We all long to make a difference in the world. But while there are many ways through which one can make a positive change, individuals who seek to impact the world on a large scale are left with no other option than to be daring enough to establish an organization through which they can ensure a lasting impact. When it comes to that, the choice is often narrowed down to one between a nonprofit and for-profit organization.
The most underlying difference between for-profit and nonprofit business is the reason for which they are set up. The primary goal of a for-profit model of business is profit-making. For nonprofits, the objective is to help the community. Over time, however, the difference between the two has become fuzzy. In fact, the line between them has become so blurred that one could help out the less fortunate either way and still find fulfillment in what they do.
The rise of charitable for-profit business entities has made organizations and leaders realize that they can address social issues and develop communities without needing to be an out and out nonprofit business. Nonetheless, each of these models has its merits and demerits. The argument for the for-profit structure is that it is self-sustainable since social entrepreneurs get to generate their own revenue and not have to rely mainly on others for funding.
More so, as a for-profit business, you can generate as much revenue as you like. There are no limits on the amount of income that you can create by providing goods and services. Sometimes making more funds is as easy as getting people to buy shares in your organization.
For all of the benefits that it offers, however, the for-profit business model is limited in certain regards. First, you must pay taxes. Second, being a for-profit business disqualifies you from receiving foundation and government grants. Nonprofits, on the other hand, are eligible for grants and can be exempted from tax payments.
If you decide to operate as a nonprofit, though, the drawback is that you won’t be able to take equity investments. Also, your ability to generate revenue becomes limited, since you can only sell products or services that are linked to the purpose for which your organization receives tax relief. Otherwise, you will be taxed. If the amount realized from selling the unconnected item is substantial, you may lose your tax privileges altogether.
In the end, your ability to make an impact in the world or push the boundaries of what’s accepted can be limited by the amount of money you can raise. Without the funds to push through the plan, your desire remains a mere wish. So, before you settle for any model, it is essential to ask yourself, “where can I raise the most funds?”
Without enough money, your ability to prevent diseases, reduce crime, global warming, or bring an end to a refugee crisis will be limited. If you are going with the nonprofit structure, then you will need to understand the vast amount of efforts it requires to attract and retain donors. If you can think of a related product or service that is marketable, even better.
Similarly, your success as a for-profit business depends on your ability to introduce a compelling product that sells at a margin that allows you to earn enough profit to alleviate human suffering.