by Charles Simmins

Created on: June 23, 2009

Profit. Businesses are broken down into categories by the word "profit". Some are "for profit". Others are "not for profit". They all share the word profit.

Making a profit, taking in more money than you spend, is everyone's goal. From the average person in the street to the largest corporation, the goal is to make a profit. Even "non profits" or "not for profits" must make a profit to continue to survive as organizations.

The two types of business also share other similarities. The not for profit world has been slow to recognize this truism but they have been forced to by the nature of the business cycle. Not for profits, formerly called non profits, have had to become more business-like and professional to continue to survive.

In the old days, many people in and around a nonprofit took that term at face value. Every dollar was spent and nothing was saved for the future. As giving patterns changed and the demands on not for profits for new programs grew, their managers came to realize that it was important to build a cash reserve. With a reserve, fluctuations in income or new and expensive programs can be handled without financial damage to the group.

The idea of a mission statement, with goals and objectives to follow, also came from the for profit sector. It was driven by an influx of businessmen onto the boards of not for profits, and the requirements of government grants. Boards and management regularly spend time on the organization's mission and the ways that it will work for that mission.

That change at the board level also resulted in the introduction of a budget process to not for profits. There was a time when such groups just spent until they ran out of money. Now, just like with for profit businesses, budgets are developed and actual results measured against them. Costs and potential income for all programs are weighed and priorities are chosen.

The similarities between nonprofit and for-profit businesses are many. The not for profit sector has learned many things from for-profit businesses. The number one lesson is that all businesses must make a profit to survive.

Also similar are the needs for board oversight and direction, a mission for the organization, and a set of goals and objectives. The need for reserves and the necessity of budgeting are similar to those in any corporation on the stock exchange. The business practices of non profits and for-profits have become essentially identical.

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