3 Challenges Unique to Nonprofit Entrepreneurs
Nonprofit founders are entrepreneurs.
They risk their time, money, and effort to create and build a successful organization. Like other entrepreneurs, they partner with like-minded investors (donors) to enact new solutions in a sector. And any organization’s founder, whether for-profit or nonprofit, will wear many hats, from marketer to accountant to customer service.
Because of these common experiences, nonprofit professionals can learn from their counterparts in startups and small businesses. There are, however, some important differences between founding a nonprofit organization and founding a for-profit. These challenges unique to nonprofit entrepreneurs require founders to exercise immense creativity, measured judgment, and, above all, passion.
1. Historic Problems vs. New Solutions
Many of the exciting, lucrative startups featured in the news are rooted in new technology. Take the video editing app Vine, for example. This app allows users to create six second videos to share with friends and the public. It has 40 million registered users, having exploded in popularity over the last couple of years. Fifteen years ago, though, this product wouldn’t exist. Even if the technology to build the app was there, few phones could play or record videos of any quality.
Many nonprofits, on the other hand, are battling problems that have existed for decades or even centuries. While entrepreneurs often set out to solve an emerging problem, nonprofit founders take on issues that are deeply-ingrained into society. They may incorporate new technology, but the history behind these issues complicates the possibility of solving them.
If problems like hunger and communicable disease have never been solved, it’s safe to say they are difficult ones. Also, many of these cause sectors carry a number of existing responses. While the problem has not been eradicated, people may be hesitant to try a new solution. People prefer the known to the unknown.
The final issue with long-lasting historic problems is the way the public thinks about them. As Dr. Helene Gayle, president and CEO of CARE USA said at the CLASSY Awards in 2014, “The biggest misconception within the poverty and hunger relief sector is that either poverty or hunger has to exist.” In other words, part of what holds us back from solving these historic problems is that we may not believe they ARE solvable. Nonprofit founders seeking to solve long-term issues must convince their supporters that progress is possible.
2. No Profit, No Product
Many startup founders suggest that young entrepreneurs come up with a minimum viable product, some object or service they can launch and refine over time. This gives customers some immediate return and understanding of the business. So with a for-profit entrepreneur, you have financials (revenue, profit) to present to your investors and a product to offer customers.
For nonprofit entrepreneurs, proving your success and progress is more complicated. Convincing your donors and supporters that your organization is worth investing in comes down to your ability to prove your impact. This makes documentation and communication doubly important for nonprofits. With a traditional business model, the numbers can often speak for themselves, but even if you have statistics or numbers to show your work, they may need context to convey their meaning.
Therefore, it is not only important for nonprofits to set goals and hold themselves accountable, they must also learn how to tell the story of their impact. When you can’t give your audience a product or stock in a company, you must deliver the emotional satisfaction that comes from helping others.
3. No Big Pay Day
Donors aren’t the only ones who must accept a different kind of return on their investment. Nonprofit founders’ work is similar to for-profit entrepreneurs in many ways, but the end result is very different. Many of us hear about emerging startups when they are bought by larger companies or go public in the stock market. This often leads to greater exposure and distribution of the product, but it also makes founders very wealthy. This business the entrepreneur has worked so hard and sacrificed so much for gains value, and the founders (who typically own the majority of the company) reap the benefit of that growth.
Nonprofit entrepreneurs, on the other hand, are not working with the prospect of a big pay day down the line. Even if a charitable organization grows in size and impact, the founders do not really own it and therefore aren’t enriched by equity. The crescendo of their work is not an influx of wealth, but the solving of a problem, one that may not have directly affected the founders at all. While founders and executives in the nonprofit sector can draw salaries, their success is truly reflected in the positive impact it has on others.
Nonprofit entrepreneurs have a lot in common with for-profit business founders. They work hard and sacrifice to build an organization and they must convince others to believe and invest in their work. Founders of charitable organizations, though, must contend with long-standing challenges to solve problems greater than revenue and stock prices. Their success isn’t measured in dollars and cents, but in impact and social good.Read Next: 6 Ways Social Entrepreneurs Can Fund Their Idea