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Oct 27, 2011

Changing Gen Y’s Perception of Nonprofits, pt. 2

In my last post, I introduced my readers to the topic of nonprofit misconceptions. Namely, I explained that well-run nonprofits will and must lose money on certain activities.

A nonprofit survives by having “lower” mission activities that are profitable and whose profits are used to finance the losses of the Key Mission activity (see explanation of Key Mission activities my last post from this series).

That is why zoos have golf courses and water parks, museums have shops and cafes, Goodwill takes junk cars and runs clothing stores and botanic gardens have wedding facilities. In short, successful nonprofits have figured out how to use the skills needed for their Key Mission to support other activities that are profitable.

These factors make a nonprofit much more difficult to operate than a for-profit. In a for-profit, you drop the unprofitable activities so your profitable activities are not dragged down. But in a nonprofit, you exist to keep the unprofitable Key Mission so you profitable activities have to support both themselves and part of the Key Mission activity. That is much harder.

A nonprofit must have two personalities. It must be able to run a very high quality Key Mission that evaluates its success and quality in nonfinancial terms because profitability is not the measure of success. Then it must have a second personality that runs profitable activities just as a for-profit would run them.

Despite many nonprofits’ understanding of the concept above, when recession hits we see many nonprofits bowing out of the game – they deny services when society has the greatest need. Equally as important as balanced activates is a focus on sustainable operations, which I will address in the last part of my blog series. Until then…