At the age of 22, fresh from Wharton, I moved to San Francisco and plunged into the startup scene. But unlike other entrepreneurs in the home of Google and Facebook, I didn’t start a tech company. I started a nonprofit.
In the nearly 10 years since, I’ve learned some lessons about navigating the nonprofit world. I’ll share them here for those of you taking your first steps into tax-exempt territory as a board member or through a career shift.
Whether you’re planning a short visit or a permanent move to the nonprofit world, here are a few tips for the journey:
Things to take with you:
1. Network—Nonprofits tackle seemingly unsolvable problems, often in areas where governments haven’t succeeded and where no marketplace exists to provide a solution. Don’t dive in alone. Your business network has the talent and finances to drive real social change; it’s your job to engage those resources.
2. Language—Justified or not, nonprofits aren’t known for being business savvy. Using the language of business will help you stand out and find your way in the nonprofit world. While pitching your plan for social change to seed funders, grab their attention by applying the language of business. ROI or its nonprofit counterpart “social return on investment” should be at the heart of explaining your work.
3. Business Planning—Great ideas, for-profit or non-profit, are easy to come by; it’s how you implement that makes the difference. Before you donate to or join a nonprofit, dig into the economics and the plan behind the mission. What’s the business model for curing a disease or increasing reading scores? Where are the economies of scale as they grow?
Things to leave behind:
1. Traditional notion of customers—When you walk into a store and buy a soda, you are both the payer and the recipient of that product. You know that if you liked it, you might buy it again. Sounds obvious, right? In the nonprofit world, the payer (a philanthropist or the government) is usually split from the recipient (teen moms or a family needing food). Successful organizations figure out how to balance these two very different types of customers.
2. Single bottom lines—You grew your revenue, but did you accomplish your mission? Are fewer kids joining gangs because of you? Can you prove it? Invest in research to prove your program’s impact and embrace the concept of the double bottom line—finances and impact.
3. Risk Capital—Because social impact is hard to measure, investments in nonprofits tend to be small and cautious. A young, promising nonprofit might score a huge win with a $100,000 investment, when a for-profit startup at the same stage is aiming for $1 million. Be prepared to build a broad, diverse funding base. There are promising signs of more “venture philanthropy” ready to launch big ideas in the nonprofit world, but it’s still a small fraction of the whole.
Now that you’ve packed your bags, here’s a secret: The territory you’re heading to may be more familiar than you think. Nonprofits are businesses, just ones owned by the public, as represented by a board of directors. Any sustainable nonprofit has to at least break even. The ones that go on to change the world bring with them the hallmarks of a great business: purpose, execution and clear ROI.