The purpose of a non-profit is to bring together a group of people that share an idea to change the world and that unite under a common goal for the specific change they seek. Unlike the perception of a non-profit as a hippie volunteer operation, a non-profit business model is a great way to make a living while pursuing your desire to fulfill a need that exists in your community or beyond.
While the term “non-profit” does not reference a specific legal structure, it does signify that your group is working on a mission towards a specific goal rather than simply working towards profit. Most non-profits will choose to incorporate and become a functioning business, and by filing as a non-profit corporation, the non-profit is eligible for various state and federal tax exemptions because the non-profit is working for a social and community benefit. In return for the tax breaks, a non-profit has to follow certain organizational guidelines designed to ensure the effective pursuit of the non-profit’s mission, such as having a board of directors.
Significant differences between a traditional corporation and non-profit corporation include the success metrics. While a profit corporation is successful if it earns a profit, a non-profit is successful if it is accomplishing its mission. However, financial health is crucial for the non-profit to continue to operate. As a non-profit generally does not earn revenue through sales, they are particularly dependent on fundraising efforts and grants. Fundraising consumes a significant amount of time and effort from the non-profit, and demands a marketing and sales skill set amongst the non-profit’s employees. But rather than selling a traditional product, you are selling your mission.
If a non-profit business model sounds like the best fit for your vision, read through the rest of The Startup Garage’s blog series on Starting a Non-Profit Organization. We will have a new post every Monday and Wednesday with tons of information on how you can start your own non-profit!