Should you start a business or a nonprofit?
4 practical considerations to help you dodge misalignment
Whether to start a business or a nonprofit organisation isn’t straightforward, and it needn’t be. A decision that’s going to affect how you spend a substantial amount of your life and direct the course of other people’s lives tends to be worrisome.
In this matter, many Christians take a binary stance from the outset. They assume that nonprofits exist to serve others and that businesses exist to generate profit, or that a nonprofit is a ministry, while businesses are ordinary.
Here’s a concern posted on Reddit:
“Does anyone else feel a bit of guilt when turning a profit? It sounds odd I know, but I feel like I didn't really "earn" the money. Like any one could call up the factory and buy stuff for cheap. I almost feel like I'm "ripping people off".
These biases have produced under-resourced nonprofits because their managers felt entitled to their donors’ wealth and guilt-laden for-profit founders who doubt their work is acceptable to God. It’s also common to hear about honest Christians abandoning corporate work or entrepreneurship to “serve God in ministry” (that is, the church). I have written previously about how Plato’s dualism influenced the church into preaching that such a move is fine. But it’s not.
That said, in this article, I wouldn’t argue for one structure over the other. Both are as legitimate as they are necessary, and can equally be operated with Kingdom intentionality that serves people and glorifies God.
That said, in what follows, I will discuss four specific operational and theological considerations to help you choose the better structure for your good intentions.
Can you keep the lights on long enough?
The first consideration is sustainability.
Simply, which structure best enables this mission to continue long enough to accomplish something impactful?
According to Peter Drucker, mission-driven organisations face serious financial fragility (funding trap). A nonprofit is typically dependent on donor cycles, grant applications, and fundraising campaigns. So, they are largely consumed by the work of sustaining themselves financially, which consumes the time, energy, and leadership attention at the direct expense of programme delivery and strategic development. That’s why nonprofits with independently verified program impacts are few and rare.
What makes running a nonprofit even more taxing is the administrative skill it requires.
Nonprofit formation often demands significant compliance requirements, from board governance and fiduciary responsibility to restricted fund accounting, annual reporting and public disclosure, and the management of donor relationships with all their attendant expectations. The extent to which you can fulfil these statutory obligations annually (even with a team) will impact how long your nonprofit will last.
Moreso, if your primary gifts are in building, designing, launching, and executing, your first few hires would have to be skilled in governance, compliance, and relationship management. You must be honest about whether the structure of a nonprofit operation is a good stewardship of your particular capacities, and if it isn’t, how quickly can you find someone equally mission-driven and faithful to take up the job? Can you also afford to hire this person or provide a stipend to the committed volunteers you might find during the early days? A few years ago, I started a nonprofit and recruited some volunteers, but a few months in, they all had good reasons to move on and it shut down.
If you prefer using more of your actual strengths to build an organisation faster and more efficiently, a business allows you to do so, and if you do it well, the business could be an inheritance someday. A business produces value and generates its own funds. In fact, your success is largely determined by the value you offer your customers or clients, so to fall short on value is to lose profit.
Does that make businesses better social companions? Not necessarily. The point is that before choosing a nonprofit structure, you must have a clear, honest, tested answer to the question: where will the operating income come from, and is that source stable enough to allow you to focus on your mission rather than primarily on persuading donors?
How will you relate to your beneficiaries?
A close consideration of sustainability is the nature of beneficiary relationships. The recent USAID funding suspension across Africa showed just how much our nonprofits rely on foreign aid rather than on sustainability. When aid was cut, a good number of them had to lay off staff and suspend vital services, exposing a failure to build local resilience.
The problem, though, is that if it were easy for the nonprofits to sustain themselves locally, they wouldn’t have sought or structured themselves to require external aid in the first place. Needless to say, many of the issues African nonprofits address are the responsibilities of corrupt state governments like Nigeria.
If you start a nonprofit, your beneficiary typically receives a service they could not otherwise afford or access, but if you start a business, your customers pay for the value you provide.
These are different relationships, and they require different operational models. Amy Sherman, in her book Kingdom Calling, says that there is a difference between programmes that develop human dignity and programmes that, despite good intentions, inadvertently reinforce dependency.
In a business, your customers’ choices and continued engagement make you accountable for quality, whereas the beneficiaries of a nonprofit have limited ability to withdraw their patronage when the service is poor, leaving donors, who sometimes may not have experienced the issues being addressed, as the primary source of accountability.
Therefore, your donors (likely more than your beneficiaries themselves) will influence your ability to reach and truly serve your target audience. Despite your good intentions, both you and your beneficiaries will be dependent on your donors.
If your desire is to serve a target audience directly and earn based on how well you serve them and how much they can pay you, a for-profit organisation is likely the better option.
Where do you belong?
The third consideration is an often-underrated part of modern Western life: community. Or, according to Os Guinness, the stewardship of influence.
In The Call, Guinness says that a person’s calling is always expressed within and shaped by a particular community. When you choose to build an organisation, the structure you choose determines which communities you and your organisation can access and serve. A nonprofit founder typically operates within donor communities, grant-making foundations, government service delivery systems, and beneficiary populations.
A business owner operates within commercial markets, industry ecosystems, and economic communities. So, for the Christian looking to expand their influence, knowing which community God has placed you in or that you’ve had affinity with for most of your life will help you further decide which organisation to start. If you choose to situate your organisation in your existing community, you could gain the connections you need to sell your minimum viable product or execute an outreach.
A Christian entrepreneur whose mission is to disciple the technology industry will almost certainly need to operate as a business to gain the proximity and credibility the mission requires. A founder whose calling is to serve low-income communities will need to start a nonprofit to pursue that mission.
What kind of success would make you happy?
Everyone wants success. It’s in our nature to think of a later “self” that has done something worthwhile, something big, whether that something is deeply personal or interpersonal, like making your “haterz” eyes roll, is a different question entirely.
To say it simply, what kind of success do you want to achieve, and would you be happy with?
When you think of running a nonprofit, are you comfortable with the idea of courting donors long enough and well enough to pursue sustainable strategic partnerships and replicate successful programmes? The biggest nonprofits in the world pay their staff well enough, but never so well as many global corporations. If you started a nonprofit today, your wealth in 15-20 years would be measured mostly by impact, not assets.
If you’re building a business, for example, your clients paying for genuine value delivered allows for more rapid growth, higher service quality, and more sustainable expansion. The richest men and women in the world all have businesses that made them rich. Then some created nonprofits through which they give back to their communities, but stay rich because otherwise they’d be unable to finance their nonprofits or lead the lives they have.
You can’t become wealthy through nonprofits; it’s a charitable model, so if you’d like a financially independent life when your organisation is fully established, start a business now.
So you see, this isn’t merely a conversation about which path to follow. It is one about your attitudes toward money and success.
Some Christians choose nonprofit structures only because it “feels spiritually safe’. They feel it saves them from the guilt of building great wealth while people are starving elsewhere, even though their business may have little, if anything, to do with the corrupt forces depriving others of the common wealth.
Moreso, nonprofits are a way for some good people to achieve their ambitions of “making the world a better place”, even though that means getting money from prudent and charitable businessmen and women to execute projects that are often the legitimate use of paid taxes.
Let me emphasise again that the question of whether making a profit is consistent with deep Christian faithfulness is: Yes, it is, especially when done faithfully, generously, and held with open-handed stewardship that acknowledges God.
The operational and organizational structure you choose should follow your mission's requirements, not your need for spiritual comfort.
To wit, you can be creative with the structure of your organisation. Social enterprises, benefit corporations and businesses with explicit Christian missionary commitments and transparency are appropriate ways to do good, profitable work that serves people and glorifies God.
It's off to tent making fellas - Paul