by Charles Simmins

Created on: January 12, 2009   Last Updated: March 26, 2009

Nonprofits need to avoid some common mistakes. A good cause is no guarantee of success.

Mistake One: Nonprofit does not mean no profit

The term "nonprofit" is the first mistake often made that leads to the failure of an organization. A better phrase is "not for profit" which describes the financial purpose of the group. In order to succeed and to continue operating year after year, every organization must take in more money than it spends.

A profit is when you do just that, have more income than expense. It is not wrong for a not for profit to make a profit because it means that the group can continue its good works into the future. That profit means that the organization can have a reserve for those times when income drops or it can meet a new and unexpected need with the cause that it raises money for.

Mistake Two: We all think alike, therefore we're right

Some nonprofits have not yet understood the need for a variety of backgrounds on their Boards. If all the directors have similar backgrounds and education, the direction by that Board may be limiting to the organization. That Board will also affect the hiring process for employees, so that executive directors and other important hires may be drawn from a pool of candidates that has been limited arbitrarily by the Board.

The Board of Directors of a nonprofit has a great deal of responsibility under the laws that govern such groups. It is very important that Boards include people from outside the small community that is the nonprofit's cause. The not for profit finds vitality in diversity.

Mistake Three: We exist to exist

As nonprofits age as organizations, the culture can change to one where existing is the reason for the group. More and more resources are devoted to administration, social events and salaries. Less and less funds are found for the cause that the nonprofit was founded to serve.

In the recent past, groups such as the United Way and the American Red Cross have had to face this issue head on. The notion that the cause is an inconvenience during the work day is easily spread if the culture of the nonprofit is not kept focused on goals that bear directly on the cause.

Mistake Four: We must last forever

Nothing lasts forever, even nonprofits. There may come a time when the existence of the nonprofit is at stake. Funding has been cut, or societal changes have made the cause no longer vital. Whatever the reason, a nonprofit must be able to recognize that it is no longer needed.

It may be that another group is performing the same tasks, only better and more successfully. It may be that the original aim of the nonprofit is no longer valid, women's suffrage as an example. It may be that the nonprofit no longer has the support to carry on alone.

A nonprofit should not be adverse to merger or to being dissolved. It is possible that the best use of the nonprofit's resources and personnel is in another place.

Nonprofits can make many of the same mistakes that for profit enterprises do. The same continual planning and self-assessment that a corporation does should be part of the process for a nonprofit. Avoiding mistakes means more resources for the cause and a greater chance that the nonprofit will make the difference it seeks.

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