For-Profit vs. Non-Profit Business: Where Can I Make the Biggest Impact?

For-Profit vs. Non-Profit Business: Where Can I Make the Biggest Impact?

We all long to change the world. But while there are many ways one can make a positive difference, people seeking to impact the world on a large scale have no choice but to be bold enough to create an organization through which they can make a lasting impact. When it comes down to it, the choice often narrows down to one between a nonprofit and a for-profit.

The most basic difference between a for-profit business and a non-profit business is the reason they were created. The primary goal of a for-profit business model is to make a profit. For nonprofits, the goal is to help the community. Over time, however, the distinction between the two became blurred. In fact, the line between the two has become so blurred that one can help the less fortunate in both cases and still find satisfaction in what they do.

The rise of philanthropic entities has led organizations and leaders to realize that they can address social issues and develop communities without the need to be an open nonprofit business. However, each of these models has its advantages and disadvantages. The argument for the for-profit structure is that it is self-sustainable because social entrepreneurs can generate their own revenue and do not have to rely primarily on others for funding.

What’s more, as a for-profit business you can generate as much revenue as you want. There are no limits to the amount of income you can generate by providing goods and services. Sometimes making more money is as easy as getting people to buy shares in your organization.

However, for all the advantages it offers, the for-profit business model is limited in some respects. First, you have to pay taxes. Second, being a for-profit business disqualifies you from receiving foundation and government grants. Non-profit organizations, on the other hand, are eligible for grants and may be exempt from tax payments.

However, if you choose to operate as a non-profit organization, the downside is that you will not be able to make capital investments. In addition, your ability to generate income becomes limited as you can only sell products or services that are related to the purpose for which your organization receives tax relief. Otherwise, you will be taxed. If the amount realized from the sale of the unrelated item is significant, you may lose your tax benefits altogether.

After all, your ability to make an impact in the world or push the boundaries of the accepted may be limited by the amount of money you can raise. Without the means to push the plan through, your wish remains just a wish. So before settling on any model, it’s important to ask yourself “where can I raise the most funds?”

Without enough money, your ability to prevent disease, reduce crime, global warming or end the refugee crisis will be limited. If you adhere to a non-profit structure, then you will need to understand the enormous amount of effort it takes to attract and retain donors. If you can think of a related product or service that is marketable, even better.

Similarly, your success as a for-profit business depends on your ability to present a compelling product that sells at a margin that allows you to earn enough profit to alleviate human suffering.

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