“Can a nonprofit make a profit?” I’m frequently asked by people interested in our work.
This natural question is at the very heart of many misunderstandings about our sector because the answer is yes and no.
The term nonprofit is used to describe a primary requirement for tax-exempt status: profits are not distributed to shareholders or owners. That’s the extent of it.
To be a fiscally responsible and sustainable organization, our revenue must exceed our expenses. So, from a balance sheet perspective, we must technically make a profit. Our fundraising events and initiatives must provide a valuable return on the resources invested – again, we make a profit in one sense. Then, we reinvest the net revenue back into the mission. No profit is distributed to private entities… nonprofit!
I want to take this opportunity to get on my soapbox about the moniker “nonprofit” (or not-for-profit) How many other industries or sectors are named for what they are not?
Do you go to a non-lawyer when you are sick?
Do you go to the non-grocery store to shop for clothes?
If we named the sector what we are, we would come up with something better, like “for good.” There are for profit corporations and there should be for good corporations. Stepping off soapbox now.
Nonprofits share many similarities with our for-profit counterparts.
Legally, we must incorporate to get our tax-exempt status, so we are all technically corporations.
Economically, we have the impact of a strong business sector. US nonprofits employ approximately 10% of the nation’s workforce, purchase over $1 trillion in goods and services, and harness over $193 billion in volunteer labor that is invested into communities and causes… every single year.
Functionally, we require the same skills and best practices that for profit businesses use, from marketing and customer service to inventory control and logistics to hiring and employee development. We must purchase insurance, pay payroll taxes, and build critical infrastructure that makes us as efficient as possible.
There is one major difference. You may have guessed it already. It’s not only about where the revenue goes (as described above), but also about where it comes from.
In for profit business models, profits come from selling the product or service on the open market. Nonprofits give away products or sell them at cost to fill a need that is typically unmet by the market. This requires us to establish other activities to generate revenue: galas, golf tournaments, luncheons, virtual fundraisers, grant writing, and major gifts programs (to name a few).
So, truly many nonprofit corporations are made up of two interconnected businesses: the primary business, the mission, delivers the product for free and the secondary business generates revenue to pay for what we give away.
At WARM, of course, our primary business is repairing, rebuilding, and making homes accessible for those who cannot afford it. Success is determined by the numbers of affordable homes we preserve, falls we prevent, and human beings who are uplifted by their improved environment and the kindness of volunteers.
Our secondary business involves grant seeking, event planning, social media, and marketing. We evaluate the return on investment of each fundraising and friend raising initiative to determine if it is a good use of resources.
This year, we decided to start up our live events again in the fall. Our Silver Celebration gala on October 9th will mark our 25th anniversary; the profit generated will replace broken heating systems, build wheelchair ramps, and complete other critical repairs. I hope you will join the fun, knowing the true “profit” on your investment in WARM is a safer and healthier home for a family who could not afford it without you.
WARM 2019 Gala. All proceeds supported WARM’s mission.
JC Lyle has served as WARM’s Executive Director since January 2009. Under her leadership, WARM's annual revenue and productivity have more than quadrupled. Prior to working in the nonprofit sector, Lyle worked at McKim & Creed on subdivision design, rezoning and permitting throughout coastal North Carolina. Lyle earned her Master of Business Administration from UNCW's Cameron School of Business and has presented workshops on affordable housing issues and nonprofit management at state-level conferences. Lyle serves on the Planning Commission for the City of Wilmington and the North Carolina Housing Partnership, the board that oversees the state's housing trust fund. In 2012, Lyle was named Wilma Magazine's first Woman to Watch in the Nonprofit Category. In 2014, she accepted WARM's Coastal Entrepreneur Award in the Nonprofit Category, given by the Greater Wilmington Business Journal and UNCW’s Center for Innovation and Entrepreneurship. In 2018, the Association of Fundraising Professionals, Cape Fear Chapter named her Outstanding Fundraiser of the Year.
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