074: Why Does Everyone Want to Start a Nonprofit? [Podcast]

It is an epidemic. Everyone seems to want to start a nonprofit. They want to serve the inner city, the poor, the boys without fathers, those who cannot read, and many other causes. Yet, when I hear nonprofit, my heart sinks. It is not that nonprofits are bad, but something about our society is being said when we all want to be a nonprofit. If you are thinking a nonprofit works for you, here I will challenge some of your assumptions.

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Reasons to Rethink Your Plan to Start a Nonprofit

• All business serves people. It seems as a society we have been taught that being a for-profit business is evil. We begin to believe that businesses which are about making a profit do not serve people. Nothing is further from the truth. Business is all about service. Look around and see all the positive impacts that have come from for-profit business ventures.
• Disconnecting the customers from the person served. This is one of the greatest challenges nonprofits have. They serve one group and are paid by another group. This disconnect is a constant source of trouble since you will need to always be trying to convince your customer (the one that pays) that you have added value.
• Non-profits do not have to show value. We assume that nonprofit means I can serve others without having to show results or show value added. People will just pay me to serve. This assumption is definitely false. Just find people who have been in the nonprofit world for a long time. The challenge is about how you show value added. Since the customer served is different from the customer paying, showing value is going to be a challenge.
• People value what they pay for. As a nonprofit providing services, we think that those receiving the “free” service will place value on what they get. Perhaps they will for a short time, but this quickly goes from thankful to expectant and then to entitled. It is human nature. What I do not pay for, I do not value.
• Nonprofit means no profit. You have to remember that nonprofit is just a tax status. You still will need to show some money flow and have good accounting practices. In fact, you will have to be more diligent in accounting than any other business since those who fund you might call you asking for evidence of how you spent their money.
• Nonprofits are messy.  Nonprofits have many legal and tax issues that the founder and directors must be careful to manage. This is definitely a place where you need an attorney and an accountant to make sure you dance between the laws.

The For-Profit Option

Nothing is wrong with nonprofits, they are just overused and poorly thought out. A much better option for serving people is by offering a regular business that provides goods and services. We often assume those people who I want to serve cannot pay. But, that is rarely the case. The problem is getting your customer to value what you offer. When I look at poor people in my country, many living on the government, they still have money to buy things like televisions, iPhones, and other luxury goods and services. If I want to help those who have little resources, I might have to get creative with what I offer and how I show them I can add value. But, that is what marketing is all about. And whether for profit or nonprofit, I still have to convince them to use my services.

Resources

• Discovering the Entrepreneur in You
• Thou Shall Prosper: Ten Commandments for Making Money

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[reminder]Who would you like to serve that you would assume needs to be through a non-profit? [/reminder]