WayQuest navigates the challenges nonprofits face while applying established business practices to enable these organizations to best serve their constituents.
Organizations conducting some kind of value-added activities, applying some defined processes to resources and raw materials, and then distributing or delivering a product or service to beneficiaries of said products and services are doing business. These organizations are established in some form or another that are registered with government agencies. Generally speaking, we call these organizations companies. These organizations may also be nonprofits and churches… different purposes or defined product or service missions, but conduct business administration activities to fulfill their mission.
Nonprofits face unique challenges which commercial, for-profit, companies do not experience. Both types of companies are required to be in compliance with some type of regulations and to report on its financial activities. Boards of directors in both types of companies are responsible for establishing strategy and overseeing operations. The products and services distributed by both types of companies benefit their recipients in some way.
A significant difference is that nonprofits are established to serve the public good in some way. Because of this, the government has established a mechanism to not require income taxes to be paid while conducting business which fulfills the defined public-serving, charitable mission. To differentiate this tax payment requirement, companies whose purpose is to serve the public do not generate a profit when they spend less money than they bring into the organization. Therefore, retained earnings cannot accumulate. However, the idea of spending all of the money that is brought into the organization within one calendar year does not makes sense (a topic for deeper discussion)… and so reserves are accumulated.
A second difference nonprofits face is the value exchange is not reciprocal. The beneficiary of the product or service offered by the nonprofit is not the one exchanging something of value to receive the product or service. The one providing the resources (or means of acquiring the resources) to then create and distribute the product or service is broadly viewed as a donor, supporter or patron. Another way to say this is the nonprofits have two customers. Responsibilities, messages communicated, and ways of interacting with these two customer sets must be considered in concert with each other.