Did you know that there are around 1.5 million nonprofit companies in the US?
Every year, it seems as though setting up nonprofit organizations is becoming more popular, and if you’re thinking of starting one it definitely isn’t a bad idea! But, there is a lot of confusion around these companies and how they work.
The biggest area of confusion is, of course, money. In particular, do nonprofits make money, and if so, how?
Find out everything you need to know in our guide.
What’s the Purpose of a Nonprofit?
Before diving into how do nonprofit organizations make money and the basics of nonprofit accounting, it’s a good idea to understand some of the basics that set these companies apart. Unlike conventional businesses, the purpose of a nonprofit isn’t to make money, but instead to make an impact. They’re usually charitable organizations that are trying to fund something else, be it research into diseases, supporting low-income families, or creating animal sanctuaries, like Unity Diner in the UK.
So, these companies aren’t looking to make money in the same way as a regular store, restaurant, or other establishments. But how does that work?
Do Nonprofits Make Money At All?
Nonprofits do make money. In fact, it’s common that their purpose is actually to raise money in the first place, so the companies they create are usually made to be profitable through the selling of goods and/or services. There are also charitable nonprofits that make their money through donations and grants.
The general difference is this; for-profit organizations make money for private interests, such as for the owners or investors, while nonprofits exist to benefit the public. They don’t focus on making any one person better off.
How Do Founders of Nonprofits Make Money?
If you’re wondering how do you make money from a nonprofit organization as the founder or an employee? the answer is simple; through a salary. Just like any other company, nonprofits can give salaries to anyone who works for them, including the founder if they choose. But, the salaries they pay do usually have to meet certain requirements, including:
- Meet all guidelines for minimum wage in the area
- Be reasonable and not excessive
- Executive salaries must be approved by the executive board
The truth is that nonprofits need to pay people in order to get talented staff on board to drive their company forward. But, it’s unlikely that any of the employees or the founder will end up as a millionaire – that goes against the values of nonprofit companies.
When it comes to how much money do nonprofits make, the answer varies just as it does with any brand! Some of the most profitable include the YMCA ($6.24 billion in revenue) and Goodwill Industries International ($4.9 billion in revenue).
Start Your Own Nonprofit
Now we’ve answered do nonprofits make money? you should understand more about how they work and whether this is the right venture for you! Remember, you have to be in it for the impact, not the money.
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