What the Pluses and Minuses of a Nonprofit Business?
Nonprofit businesses use any surplus of money to serve and enrich the community, instead of the owners and executives. This can be both an advantage and a disadvantage for your small business. Securing investors without the incentive of earning a consistent profit may make it hard to obtain multiple investors. Instead, look for funding from donations, grants, and sponsorships. In contrast, your for-profit business would receive funding from loans, investors, and revenue from sales.
One disadvantage of a for-profit business is the amount of paperwork required. For-profit businesses must complete detailed balance sheets and income statements regularly to confirm profitability. Nonprofits must create a Statement of Financial Position to outline their assets and a Statement of Activities to show total revenue after expenses.
But nonprofits have their disadvantages, too. One common disadvantage involves public scrutiny. How will you feel if your nonprofit receives criticism for how well you handle administrative expenses and how well you use income to help your business complete its mission. And how do you define success and raise money to keep going? The success of for-profit businesses is based on how much money the business makes for owners and founders, whether shares of the company are privately held or publicly traded. For your nonprofit business, generating enough revenue to be stay afloat can be difficult at first. You must find ways to ensure your revenue is consistently more than your expenses while serving the public. Aside from performing your mission, the success of your nonprofit business stems from the satisfaction you receive from serving a noble cause.
