3 Ways ‘Nonprofit’ Is Misunderstood

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Here’s one of those Seth Godin posts that almost sounds audacious:

Go fail. And then fail again. Nonprofit failure is too rare, which means that nonprofit innovation is too rare as well. Innovators understand that their job is to fail, repeatedly, until they don’t.

My, my, this hits home. I’m loosely involved with a nonprofit that appears to be wrapped up in the axle of nonprofit compliance. While their purpose is to make a change in the world and train young people to do great things, they resist the daring, scoff at the controversial, and never risk a penny.

I have found sometimes good people have inaccurate views of what a nonprofit, not-for-profit, 501(c)3, or tax-exempt organization should be. Specifically, there are three misunderstandings that bring nonprofits to a screeching halt: 

  1. Nonprofits should not be controversial.
    Not true. Nonprofit compliance does not mean surrendering your purpose. If your bi-laws and purpose was approved by the IRS and granted tax-exempt status, then stick with that purpose and don’t buckle. “Oh no, we can’t say things like that because we might lose our status with the government” — so goes the argument. I wonder how many nonprofits end up doing nothing of real significance because of the fear of non-compliance.
  2. Nonprofits should not make money.
    Also not true. Nonprofit does not mean no-profit. The existence of a nonprofit is not for profit (some states actually call the business type “not for profit”), but all nonprofits should end up in “the black.” Sometimes a nonprofit will purposely do something that loses money, and that may be okay. But a nonprofit leader who thinks the organization shouldn’t make any money will most certainly fail. (Funny thing, especially in religious nonprofits, they may feel a bit pious because of it.)
  3. Nonprofits have plush jobs.
    Hardly. Nonprofits must create, work hard, and prosper – oftentimes harder than the private sector. Sometimes nonprofits need funding to survive, but this does not mean it is a slush fund for laziness and apathy. Some mistake nonprofit to mean relaxed, easy-keel, simple. The ones I’ve been a part of have been most exciting (like this one, of course).

I understand 501(c)3 compliance, what it means to be “nonprofit,” and how much hard work a nonprofit requires. But I’m afraid others don’t. Maybe it’s paranoia, fear of being called to task by the IRS or some government employee. Whatever it is, misunderstanding what a nonprofit is can bring the nonprofit to failure.

I agree totally with Seth. Read Seth’s full blog post here.

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