How To Operate Your Non-Profit Organization Like a Business in 8 Steps

Updated: Jun 26, 2020

Like for-profit businesses, non-profit organizations budget, create sales goals, and market services. Why manage non-profit organizations any differently?

Yes, there are undeniable differences between for-profit and nonprofit organizations. For-profit businesses main goals are to sell products and services, maximize those profits and divide those profits between owners, investors, and other stakeholders. Nonprofit organizations aim to serve the community's needs without the drive of personal gain.

But, if you take a step back and compare the basic functions of both for-profit and non-profit organizations, you'll see they are quite similar:

  • All businesses and nonprofit organizations provide a product or service to fulfill some type of need.

  • Both have limited resources and have to work within budgets to meet set goals.

  • Businesses and nonprofit organizations have some type of board or governance the leadership reports to ensure efficiency in the organization.

  • The need for effective personnel/HR

Non-profit organizations may not be selling a direct product or service, but nonprofits are "selling" programs and services (like providing meals to poverty-stricken families). Nonprofit organizations need the community to "buy-in" to the mission and goals of the organization so they can contribute to local solutions and the overall social impact of the organization.

Nonprofit organizations SHOULD STRIVE to create profit. When earning a profit ethically, nonprofit organizations have the opportunity to set and achieve revenue goals and can operate without having to make those critical budget-cuts that could end up costing the organization in the long run.

Creating a profit will allow your organization to expand those wonderful programs and services, increase the number of paid staff, and allow the organization to set realistic financial goals for the future.

Let's looks at some steps on how your organization can utilize business methods to further develop your organization's financial growth.

Treat Donors As Customers

We all buy certain products for different reasons. But, we continue to buy those products because we know the value they bring. Make sure your "customers" know the value your organization brings to the community so they feel compelled to invest in the organization's mission and goals.

Set realistic expectations for donors and then strive to over-deliver on those expectations. If your team lacks basic customer service skills, now is the time to train, train, train!

Another important suggestion: Do not ignore the concerns of donors. How your organization engages with and responds to donors is vital. According to this 2016 Fidelity Charitable report, addressing donor concerns (especially related to finances) has the greatest potential to influence the amount donors give overall. By addressing your funder's concerns, you'll create rapport with them, in return, they will solicit additional funds.

Understand the Needs of Your Beneficiaries

No matter what "phase of development" your organization is going through, it's vital you and your leadership team include your beneficiaries in the decision-making process. Why?

Let's use this example: An international development organization (that shall remain nameless) noticed women in a rural Ugandan village had to walk fairly fair from their homes to collect water. The process of water collection would take hours. To address the lack of access to water closer to their homes, this organization spent several millions of dollars to build a well in the village.

Months later, the organization came back to monitor "the success" of the well only to find out it had rarely been used.

Why did this happen?

Amongst other issues, the organization did not take into account the villagers themselves. The organization was unaware that the women did not mind walking the long distance to fetch water because that was their social time. This was a time to see their friends and enjoy being together. Although the organization had good intentions, the well was unsuccessful because it did not include its beneficiaries in the decision-making process.

Without truly identifying the needs of your community you are serving, you are already setting your organization up for failure.

Don't Underestimate the Power of Marketing

When organizations (both for-profit and non-profit) see budget shortfalls, one of the first departments to get defunded or even chopped is marketing. Although that seems like the logical thing to do, it's not.

Building and retaining your organization's brand is everything. It's nearly impossible to maintain your brand on referrals and "word of mouth" alone. Your organization provides excellent programs and services! Don't let those potential funding opportunities disappear!

If your organization does not have a person or team dedicated to marketing, consider this Hubspot article to get a basic idea of what marketing tools you need to maintain your organization's marketing efforts.

Invest In Your Team (And Board)

CFO asks CEO: "What happens if we invest in developing our people and they leave us?" CEO: "What happens if we don't and they stay?"

Gosh, does that not just resonate with you?

If your organization invests in your team, you are going to have a well-trained staff and board, which gives your organization a competitive advantage and will save your organization money in the long-run.

My number one skill is being a learner. I love to learn and take every learning opportunity I can (especially if it's free).

I knew learning was in my top 5 skills, but I did not realize it was number one. How was I able to determine that? A previous employer understood the value of identifying each skill set of every employee. This employer used the Clifton Strengths Finder.

Although this employer had the funds to invest in this type of skills aptitude test, it does not mean your organization also needs to invest in it.

There are all sorts of FREE and reduced rate resources to develop your team and board! Assessments, webinars, courses-the limit does not exist!

Here are a few resources to get you started: National Council of Nonprofits Board and Governance Tools, Free personality test, Nonprofit Quarterly Webinars, edX Courses, CharityHowTo Webinars, Grantspace by Candid Training Programs

Prioritize ROI

Prioritizing the ROI (Return on Investment) is great for small to mid-sized nonprofits or any organization that does not have a dedicated funding/development team. Defining your organization's ROI can give your leadership and board a sense of profitability and value of the services and programs your organization offers.

The WealthEngine, a CRM platform based on wealth generation, published this report on how to determine ROI and conducting cost vs benefits analysis. This report even has a template your organization can use as a guide.

Conduct Costs Vs Benefits Analysis and Rely on Hard Data

Conducting a costs vs benefits analysis and relying on hard data goes hand-to-hand with prioritizing ROI. Again, your organization needs to determine what services, programs, and events are profitable to the organization.

Is it more profitable to have one event a year compared to the three your organization usually hosts? How often and how much are donors giving compared to the marketing strategy? This webinar/article is a great resource on how to transition to a data-driven culture.

You should also consider the mistakes that can occur when collecting data. This PND article by Blake Goves, "5 Major Mistakes Nonprofits Make When Measuring Performance" gives a good indication of what to look out for.

Cultivate and Utilize Strategic Alliances & Partnerships

The Council of Nonprofits makes a great distinction between a strategic alliance and a strategic partnership.

"A strategic alliance is any collaboration that a nonprofit enters with another party, often intentionally designed to leverage the strengths of each party to achieve a common goal."

The term "strategic partnership" tends to have a legal connotation behind it.

None the less, alliances and partnerships create a mutual benefit for all organizations involved, whether that's with another nonprofit organization or a large corporation.

The Montana Nonprofit Association beautifully lays out the best practices of utilizing strategic partnerships.

In her Guidestar article "Building Successful Partnerships: How Nonprofits and Corporations Benefit", Katie Tatham lays out the qualities a nonprofit organization should look for when searching for strategic partnerships.

Update The Technology

Can it be a pain? Yes. Is it necessary? Absolutely! Updating your databases, website, office equipment, and marketing tools is a great way to stay ahead of the game and run a functional operation. But remember, there's a huge difference between being cheap and being frugal.

If your organization is still using the same Microsoft Access application from 15 years ago (yes, I've seen this happen before) then your organization is long overdue for an update. It doesn't have to be all at once. Just identifying where your organization needs updates and starting that process is acceptable.

These are only eight steps. They are not arranged in any specific order. There are other steps you can take, but these should be the first you should consider when running your nonprofit like a business. What other steps do you think nonprofit organizations should take to running their operations like a business?


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