Why Nonprofits Can and Should Make a Profit

Gold HeartsA common misconception is that non-profit means the company doesn’t make a profit.   On the contrary, non-profits can and often do make a LOT of money.  And they’re not prohibited from doing so.

A non-profit (sometimes called not-for-profit) differs from a for-profit corporation because non-profits don’t have owners.  That’s right, no one owns a non-profit.  Compare that with for-profit corporations that have shareholders (or owners).  When the company profits, the owners get a piece of the profit.  And the purpose of a for-profit company is to increase the profits for the owners.

That is not the purpose of non-profits.  Non-profits exist to achieve social goals, not to increase profits for owners.  An easy way to remember this is to think of the phrase not-for-profit as missing a few words.  Think of it as notforan-owner’sprofit.

Just because the purpose of a nonprofit isn’t to increase profits for the owners, doesn’t mean the company shouldn’t focus on its bottom line.  After all, a profit is realized when revenue exceeds expenses and that’s goal of every business.  Because, frankly, if your expenses consistently exceed your revenue, you won’t be in business for long.

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