Episode 88: Nonprofit Does Not Mean "No Profit": A Nonprofit is a Business
*Originally published on November 1, 2021*
In this episode, Amber explains why "Nonprofit" doesn't mean "No Profit." A nonprofit is a business (it's just a business with a philanthropic purpose), and every business has expenses. That's why nonprofits MUST generate revenue to cover those expenses. *It is the organization's responsibility to cover business costs, not the funders.
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Not sure where to start or if you should start a nonprofit? 👇🏿👇🏿👇🏿
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This offer will save you hundreds of dollars in the long run as Amber is here to help you determine whether or not you should start a for-profit or a nonprofit. https://calendly.com/amberwynn/60min-call
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SPONSORS:
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NONPROFIT SPOTLIGHT:
This episode's spotlight highlights the nonprofit "Educational Student Tours: Student Access Program," where they provide youth from the foster care system and low-income communities with tours to historically black colleges and help increase participant acceptance rates to 4-year colleges. If you would like your nonprofit featured, reach out to Amber Wynn through e-mail or any social media platform.
Check out Educational Student Tours: Student Access Program! 👇🏿👇🏿👇🏿
Website: https://estcap.org/ Instagram: https://www.instagram.com/estcollegeaccessprogram/
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Apple Podcasts: https://podcasts.apple.com/us/podcast/on-air-with-amber-wynn-philanthrepreneur/id1462577181
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Got Questions? "Ask Amber" on any of my social media platforms or email me at amber@amberwynn.net.
#OnAirWithAmberWynn #Philanthrepreneur #nonprofit #publiccharity #nonprofitmanagement #nonprofitbusiness #taxexempt #nonprofitfounder #podcast #philanthropy #philanthrepreneur
Podcast Transcript
Speaker 1 (00:10):
Welcome to On Air with Amber Wynn, where nonprofit leaders learned to fuse passion and commitment with proven business strategies to create long-term funding impact and sustainability. And now here's your host and resident, Philanthrepreneur, Amber Wynn.
Speaker 2 (00:31):
Hello everyone, and welcome to the very first episode of On Air with Amber, and I'm Amber, your resident, Philanthrepreneur. More about what that name means a little bit later. But first, I just wanted to introduce you to what I hope will be a long lasting relationship between me and you and a little bit about myself. I have been in the nonprofit sector for over 30 years, and I've done everything from emptying the trash to giving out $7 million in grants annually. We're going to share a lot about the nonprofit sector, the nonprofit journey, but for me right now, I just want to just be very honest and let you know I'm going to keep things real with you because all of the goobly goop and all of the overwhelm, it doesn't get you anywhere. And my goal is to support the nonprofit founder, the executive director, making a difference in our community.
(01:29):
I will tell you though, that I have been a grant writer with my largest grant being $3.2 million, and as I stated, I've been a funder, I've also been a board member, and currently I'm a nonprofit consultant, and my goal, my passion, is to support nonprofit founders. So let's jump into today's topic we're going to talk about today, that nonprofit doesn't mean nonprofit. Now people start their nonprofits without doing any research and really understanding what a nonprofit is. But a nonprofit does not mean no profit. So we're going to jump into that. But before we do, let's hear from our first sponsor.
Speaker 3 (02:12):
Do you have a tool that organizes your company's paperwork and takes care of all your record keeping? Does your current record keeping system send you 90 day alerts to remind you that your key documents are about to expire and need to be renewed? Can you find contracts and procurement opportunities in seconds from any of the 50 United States so you can grow your business?
(02:38):
Is your business organized so that you can tell which key documents are needed to efficiently run the business? How about woman owned, small business or disadvantaged business enterprise certifications? You have a checklist of all the key documents you need to become certified. Does your current system allow you to conduct market research from multiple sources and provide you industry and market in seconds? Well, SmallBizPro does all of that and more SmallBizPro is the number one business management, compliance, procurement assistance, and market research assistance tool on the market today. Download the app now and you will be amazed. It's like having three additional employees working for you, but you don't have to pay them. What are you waiting for?
Speaker 2 (03:25):
Welcome back everyone. For those of you just joining, thank you. My name is Amber Wynn and I am your resident, Philanthrepreneur. What is the Philanthrepreneur? Well, it's the fusion between philanthropy, which is your heart and your passion and your commitment and proven business practices. I fuse philanthropy with business practices so that our nonprofit leaders can be successful in everything that they do because it takes more than passion and commitment to be as successful nonprofit leader. It takes skills, experience, processes because your funders are looking for those types of things in order to know that you're an organization that's qualified to actually receive funding. We'll talk a little bit more about that later. So today's topic is nonprofit doesn't mean no profit, and that's important to know because some people start nonprofits thinking you're not supposed to make a profit. Well, you are have to, a nonprofit is a business.
(04:26):
It's just a business with a philanthropic purpose. So one thing you need to know coming out the gate is that number one, you can't start a nonprofit without any money. You can't. There are no grants out there specifically to help you start a nonprofit. You've got to go into this as if it's a business. The other thing you need to know is that it takes money to make money. If you're going to have programs and services and deliver them out into the community, you've got to have money to start your business right off the top. I can tell you to file for a nonprofit and to get your legal certification as a nonprofit, it's going to cost you anywhere between $400 to $2,500. So you have to have money. If you do a Google search though, one of the top hits on Google is how to start a nonprofit with no money.
(05:21):
It's impossible. A nonprofit is a business. And then the other thing, I think a lot of people start nonprofits thinking it's easy. I would say that starting a nonprofit, running a nonprofit is probably more difficult than running a for-profit because at the end of the day, you've got to build up this organization before you even qualify for money. Whereas with the for-profit, you can just jump in. You have your widget, your product, your service, and you start generating money. So starting a nonprofit is not easy. And then finally, I want you to understand that you to generate revenue in order for you to have successful programs, if you are tutoring, you need to be able to have the materials and supplies. If you're doing sports programs, you've got to have the equipment, the uniforms, all of that takes money, and I know what you're saying, that's what grant money is for, right?
(06:19):
We're going to have an entire episode about grants, but suffice it to say you don't qualify for grant money right off the bat. There are people who you'll be competing with other organizations who've been doing the same thing that you've been doing for years, and now they have a reputation, and so they're getting funded. When you first start your nonprofit, you start off as a concept. It's unproven. In contrary to popular belief, funders are not funding unproven organizations unless they have really powerful boards that show them that your organization is going to be run professionally. But for most nonprofits starting out, you don't have a track record. You don't have a track record of managing funds, and so it's going to take probably between one to two years before you actually qualify for grants. In the meantime, what are you supposed to be doing? You're supposed to be diversifying your funding strings, bringing in revenues, different ways until you build up your track record and you can qualify for a grant.
(07:25):
But that doesn't mean that you're not supposed to generate revenue. You're supposed to generate it, and you're supposed to generate it in different ways. So having a nonprofit, you need to generate a profit. Let me just clarify this as well. The difference between a nonprofit and a for-profit when it comes to revenue is that the money that comes in for a nonprofit can't go into the executive director's pocket. We're going to spend a whole episode on how a nonprofit founder or executive director, how a nonprofit cannot be owned. We'll get into that separately, but for this episode, just know that all revenue that comes into your organization has to go back into your organization. So it's either going to go into the programs or it's going to go into the infrastructure. It's not going to go into the nonprofit leader's pocket. So that's the difference with the For-profit, when the money comes in, it's yours.
(08:24):
That's how it's set up. There's nothing you can do about that because legally the difference between a nonprofit and the for-profit, what happens to the money when it comes into the organization, the money that comes into the nonprofit has to go back into the nonprofit, and that's even if you, as the founder started the organization, you put in the $2,500, you're self-funding it every month, $2,500. The monies that come in, they have to go back into the nonprofit. Yeah, you can get a salary, but it has to go back into the nonprofit. Whereas with the for-profit, when the money comes in, you could put it in your bank account. That's the whole purpose of owning a business and a public charity can never be owned, so I think it's really important. I wanted to start off just giving you some insight about a nonprofit. You definitely want to always generate revenue.
(09:18):
Nonprofit does not mean no profit. Then the other thing I wanted just really to pause, because sometimes people start nonprofits without any information. Somebody will say, oh my God, you're doing this amazing program. You should make it a nonprofit. And my question to you is, who is this person? Who is this person telling you that you should start a nonprofit or who are these people? Nine times out of 10, the people who come to me and say, oh, I want to start a nonprofit. My first question is why. But nine times out of 10, they can't really tell you why. Well, somebody told me I should start a nonprofit. Well, I'm here to tell you, you should do your research first to determine whether or not you should start a nonprofit because it's not something that's easy, it's rewarding, and it's beneficial to your community, but it requires a lot of work time and energy.
(10:12):
So should you start a nonprofit, you should start a nonprofit. If you've done the research, if you've looked into your community to see how many other nonprofits are doing what you're doing, and I get this all the time. Oh, nobody's doing what I'm doing, I'm doing this, and it may be slightly different, but that's irrelevant when it comes to funding, and that's really what you want to make sure of. You want to make sure that what you're doing is fundable. And if you've got 10 organizations, five organizations within a 25 mile radius, then that area is saturated and it's going to be a little bit challenging for you to get funding. That's not to say that you can't, but you want to do your research first because you can still do your program, but maybe you do it in a different community where it's not as competitive. We're going to talk about how and win to do research in a later episode, but just for now, when we talk about should you start a nonprofit, you shouldn't start a nonprofit if you have no money.
(11:18):
If you have no money, don't start a nonprofit. People think, oh, I'm just going to start this nonprofit and this grant money's going to come in and I'm going to get me a salary and I'm going to pay for this equipment. I'm going to pay for this billing. And it doesn't work like that. If you are broke, do not start a nonprofit. Don't do it because you're going to just go deeper and deeper into your pocket. A lot of nonprofits tend to self-fund their organizations, and it's because they don't understand what it takes to get the money. And what it takes is a track record, and in order for you to get a track record, you have to deliver services. And in order for to deliver services, you got to have some money. So you should start a nonprofit. If you have a seasoned board, this is a big miss.
(12:03):
A lot of people, you only need three people to start a nonprofit. That's what you hear. It's true legally, you only need three people. You need a president, a treasurer, and a secretary. What typically happens is that somebody will put their mama, their cousin, and a best friend on the, there's their board, and now you have a legal entity. Well, the purpose of the board is to help you fundraise. The purpose of the board is to get you into board rooms and to make connections. But if you've got Mooky, Pooky and Sheika and them on your board, or you got Jeb and Uncle Jane and Jimmy and all of them on your board with no board experience, then they can't help you. And what ends up happening is you're doing everything and you're burnt out. So if you don't have a seasoned board, if you don't have prospects of people who are experts in the area that you're starting your nonprofit in, then you want to get that first before you start your board.
(13:02):
And then finally, I want you to consider this, starting a nonprofit is a business. Would you start a plumbing business if you didn't have plumbing skills? Would you start a dental office if you didn't have dental skills? It's the same thing for a nonprofit. People start nonprofits all the time without having any business skills. Let me tell you this, 40% of all nonprofits fail within two years of starting, and it's not because they're not passionate, and it's not because they're not committed to their communities, it's because they don't know what they're doing and they're so busy trying to keep this organization afloat that they're not doing what they need to do to make it successful. So within two years, 40% of all nonprofits fail, and I don't want that to be you. So you can be very skilled at tutoring. You can be very skilled at etiquette.
(14:04):
You can be very skilled at what it is that you do, but that doesn't necessarily transfer over to running a business. And I can speak from personal experience. I know the nonprofit sector inside out. You can ask me anything. I can tell you anything. I know the nonprofits, but when I transitioned into being a consultant, that was a whole ‘nother beast in itself. You've got to file taxes, you've got to do payroll. It's running a business. And when you go from being an employee where you just collect your check every two weeks to actually running a business, it's a whole ‘nother beast. And that's what I teach nonprofit founders to do to run a successful nonprofit. It's more than just getting grants. It's more than just delivering services. If you don't have staff, you've got to manage volunteers. If you don't have money, then you've got to get donations.
(14:57):
So it's all of this that goes into running a nonprofit, and it's not easy. So should you start a nonprofit? The answer is, if you've done the research and you've determined that the community you want to serve is unsaturated, sure, if you have money to invest, not only to file to start, but to run it $2,500 a month to run it, then yes, if you have a season board, it doesn't have to be 15, 20, you could have three people, but do they know what they're doing? If you have a seasoned board, yes, start a nonprofit. And if you have business skills, and I'm not saying you have to have an MBA, but you understand that you got to do accounting and you have to do marketing, and you have to manage people. If you understand business, then yes, perhaps maybe you should start a nonprofit.
(15:51):
All of these things are important in order for you to have a successful nonprofit because this is what it takes. And today, I'm actually extending an offer to all of my listeners. If you're unsure, should you start a nonprofit? If you don't know, if your nonprofit idea is a good one, then you can reach out to me and I have a special offer. Borrow my brain for 60 minutes and we can talk through it. And I'll tell you upfront, maybe you should consider this being a for-profit, or maybe you should consider doing this in another area. I'll just tell you upfront. But for $99, you can save yourself thousands of dollars, hundreds of hours because people just go into it because committed to their community, and they start and don't know, and then two years later, they end up closing their doors. And I don't want that to be you. So you can borrow my brain for 60 minutes. I'm good for it. Save yourself a lot of hassle, a lot of trouble, and get the roadmap that you need in order to start and ensure that you have a sustainable nonprofit organization. All right, let's take a break for a short sponsor announcement, and then I'll come back.
Speaker 4 (17:08):
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Speaker 2 (18:28):
All right, welcome back. For those of you just joining me, you're on air with Amber Wynn. And listen, guys, you can find me, I've got all types of locations where you can find me on my website, www.amberwynn.net. You can reach me on Instagram, Facebook, Twitter. This next segment that I'm going to include in all future episodes, it's called Ask Amber, and it's your opportunity to ask me any question that you want. So follow me on my social media and if you feel so inclined, ask me a question. This week's question is, can I get a grant to start a nonprofit? And the answer is no. There's a lot of misinformation out there, but this is what you need to understand. A nonprofit is a business, and so a foundation of funder, they're not going to give you money to start a business. If you think about it, when normal people start businesses, they don't go to their investors and say, can you help me start this business?
(19:31):
They have the business. It's already started up. They've gotten some type of traction, they've got some track record, and then they go to the investors and they say, will you invest in this company? I've been able to demonstrate that we can produce X, Y, and Z. We can generate this amount of money over a certain amount of years. It's the same thing for a nonprofit. If I'm giving you money to start a nonprofit, then that means that you're not ready to run a business. So the same thing goes for a nonprofit. There's no money out there for you to start a nonprofit. You have to come in with your business ready to fund your business and ready to continue to support your business. So if you have a question for me, feel free to email me at www.amberamberwynn.net and submit your questions or hit me up on social media, and then maybe one of your questions will be read on air.
(20:22):
Alright, so the next thing that I wanted to share with you is in my future episodes, I want to highlight nonprofits because a lot of the times my nonprofit leaders are so ingrained in their work that they're keeping their heads down and they're just doing the work. Nonprofits need visibility not only so that they can be exposed to funders, but so they can be exposed to different people in the community who need their services. So on my show, I am going to highlight nonprofit organizations. So if you are interested and you want me to do a shout out, hit me up on my social media and we'll feature you on the show. Another good place to locate things that are going on in your community is Eventbrite. They do a really good job of spotlighting nonprofits in the community, so check them out. But for today's spotlight, I am going to feature Educational Student Tours College access program.
(21:29):
So this episode, we're featuring Educational Student Tours College access program, a nonprofit founded in 1987 to provide youth from foster care and low-income communities with tours to historically black colleges and universities to increase access, acceptance, and graduation from the college of their dreams. EST helps youth increase their ACT and SAT scores, write outstanding personal statements, and find money to pay for college. If you didn't know, over 60% of the youth sex trafficked in this country are products of the foster care system. But because of the hard work and dedication of this amazing organization, almost $2 million in institutional scholarships have been awarded to their program participants. If you'd like to donate, volunteer, or know someone at an HBCU in the admissions housing or financial aid office, please contact them so that EST can partner with them and help more of our young, brilliant youth achieve their academic and career goals.
(22:31):
Thank you EST for all you do to transform lives in our communities. For more information, please visit www.estcap.org. That's www.estcap.org or call them at (310) 512-9522. All right, so that is our nonprofit spotlight. And again, like I said, I'm so excited about all of the work that's going on in the community, and so we want to acknowledge people and leaders who are doing the amazing work. I'd also like to thank our sponsors today, small Biz Pro and Nonprofit Elite. It's important that we have the resources that we need in the nonprofit sector in order to do the work that we do, and both of these sponsors can assist you, one with your infrastructure and then the other with getting the skills that you need in order to be a successful nonprofit leader. All right, so today we talked a little bit about just the nonprofit.
(23:37):
And nonprofit doesn't mean no profit. I want to make sure that when you're coming into this space that you exactly what it is that you're doing. Next week, we're going to talk about what you don't know, you don't know, and it's sort of like what we've been talking about today. What you don't know you don't know could really make or break you. If you don't know that you need a board, if you don't know that it takes money, it could break you. So in our next episode, we're going to talk a little bit more about the things that you should know before you start a nonprofit or if you're in it and you're struggling. Alright, so the last thing that I would love to do for every episode is called a Mindset Minute. A lot of the times nonprofits fail, not because necessarily they don't have the passion or the commitment, but it's because of their mindset.
(24:32):
Somebody told them they could do something and they believed it, and that's what they're working towards. Sometimes with just a shift of your mind, you can open up doors. So this mindset Minute is called if it's too good to be true, you know how your mama say to you. If it's too good to be true, then maybe it is. It's the same thing with the nonprofit. If someone's telling you, oh, you can get this free money. Where have you ever gotten free money? There's no such thing, or You should just do this, and you get that easy money, there is no easy money. There is a lot of work that comes into starting a nonprofit. So what I'd like for you to think about for this Mindset Minute is a nonprofit is a business. It's just a business with a philanthropic purpose. So before you jump into your business, do what's required of every other business, do your research, get on the internet, Google, whatever it is that you're trying to do in your neighborhood.
(25:33):
Put a 10 mile radius and ask the internet if someone else is doing the same type of work that you're doing. Find out who your competition is, find out if your organization is fundable, but before you start, before you invest hundreds of thousands of dollars, trust me, because that's what it goes up to be when you're self-funding, do your research. Alright, so I would love to just pause for a minute. Thank all of you guys for joining me for my very first podcast. If you can't tell, I'm extremely nervous. I'm excited, but I'm nervous. I hope that I'll get a whole lot better over the upcoming episodes. But in terms of moving forward, you can visit me. I'm here Sundays at 10 30, and you can check me out on all of my social media, my website, my Instagram, my Facebook, the offer that I gave you earlier. It was for the 60 minute. Borrow my Brain q and a session that's available. I'll post it in the note sections below. You can call me. We'll have an hour conversation to talk through all of your concerns, your worries, your hopes, your dreams, your aspirations. That's what I'm here for, is to support you. And then lastly, don't forget to support Educational Student Tours. And I'd like to thank again, small Biz Pro and Nonprofit Elite, and we'll look forward to seeing you on the next episode. We're going to do this, guys.
Speaker 1 (27:13):
Thanks for listening. If you enjoyed this episode, subscribe and leave a review on iTunes. Head over to www.amberwynn.net/podcast for the links and resources mentioned in today's podcast. See you next time.