Why Nonprofits Need to Make a Profit

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It's a common misconception that nonprofits do not generate or need to make a profit. In reality, it is quite necessary. Learn more about how nonprofits are mostly corporations.When people hear the word “nonprofit” and they may think, “Oh, you can’t make a profit.” This is not true, and a common misconception. If you’re not making a profit in your nonprofit, you’ve got a problem. You need your revenue to exceed your expenses one way or another. If you’re a director of a nonprofit, you have fiduciary duties of care, duty of care and duty of loyalty. One of the aspects of a duty of care is to ensure that there’s a solid foundation for your nonprofit to succeed. That is ensuring that you’ve got the right revenue sources, you’re following the law, and you’re making things happen.What does nonprofit mean? Nonprofit organizations are really mostly corporations.There are a few different types of entities that they might be, but they just can’t distribute the profits to their owners. When they make money, it has to be invested back into mission.The focus of nonprofit is more about not distributing earnings and profits. If your nonprofit is not making a profit, you have a problem.Hopefully this helped clear up some of your questions about why a nonprofit needs to make a profit…