When joining a new organization, understanding its structure and goals is tremendously important if you are looking for long-term success. Nonprofits and For-profits are two major organizational structures that have different missions and target audiences. Below are the key differences between the two:
All companies have a unique purpose, and hereby lies the primary difference between a nonprofit and a for-profit. For-profit organizations have a number of different goals. Out of these, the primary goal is to develop products that are valuable to customers and eventually generate profit. Companies are focused on developing products and services that directly solve a problem, or are looking to increase overall efficiency. A nonprofit, however will not prioritize profits, and is instead dedicated to promoting a social cause, focused on helping communities, or advocating for a particular issue.
Amongst the most important aspects of running an organization is establishing a consistent method for funding. For-profit organizations usually fund their efforts through bank loans, investors or revenue generated from sales. They may also have the opportunity to receive funding from national or global investors like venture capitalists.
Nonprofits have a different approach and tend to seek out private donations of time and money, volunteers, corporate sponsorships and government grants etc.
For-profit companies tend to have a more specified target audience than that of a non-profit. A for-profit looks to establish a relationship with customers who will purchase their products to generate revenue. Nonprofit, however, typically approach their audiences with a message about a product, service or action. Nonprofits have to try to reach a much more diverse audience which comprises volunteers, donors, corporate sponsors, and the public.
In a for-profit company, regardless of whether it’s a private business or a corporation with stakeholders, the leadership responsibilities will be distributed among a certain group of individuals. These individuals are not just playing the role of leaders, but also have a stake in the financial success of the organization.
Nonprofit organizations, however, tend to be directed by a board of directors who lead the organization without having direct financial ownership. The board can be anywhere from 25 members to a 100 members. Not as much concerned with financial success, the leadership must balance financial concerns along with social or environmental causes.
The differences in mission statements inevitably lead to for-profit and nonprofit organizations having to establish two very different organizational cultures. Due to the goal of financial gain, the culture within for-profit organizations tends to focus on finances and business metrics. Hence, employees are also encouraged to be as innovative as possible with the creation of new products and markets. All of this will help increase the short and long-term revenue for the company. The culture within a nonprofit, however, often tends to be more community-oriented, as employees are often asked to address and solve problems that do not have much financial incentive. With this community-oriented culture, it’s not uncommon to see employees advocating for the organization even outside their work schedule.
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Until next time, continue to take steps of excellency and you will leave behind a trail of greatness.
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