh, I want to help this person. Why you don't have any money? You can't help someone else if you can't help yourself. It's that put your oxygen mask on first. So how would it look for you to say, Hey, we help people alleviate poverty. We help feed them, but all our all our workers work at food banks. That's not a good look. So you do have to think about making a profit.

You just know that that's not your sole focus and you're making this profit because you want to move on. You want to continue your work. Think of it like your retirement plan. If you don't save for the future, you're going to be working forever or you're going to be living a life that you're not pleased with. If you want to expand your services to the community, you have to think about ways to make a profit, have some money leftover. Think about what are we saving for the future? What are we saving to make a bigger impact? When people ask, well, how much cash should we have in the bank? I think of three months of operations. If nothing else, if no new money came in, could you last another three months? Yes. Great. Could you last another six months even better? Why is that good?

Because now you have a buffer for if you wanted to start a new program. If you said, Oh, we want to expand our services into this neighborhood, now you have the money to do that. But if you're constantly thinking about just the fires in front of you, you are going to be overwhelmed. You are going to be stressed out. You are going to be thinking, we can't do that because you haven't made that plan. So think about that today. What is it that if you saved some money, your organization could do? Is that adding any program? Is that adding new staff member? Don't think of it just from the logistics of it. Think about what does it mean for the communities that you serve. What difference would it make in their lives? If you could add that once you have that, it's easier to focus on.

We have to think about a way that we could increase our revenue or we can decrease our costs. Increasing revenue looks like, Oh, do we need to be more specific when we do our fundraising ask, do we need to tell people this is what we do and this is how we serve and this is what each dollar does. When you can do that, when you can clearly explain your impact, it makes it easier for people to give you money. So think about what you could do with a little bit more money. Work your way up to it. Feel bold when you go to your board and talk about it and that confidence that you talk to the board with will help you talk to other people and help them talk to other people and that will get you more money so that you can make a greater impact.

Thanks. Let me know what you think. Follow us on social media @cnrgadvisory. Be sure to subscribe to the podcast wherever you're listening now.

PS - 

Have you checked out our new course Impact Basics? It is our six week course to help guide nonprofits through the things that make a difference when explaining your impact. So we're going to talk about your mission. We're going to work through your priorities, some tools for reflecting that impact, and then we're going to dig into storytelling and how you can show your impact in ways that are way more fun than just looking at the numbers. Super excited. Let me know if you have questions. You can schedule a call. My calendar will be in the notes and we can talk about if this is a good fit for you. The course will start on January 21st.

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