Despite the fact that nonprofit organizations have been part of our daily lives, directly or indirectly, for a very long time, there are still many myths and misconceptions about who they are and what they do.
Unfortunately, these misconceptions have a negative impact on the public’s conception of governance, the recruitment of volunteers and staff, the use of funds, the expected results, and ultimately the success of these organizations.
In this blog, I will discuss the most common stereotypes and misconceptions and their impact on the overall reputation and performance of nonprofits.
1. Nonprofits Can’t Make a Profit
While government funding, foundations’ grants, individual and corporate donations, and other fundraising venues are an important part of nonprofit and charity budgets, it is important to emphasize that not only do these funds come with restrictions and constraints about their use, but they are also subject to uncertainties due to political changes and economic downturns, to name a few.
Also, there is tight competition for such scarce funding from thousands of nonprofits and charities.
Shifting to self-sustaining or profitable business models allows nonprofits to sustain their services and programs, attract and retain knowledgeable and competent staff and volunteers, be more creative, and ultimately be successful.
Unlike for-profit companies, nonprofits and charities are not allowed to distribute dividends to their board or members. Nonprofits that choose to operate a business must comply with significant rules and regulations depending on whether they are registered (or not) with Canada Revenue Agency.
2. Nonprofits Must Spend All Their Income on the Cause
Even though nonprofits can rely on volunteers, cash, and in-kind donations, most of their day-to-day operations run similarly to for-profit businesses. To be successful, they need knowledgeable and competent advisors and staff, such as accountants, lawyers, programmers, web and graphic designers, and other specialized individuals. They also have to lease commercial space, pay utilities, and cover any other expenses required to deliver programs or services to their clients. As most nonprofits operate on tight budgets, they should do their best to keep overheads down, but they can’t spend all their income on the cause: it’s a myth.
3. Nonprofits Don’t Contribute to the Economy
Reliable data and statistics are available to contradict the misconception that nonprofits don’t contribute to the economy. In fact, nonprofits and registered charities play an important role in Albertan’s economy—they provide both tangible and intangible benefits to Albertans. For example, they create many paid jobs (over 600,000 in Canada in 2017!), which indirectly stimulate other facets of the economy. Also, according to Calgary Chamber of Voluntary Organizations (CCVO), Alberta is home to 24,800 nonprofits (35% are registered charities). Registered charities make $29.4 billion in annual revenue, and employ 187,000 full-time employees and 230,000 part-time employees.
4. Nonprofits Are Grant Magnets
This is one of the most common misconceptions. The reality is that there are no grants for starting a nonprofit. Grants are provided, however, to already established nonprofits. Founders often use their own funds and resources to start and operate a nonprofit until they can eventually get financial help from foundations and the government. Unfortunately, there is no guarantee that a nonprofit will receive grants. Also, founders must remember that the personal funds spent to run the nonprofit are not eligible for tax deductions.
5. Nonprofits Can’t Hire Paid Staff
Volunteers are the backbone of nonprofits as they help them deliver programs or services to their target demographics in a cost-efficient manner. However, starting and running a successful nonprofit requires dedication, commitment, knowledge, skills, and accountability that volunteers are not usually able to offer because they also need to make a living. Volunteers will help when they are available and as they can.
Most nonprofits are staffed by paid staff (full-time or part-time) exclusively, while others choose to employ both paid staff and volunteers.
Now that we’ve slayed the nonprofit dragons and assured you that no nonprofit leprechauns will offer you pots of gold, you can see clearly and get started with open eyes. For advice, help, or market research, give us a call or email us. One thing that’s not a myth is how happy Business Link is to help!