Lauren has an idea to run workshops in schools to empower and train teenage girls in leadership skills. She’s put together the program structure and is ready to pilot the program in two schools for a small fee. She wants to put a more formal structure around this idea and can’t decide if she should be for-profit or non-profit. There are pros and cons to both, so Lauren is having trouble determining which is the best fit for what she wants to do. So how (and when) should she make a decision?
Roadblock: Deciding on your for-profit or non-profit status too soon.
We’ve found that people typically think that if they are doing something good in the world, they should be formed as a non-profit, or if they are selling something that generates revenue, they should be a for-profit. This is not true. There are plenty of for-profits who are doing fantastic work in the world and plenty of non-profits that generate revenue. So hear this loud and clear: We’re all about doing good. But advancing the common good has more to do with your mission and model than how the government defines your organization or how you file your taxes.
Solution: Choose a legal entity that best enables your mission and strategy.
Engaging in the Business Model Canvas as you focus on your customer segments and create and deliver value to them will create clarity about how your organization will operate. If your customer segments can’t pay enough for your products or services for your organization to be financially sustainable, you might need to consider donors as a revenue source and pursue non-profit status. If you decide to operate as a for-profit, there are several different ways do it, and it’s worth getting some insight from legal and financial professionals to help you make that decision. If you choose non-profit status, make sure you understand the additional requirements, responsibilities, and implications to you and the organization.
The bottom line is this: you want to be clear on what matters most before you make this decision. If you’re looking to clarify your mission and how to accomplish it, we’d love to help. Schedule a free call with one of our coaches or check out our programs on our coaching page.