Think like a profit organization

Thought_BubbleMy frustration with non-profit organizations have always been the mentality around the way they are run.  In a start-up profit organization decisions are made by the entrepreneur who you would hope (as an investor) vetted the concept, asked for advice and understood the parameters.  In a non-profit organization they bring in experts to analyze the decision.  Most of the analysts come out of the non-profit world.  They are methodical and costly and many times the presentations that they come up with, IMHO, are not that different than what I could have come up with if I had been put in a office with some employees, board members and a big white board.  It is not easy changing that mentality but I do believe that the next generation of people who are supporting non-profit causes wants to see non-profit organizations think about sustainability and behave like they are a profit organization.

One of the things that I always love about MOUSE is that they thought like a profit organization and kept the overhead to a minimal.  The employees are all top level meaning there is no fluff.  Donors Choose is a non-profit organization but thinks like a profit organization.  They think about revenues, margins, impact and do not think about how they need to raise money every year from a donor base to run the place but have built a sustainable organization making an impact in schools across the country.  That is amazing. 

I sit on the board of two non-profits right now, Hot Bread Kitchen that I chair and the High Line.  Each of them did not get to where they are with out donor support.  The question now is how do they begin to think like a profit organization.  Hot Bread is currently raising money towards scholarships for our women bakers.  You can donate here.with the opportunity to win great stuff with your give.  I have been adamant about figuring out exactly how much money does it take to become sustainable.  How do we take out our social piece from our bread business and make sure our bread business is run like any bread business would.  It forces the board to look at the business with a set of profit eyes and be realistic about our financial goals including taking a look from top down at the organizational chart and does that make sense. 

Even at the High Line that has built one of the most amazing cultural park institutions that has made its mark on Manhattan in fifty years.  A powerful board that has had incredible leadership with two smart entrepreneurs that kicked off the whole idea.  I look at what has been built including the constant cultural happenings from art to events, a connection to the community, restaurants and retail.  They will continue to grow each of those areas as well as put on some killer fundraisers each year which are important too. Yet the question remains how do you built an endowment and pair that with the revenue opportunities to become a sustainable organization.  How do you get out of the constant large donor acquisition vs embracing all the people who walk onto the High Line each day letting them know that the park exists because of public crowd funding not the Government. 

Not surprising that I am a big fan of pushing non-profits to think differently.  Don't get stuck in the ways of the past where it is wealthy donors that are keeping the organization alive.  There will always be organizations that are doing good but have no chance of ever being sustainable but then be as lean as possible so that the majority of funds raised go to the mission.  I want to support organizations that are thinking out of the box not set in the past. 

Comments (Archived):

  1. awaldstein

    How do you take the good will that is the currency of non profits and move that will into a sustaining business model?That’s how I read this post. Great question, no easy answer.

    1. Gotham Gal

      certainly no easy answer.

  2. John Fazzolari

    Biggest issue I’ve seen with the non-profits I’ve worked with is that reliance on those few wealthy donors to keep things going for the next 50 years. Unfortunately, the only thing that really causes most of these organizations to innovate are when the expected donations stop coming in due to an outstanding event (ex/ financial crisis). Every time I speak with non profit leaders about their plans for the next 6 months they say that they’re “just looking to maintain things moving forward.” However, new non-profits are being formed everyday and will try different things + innovate as they try to establish a core donor base that gets things off the ground.

    1. Gotham Gal

      the reliance on a few wealthy donors (and every non-profit brings up the same few as their saviors) is not healthy in the long run.

  3. CJWesterberg

    Really interesting topic – non-profit vs. for profit. Is there a book on this one that is worthwhile/?Not sure I agree with that experts hired by non-profits come up with the same as . .. Find (often) non-profits often find reasons why one cannot do something, wanting research proof – whereas for profit want proof of a diff nature –

    1. Gotham Gal

      it is a completely different nature. i would assume there is a book out there somewhere.

      1. Ruth BT

        I’ve only dipped into the second book on the subject of how to build a great non-profit but John Wood of Room to Read ( surely has to be one of the most successful at this. His first book Leaving Microsoft to Change the World is a worthy read. Having seen John raising money on a first hand basis for a few years now I can say he is a master!

        1. Gotham Gal

          thanks. have not read this his book.

  4. JLM

    .I have served on so many non-profit boards that I can’t remember them all.I am always the guy who raises the money and I have always been successful in raising a lot of money. I have absolutely no misgivings as to why I am asked to serve and take no offense.I refuse to serve forever and think that 3-4 years is about right. I try to leave in place a “system” for the next guy and the organization. Sometimes this works and sometimes the roof caves in a couple of years later.I am cautious in saying that NPs should operate like profit seeking companies in much the same way that the Army is a great foundation for business but businesses cannot be run like the Army.I think it gets down to this — successful businesses and people have a Vision, Mission, Strategy, Tactics, Objectives, Values and a distinct Culture.Non-profits need the same thing and in writing. The plans have to address governance, operations, marketing and finance with a clear understanding of what documents will be produced to track operations v plan.This is a very hard bit of work but when done correctly it will drive the organization and give everyone involved a sense of alignment.Two of the best organizations I have ever been involved with — one medical and one arts — had similar plans and relied upon a combination of operational revenue and donations (I prefer to call them “investments”).One religiously kept updating their plans and the other drifted. One prospered and one failed.I think it is the quality of the plan which drives the quality of performance particularly in enterprises which do not have Boardmembers who “have” to serve.You are very good to serve on these boards and your innate sense of order from chaos will go a long way toward driving performance but it is much easier with written plans.JLM.

  5. pointsnfigures

    totally agree. in Chicago is trying to solve big problems with entrepreneurship. Run by Chuck Templeton who founded Some cool companies come out of it.