Entrepreneur Beginners Guide
“Nonprofit Really Means Profit”
Opportunity often comes disguised. —Napoleon Hill, author, Think and Grow Rich
When I started my company, I had this ill-conceived notion about nonprofit organizations: I falsely believed that nonprofits weren’t worth pursuing as clients. I assumed that they would be terrible customers. After all, they didn’t make any profit, right? How could they afford what I had to offer? I was so naïve and dead wrong. Nonprofit organizations were a huge contributor to my early success and continue to be a significant part of my company’s revenue.
I learned that for-profit companies and nonprofit organizations have more similarities than differences. For example, nonprofits have the same major challenge that corporations have: generating revenue. In fact, many CEOs and directors of nonprofit organizations lead with a profit mind-set. Furthermore, like corporations, nonprofits devote a large portion of their budgets to purchasing products and services to help generate revenue. This fact translates into opportunity for entrepreneurs to meet that demand. Consequently, nonprofits are likely a viable market for your business.
There are differences, too, between the two entities. Most people focus on the fact that nonprofits use surplus revenues to achieve its goals rather than to distribute them as profit or dividends. In other words, nonprofits can have more revenues than expenses in a given fiscal year, but they must use .what would be considered profit to fund more programs or to establish an endowment, and so on. Some people classify this difference as a small one, considering that you could interpret a nonprofit organization as a corporation that is reinvesting its surplus back into the business. Nevertheless, the takeaway is that nonprofits certainly have money to spend, just like corporations.
Here are three reasons you should be doing business with non-profits and perhaps even making them a priority. 1. Nonprofits do spend money. A large part of nonprofits’ budgets are dedicated to operations, which can include things like utilities, rent, software, training, and travel. They also spend a lot on sales and marketing to find donors or to support ancillary sources of income: According to the Forbes list of the 200 largest U.S. charities in 2011, the rankings and annual expenses of five popular charities are as follows:
- The Mayo Clinic, $5.1 billion
- YMCAs in the United States, $4.5 billion
- United Way, $3.8 billion
- Boys and Girls Clubs, $1.1 billion
- Habitat for Humanity International, $781 million.
By the way, many nonprofits are required to spend money they received through grants that have very specific guidelines. Certain grants require nonprofits to spend money before a deadline. Thus, an organization may be looking to spend money quickly to remain in compliance with the stipulations of a grant received from a private donor or a government entity. One of my first major clients was a nonprofit organization in education. My company was .able to negotiate an amazing deal in which we received a database of the organization’s corporate contacts. It was a list of over one hundred Fortune 500 companies and buyer contact information. In addition to this, the nonprofit organization hired us..annually to develop new marketing materials. We also wrote and implemented its social media strategy. This major account lasted nearly a decade, and though we no longer have this client, we still use and benefit from the database of Fortune 500 companies we received.
- Nonprofits are willing to take risks with new vendors to save money or to generate solid revenues. If your product helps non-profits save money or generate significant income, you are well on your way to gaining great customers. Nonprofits are under constant pressure to watch their spending and .keep expenses in check. A quality product or service that aids them in this area is like pure gold.
Shortly after the completion of OmniPublisher, my company’s online content management system, we decided to use local non-profit organizations as our beta testers. We eventually brought many of them on as paying clients and in the process received great feedback on how we could improve our product. Consequently, our first marketing campaign for the software targeted state and national trade organizations that served thousands of nonprofits. The strategy worked well, as many nonprofits loved the product, but more importantly loved the price.
- Nonprofits are loyal and will refer you if you are excellent. In many large cities, you’ll find that nonprofits tend to be located in a certain part of the city. Maybe a designated building offers subsidized rent, or that’s just where the nonprofit community has thrived. It is a great indication of how close-knit the industry is. Accordingly, executives and employees of different organizations often share resources. They are especially willing to recommend good resources to for-profit enterprises, too.
Over the years, my nonprofit clients have been especially loyal. They will refer me to other nonprofits and give the most favorable references. I think a common sentiment exists among these organizations that the relationships they build with vendors are special. It’s not business as usual in a corporate way. Their vendors help them to save lives, build homes, provide education: and so on. Nonprofit organizations often feel a special affinity for those vendors that help them change the world, and they tend to be especially supportive of their vendors. I have personally witnessed the benefits of this exceeding goodwill, which has helped my company prosper.
If you think that serving the nonprofit sector is a waste of time, just ask Facebook. The social media giant has profited greatly from its popular Causes application. Causes serves hundreds of thou-sands of nonprofit organizations every day, making Facebook millions of dollars in processing fees and from customizing fundraising campaigns. Not only Facebobk, but also many other companies consider the nonprofit sector to be an important business segment. Hence, from the very beginning, see how your product or service can serve nonprofits. Chances are that you will realize that non-profit really means profit—at least for you.