What does 'nonprofit' mean, anyway?

sisterSTAFF Blog

What does 'nonprofit' mean, anyway?

Running a nonprofit is a lot like having diabetes.  “How’s that?”  you ask.  Well, just like with diabetes, there are a lot of misunderstandings and misconceptions about nonprofits. (As a person with diabetes, how many times have you heard the following?: “You don’t look like you have diabetes” or “Oh, you must have eaten too much sugar…that’s what causes diabetes.”)  Similarly, some of the statements  I’ve heard about nonprofits since I founded DiabetesSisters in 2008 include:

“Your family must have a lot of money if you run a nonprofit.”

“Oh, nonprofit means you can’t charge for anything, right?”

“Nobody should earn a salary at a nonprofit.”

“Why are you running a nonprofit organization like it’s a business?”  

“Nonprofit is another word for ‘women’s social club’, right?”

“Your job must be easy because people just give you money.”  

“Working at a nonprofit seems like easy work when compared to work in corporate America.”

Maybe I’m a glutton for punishment…I think I just have the heart of a social worker…always fighting for the underdog to be heard and understood.  Diabetes and nonprofits are my underdogs!

So, just as we (people with diabetes) want the public to understand diabetes (and what it’s like to live  with a 24-hour-a-day disease), my goal with this month’s post is to help you understand our day-to-day experiences as a young nonprofit so that you (our members) can better understand how we operate, why we do what we do,  what restrictions and obstacles  we face, and why you (our members) are so important to us.      

First, designation as a nonprofit does not mean that the organization does not intend to make a profit, but rather that any profits made are invested back into the mission of the organization.   After all, if we don’t make a profit (i.e. bring in more money than it costs us to operate), we will be bringing in just enough money to make payroll and pay the bills, but not setting aside any money for a reserve fund (money for new projects/programs/employees nor would we have any money for the organization to run when funding slows or the economy takes a downward turn).   Another important differentiation of a nonprofit organization is that it has no shareholders, nor does it pay anyone any dividends.  

The most common definition of a non-profit organization is one that has been designated by the IRS as having 501(c)3 status. To qualify for this status, an organization must pass a rigorous screening and review process to prove that the organization's mission and activities will be of a charitable nature. It will then be exempt from paying federal corporate income tax.  Every nonprofit must also submit an annual 990 form to the IRS.  This lengthy document provides the IRS an in-depth view of the organization’s mission, goals, programs/services, and the financial health of the organization.  This form also allows the public to evaluate the nonprofit and how it operates.

While it did take some start-up funding from my husband and I to get the organization off the ground (less than $20,000), I certainly do not ‘come from money.’  I come from an average working class household (two working parents) in a rural town of North Carolina where I was the first in my family to earn a college degree or an advanced degree.  It was while in college at UNC Chapel Hill earning my undergraduate degree in psychology that I decided that I wanted to use my life to help others with the emotional impact of diabetes. So, I continued on at UNC to earn my Master’s degree in Social Work. My goal in starting DiabetesSisters has always been to fulfill God’s plan for my life, not to make money.  So, my pushback to anyone’s assertion that I must have a lot of money would be that it takes more “perseverance” than “money” to start a nonprofit.  You have to be willing to work hard (I’m talking 80-90 hours a week) to get a successful nonprofit organization off the ground and gain some traction.  You also have to be willing to stick it out through the hard times when you are unsure where funding will come from.  And that brings me to the topic of salaries: Although not all nonprofits pay a staff to work for them(some are completely volunteer-driven), my experience has been that if you want to create a top notch organization (corporate or nonprofit), you must be willing to pay them for their intellect and their work.  Furthermore, if we didn’t pay employees to work for DiabetesSisters, the only people who could ‘afford’ to give the organization significant amounts of time and energy would be those who are independently wealthy.    Although I did not earn a salary the first two years while I was trying to get the organization off the ground, I currently earn an annual salary.  After all, it takes money to live in today’s world, so I feel very strongly about paying employees and paying them well for their hard work.  I can guarantee you that NO ONE who has ever worked or volunteered for a significant amount time at DiabetesSisters will say, “Oh, that was an easy job.”  There are so few people (only 2 of us currently) to run all of the national programs, raise the money to run the national programs; run the office; establish partnerships, and so on, that every minute of the day (not just the traditional 8-5 work day) is valuable.  

While we are talking about money, I am often asked where our money comes from. Our funding comes from foundations and corporations and the generosity of individuals who believe in our mission. However, companies and foundations rarely seek out organizations to give money to.  It’s quite the opposite—lots of research and cultivation must be done to secure funds from foundations and companies.  Individuals also give to us, but it’s only in Hollywood where you see organizations waking up one morning to find out that someone they never even knew left millions of dollars to them.  Relationships with individuals must be built and a trust must be established in order to earn their donation.   

Now, in terms of why we charge for programming, hopefully, you have a better understanding now of why it’s necessary for us to charge for our programming.  Aside from the fact that ‘someone has to pay for it’, any program we charge for is offered at a significantly reduced rate. In addition, research has shown that when programs are offered for free, the public’s perceived value of the program is diminished.  When a monetary ‘investment’ is made by an individual to pay for a program or service, the perceived value is increased and a commitment is made to make use of the program/service.

So, why do people run nonprofits as if it is a business?  Quite simply, it IS a business.  It is not a social club that meets occasionally to catch up at a friend’s house or at the local Rotary Club.  Just like any other business, we have to pay rent, program expenses, salaries, insurance, etc. to maintain the organization and its membership.  If not, we go out of business.   The biggest differences in for-profits and non-profits are that 1- Nonprofits must apply for and be awarded with their nonprofit status by the federal government and 2- Any profits earned by a nonprofit are put back into the organization to further the mission (in for-profits, profits are often given to shareholders or staff).  Finally, nonprofits do not have to pay taxes on the money the organization receives related to its exempt (charitable, public-benefitting) activities.

I hope all of this provides some insight into what goes on at DiabetesSisters’ National Office.  Hopefully, it also shows how important our members and our volunteers are to us.  Without you, our programs and services would not exist, and if our programs and services did not exist, the national organization would not exist.  Many of you are volunteers who help run programs, like the PODS Meetup Program, throughout the US.  Many of you are also part of the Sister Strength Monthly Giving Program- a funding program which helps sustain the organization. We exist FOR YOU and WOMEN LIKE YOU so that no woman, now or in the future, has to walk alone on their diabetes journey.  We work hard each and every day to move the proverbial needle forward just a little bit more so that fewer women with diabetes feel isolated, more women with diabetes are living healthy lives, and more of the general public is aware of the unique challenges women with diabetes face on a daily basis.  We appreciate your support and we welcome your involvement in DiabetesSisters!