Let’s Help Nonprofits Succeed by Respecting Them for What They Are—Businesses
The reality is: nonprofits are businesses. If that sentence spooked you, please stay with us! We’re going to shine a light under the floorboards—where resistance to treating nonprofits like businesses comes from, why it matters, and how we can rethink it to help both nonprofits and our communities.
There are plenty of nonprofit professionals who shrug at the notion of nonprofits as businesses, as if to say “of course they are…moving on now.” But a degree of discomfort is still common, along with a desire to create distance between “nonprofits” and “businesses.”
We understand where that sentiment comes from. Nonprofit = community, mission, service. Conversely, business = profit-maximizing, extraction, even “evil.”
Unfortunately, this association isn’t entirely undeserved. “Business” becomes a word you don’t want anywhere near you when it so often gets used to justify harm—think, “no hard feelings, it’s just business.” Cutting benefits? It’s just business. Mass layoffs? Just business. (Creating 1.4 million pages to fundraise on nonprofits’ behalf while applying a default 16.5% tip to donations, all without nonprofits’ consent or transparency for unsuspecting donors? Yeah…)
Let’s set aside this cultural baggage for just a moment. Legally and functionally, nonprofits are businesses, and they operate just like any other enterprise. The real difference is that they’re expected to do more with less. Nonprofit leaders are tasked with building, managing, and sustaining organizations without the tools or resources that for-profit leaders take for granted. When their organizations struggle, they’re accused of poor leadership or, ironically, as lacking business acumen.
But the fundamental issue isn’t leadership. It’s the legal, economic, and societal systems within which nonprofits exist. Only by naming and understanding it can we begin to change it. And one important step we can take is to start treating nonprofits as what they are: essential businesses that serve our communities and make the rest of our society possible.
Tax Status, Not Moral Category
Yes, the cultural baggage is real. Still, we must acknowledge that “for-profit” and “nonprofit” are tax designations, not moral judgments.
Both for-profits and nonprofits can “do good” (or cause harm). What matters for differentiating them is who they serve and how they’re funded. For-profits generate revenue from customers, while nonprofits generate revenue through philanthropy, grants, and fundraising, in addition to customers. Neither can succeed without thoughtful strategies, systems, and leadership.
Nonprofits are not just woven into the fabric of our economy—they subsidize it. When for-profits fail to pay their employees living wages, nonprofits step in with food, healthcare, and housing support. They address the gaps of inequity that our economic system creates. And in doing so, they make it possible for people to patronize the for-profits in their communities. Which—importantly—keeps those businesses running.
Scarcity by Design
Nonprofits don’t choose to run on a scarcity hamster wheel. They are made to navigate inequitable funding models and outdated expectations about “doing good” that don’t acknowledge the reality of the role they play in our society.
Philanthropy and corporate giving often treat nonprofit partnerships as acts of charity rather than strategic investments. Restricted grants, limited overhead allowances, and short-term funding cycles keep nonprofits perpetually in survival mode.
Nonprofit leaders do accomplish incredible things on shoestring budgets. But expecting extraordinary business outcomes without proper business investment is simply unfair, and not sustainable. It limits innovation, undermines organizational health, and contributes to burnout among the people working the hardest to solve our most urgent challenges.
Investing in Community
We see supporting nonprofits less as “donating” and more as investing in your community.
You’re committing to the wellbeing of your neighbors, your teachers, the person who bags your groceries, the barista at the corner coffee shop you like, and the organization running your favorite local after-school program.
It all amounts to investment in the infrastructure that holds your community together.
Nonprofits and community organizations are filling the gap today as families face the harsh realities of the government shutdown. With SNAP benefits set to halt on November 1, groups are jumping into action to feed our community, like HEB’s $6 million contribution to Texas food banks and Meals on Wheels, AACHI’s “Fill the SNAP Gap” fundraiser, and pop-up food distribution sites for federal employees missing paychecks.
When we support nonprofits, it’s recognition that we are in community together, and we all benefit from collective wellbeing. So every time a foundation, corporation, or individual invests, they’re strengthening the entire ecosystem that sustains their workforce, neighborhoods, and local economies.
Rethinking What “Good Business” Means for Nonprofits
For-profit businesses can be good or bad. The bigger problem is that our current version of business is tightly bound to profit maximization, rather than shared wellbeing. But the tools of business—planning, metrics, strategy, systems—are powerful. How do we adapt them to serve community, purpose, and equity, rather than extraction?
The hallmark of efficiency that many for-profits pride themselves on can become harmful when applied to community-driven work, where relationships and trust take time. The ability to move quickly, scale ideas, and execute with precision does often drive strong outcomes, but not everything that matters can or should be sped up.
To truly respect nonprofits as businesses, we have to broaden what we mean by business success. Nonprofits measure success not just in revenue, but in improving lives, changing systems, and strengthening communities.
Here at Insights4Equity, we help business leaders that focus on community—whether through a traditional nonprofit model, philanthropy, or through a for-profit venture that provides key community support (think creatives, storytellers, social entrepreneurs). As it happens, getting comfortable with the notion of nonprofits as businesses is just the beginning. Stay tuned for Part 2, where we explore further how complex the nonprofit business really is…