WHAT’S THE DIFFERENCE BETWEEN SMALL BUSINESS AND SMALL NON-PROFITS?

NOT MUCH! 

 

The similarities between small business and non-profits are far greater than anyone realizes.

Most people are quite surprised by the similarities. 

They are both businesses after all!

 THINK ABOUT IT . . .

Both have:

  • investors

  • operations

  • profits/losses

  • staff in one form or another

  • promotion and advertising

  • finances

  • competition

  • sales and marketing

  • business plan

  • vision, mission, values and business statements

  • boards of directors

  • ETC.

Why do People Think They are Different?

Because most people never see a non-profit as a business - they think "charity".

To succeed, non-profits must adopt good business practices.  The operations of a non-profit need to be as tight as that of a small business to maximize the efforts put forward.

What about Profits?

Both can make profits.

Non-profits raise money either through donations or profits through sales and promote a cause with that money.  Small business put their profits towards the benefit of the owner and investors.

Either way, someone or something is benefited by the success of the enterprise.

What is truly necessary for both types of businesses?

Both small business and non-profits must be well run as efficient and effective entities to succeed.  Without the proper management of resources, the enterprises suffer and, often, die.

Just because the cause of a non-profit is worthy or just because a person has saleable products or skills does not make the enterprise successful.  Many a good cause, product or skill has never produced much  because the whole host of skills and abilities was not available to them either because they couldn't afford them or the individuals involved that effort would be enough.

The three most important factors are:

1.  The very first thing on the list is understanding finances thoroughly - the budget, financial statements and chart of accounts 

Understanding finances is a simple, simple process made complicated by people who don't know how to show other people the basics or don't want to in order to retain power and control.

I helped a small architectural firm once which found itself in a declining market.  Despite the fact that the owner had been in business for many years and made a lot of money, he was now faced with asking the banks for a loan.  He couldn't do that because he didn't understand his financial picture nor how his budget related to what had happened in the past and what was to happen in the future.  When I showed him how to relate the figures and justify his requirement to the bank, he couldn't believe how understanding the overall picture was simple.  He had left finances up to his accountant for years without taking the time to understand what the story the numbers were saying about his business.

Non-profits have the same issue - many executive directors and most members of the board don't understand the finances clearly.

2.  Create a realistic documented budget. 

I am astonished during my consulting work to see that most budgets are undocumented.  How can anyone, staff or board members, possibly, first understand the budget without details and, secondly, remember later what the figures consisted.  They can't. 

3.  Learn to sell well.  

If you hate selling, then don't go into business for yourself nor should you seek to help a non-profit.

If you hate selling, don't become an executive director or member of the board of directors.  Fundraising is essentially sales - asking for something for something in return.

So many would-be small business people to whom I presented workshops told me they couldn't and wouldn't sell.  My answer was blunt:  get a job.  Selling is critical to starting or growing a business or a non-profit.

 

Lorraine Arams

On Contract Only

 

 

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