3 Reasons Why You Shouldn’t Start a Not for Profit

Wondering if you should start a nonprofit?

Have you asked the question –  Should I start a non profit?  It’s gonna help people that really need the help.  They are under resourced and I want to give back. Well, if you’ve already even thought about this question, I want you to listen to today’s podcast episode for three ideas to consider before you form your legal structure.

Who am I?

My name is Malla Haridat. I’m a business coach on speaker and I help people uncover what they don’t know that they don’t know about running successful businesses.

Why I choose today’s topic

Today’s question came from a participant who was in a workshop of mine a few years ago. She reached out recently and asked Malla, you know, I really wanna start a nonprofit. I think that’s the right legal structure to get started with. Can you give me some advice? And I’ve heard this question a bunch of times.  I wanted to give a spin that I think far too often is not offered when people are thinking about what legal structure should they start.

Don't think much about the legalities but instead think beyond what's more realistic.

Too often people only look at the technical details of starting a legal structure and don’t think of the deeper reasons why they should start a not for profit

A lot of times people are given the technical detail.  Here’s how you start a nonprofit or here’s how you start a for-profit business. You know, it’s different from New York state or from another state.  But they don’t actually give you the strategy behind it. They don’t help you break apart. The real questions you need to ask and get underneath the hood to figure out what’s the best way to go about doing this. 



We are going to dive into 3 ideas today

So I wanna give you those three questions to think about today, because I think it’ll make a dramatic impact on your results moving forward. Regardless of whatever you choose, when you’re able to think from these perspectives, you’ve got a way better shot of success with whatever your ultimate goals are. 


My completely biased upfront thoughts

I don’t like nonprofit structures for most entrepreneurs. And I’ll just say that upfront. I think if you have money and you wanna start your own private foundation or, or if you’re lucky and you have access to a big pool of money that you can use that to start a nonprofit. I think that’s awesome. And that’s great. And that would be a good reason for someone to choose a nonprofit over a for-profit business. 


Be more realistic and start to aim less than nothing.

[3:00] The First Idea – Do you have clarity on earning a profit or is it someone else’s “responsibility”?

But I wanna tell you the first reason that often comes up.  The number one reason is because you don’t have clarity on how you’re gonna earn a profit yet. Ouch. I am so sorry if that hurt. But let me back in into what I actually mean. 


Why people think that they should start a not for profit 

The reason why a lot of people think about a nonprofit is they think – I’ll be able to get grants and donations. I don’t have to then charge people full price. I won’t have to charge them full price and I’ll make money on it. Right. And they’re okay with not making a ton of money because this is not for them to make a ton of money.  They have a genuine desire to give back and and help people. 

Here’s why it’s problematic

And I’m a hundred percent here for it. The challenge is, do you really understand how a nonprofit operates? Do you get how much time and energy you are gonna have to spend going after grants and going after donations?  Or do you know how much time you’ll spend going after  the types of grants and donations that you want?


Traditional organizations have this process perfected

I think one of the best branded organizations around fundraising is probably the girl Scouts.  You visit any supermarket in America and you see a bunch of brownies or juniors in their girl scout uniform with a box of cookies. We don’t even need to have a conversation about what is going on.  You already know they’re selling cookies.  I want the chocolate fill in the blank with whatever it is. How much do I need to give you? 


What you didn’t think about when you saw that Girl Scout cookie stand

Well, did you ever understand the backend process of what it takes to get those cookies in front of you? The way that it operates? Now any of you who have worked as a girl scout leader or a troop mom, you’ll understand. There was a lot of heavy lifting that went on behind the scenes to get that one group of girl Scouts to stand together at one supermarket on one date, one time to be able [5:00] to sell those cookies.


Is that really how you wanna be spending your time? 

Do you really wanna be out there trying to organize and canvas?  Filling out applications and hoping that this application is the one that’s going to work?  Reading through all of the different grant opportunities and thinking I don’t wanna do that.


This probably contradicts your original vision

Yeah, probably not. Because very often when you’re thinking about providing these products or services, you’ve got a clear vision of what it is that you want to do. You see exactly what this particular need is and you wanna fulfill the need.  With the nonprofit way, there’s a lot of hours behind the scene, and there’s a lot of work that goes into hoping you can actually get the funding.


At least with Girl Scouts, their model is perfected. They’ve spent literally a hundred years perfecting their model. You don’t have that 100 year bandwidth behind you.  Nor do you have the countless thousands of volunteer hours that people have put in to perfect the system.


Think about if there another way

Don’t waste your time with it. I’d much rather you create a for-profit entity. Get crystal clear on how you’re gonna earn a profit and spend your time. As you make more and more money, give to a nonprofit that really speaks to you.  One that touches your heart. But, don’t you try to take that work on and spend the hundreds of hours fundraising.  


Why you might not want to start a not for profit 

Now I know you’re gonna tell me, but Malla, you know, this need is so important.  It  needs to happen now.  It’s gonna be so expensive and so costly. Yeah. I get that. Ironically, that’s the same problem that any entrepreneur has when they’re getting started with their business.  They have this huge vision of what they want to do.  Then reality hits because you’re selling to customers and people don’t wanna spend that amount of money.

Start with this first

A clever businesswoman knows best.

So your homework is cut out for you. Figure out how you’re gonna earn a profit. My suggestion is to do two things, narrow your focus and narrow the need.   There’s only so many hours of the day.  There is only so much money we have to be able to work with.

Here is an example of how to break it down

Let’s say you wanna be able to provide service to at risk youth. Okay.  Pick one age group. I just wanna work with middle school kids and I’m gonna do this one thing. That’s it awesome.  

  • Now you have a specific demographic – middle school kids.  They’re not little babies y but yet they’re not teenagers. 
  • And there are very specific problems that you can support or solve 
  • And yes, parents might be interested in paying for schools or nonprofit organizations in your community would probably pay for certain types of things.


Be open to the mistakes and you’ll get to the end goal of giving back

So now you’re focused.  It’s gonna require a lot of mistake.  It’s  gonna take a lot of effort to get this done. I don’t wanna minimize that at all.  But if you focus on how you’re going to earn a profit, I bet that you will also within that find a way to be able to give back. You will find a way to be able to serve your community.  You find a way to meet part of that need that spoke to you in the first place.  It might look a little different than you anticipated, but I also think that in a weird way, it’s actually gonna provide a more long lasting impact if you go via this for-profit route.


Be always ready to accept bad news and good news.

The second idea –  What is your your mental messaging around sales?

Now the second idea, interestingly enough, ties into the first idea, but it comes at it from the level of your leadership. And I want you to ask yourself a very interesting question – What is your mental messaging around sales?


Mm, that one, the more I think about it, I need to do a whole course, a whole program, a whole everything on what is your mental messaging around sales? Now that I say that out loud, here’s the deal.  Many businesses have products or services that people need. They solve problems that we have. 


Do your company actually sell something that people need?

Why isn’t your company making more money now?  You might have a product or service that does not serve a need or solve a problem.  In this case, yes, I would recommend you go back and retweet and retool to make sure that you’re in alignment, that there is an.


If you are selling something that people need but still aren’t making enough profit, consider this:

But assuming that you do, and you’re not getting enough money coming in, you realize right away, you’re not earning enough profit. One of the first questions you need to step back and ask yourself is what do [10:00]I really believe about sales? And listen, I’m gonna break it down to you.


You have to be good at sales.  Even if you start a not for profit, someone has to fundraise

Even if you had a nonprofit, you gotta be good at sales, my friend.  Because the nonprofit has to get the money, be able to deliver the services or to deliver the products to their people that they’re trying to help well.


Did you ever notice trend?

If you look across America at who’s running nonprofits, did you ever notice something fascinating about the executive directors, or whoever is in charge?  They’re a great salesperson. Sorry. Hate to break it to you. This conversation, I think is often not discussed. They probably have an amazing ability to convey the cause so that it doesn’t feel like they’re beating you over the head.  The person in charge is usually amazing at sales. 


Here is a sample of how this sneaky message shows up

So what is it around your mental messaging, your thoughts around sales?  Do you need to do some work on it and clean up? Is it that you feel that  – I just wanna focus on doing the work?  That might be true.  But interestingly enough, you actually get to do more of the work if  you get good at sales. That’s a whole other podcast topic, but I’ll just say this, the more money that your company is earning and the more that you’re making, the more people’s lives you’re impacting.


Here are a few other ways to think about it:

  • How do you invite people to work with your business? 
  • How do you build up the relationship once they are interested ?
  • How do you invite them specifically to say yes to your offer?
  • How do you close the sale? 

Well, I would recommend doing some deep diving into what comes up for you. What hesitations come up, what fears come up? What makes you just wanna ignore the whole conversation and walk away? 


My example of what I do when I don’t’ want to “deal” with sales

I’ll tell my go-to whenever I don’t wanna deal with something in my business is all of a sudden I’m magically realize that I’ve got about five loads of laundry that need to get done. I’m not even gonna lie about it anymore. That is my go-to.  It’s not that I realize the laundry has backed up at that moment.  It’s because I don’t feel like doing something in my business that needs to get done.


If you can relate consider how to unpack it

Spend some time thinking about this journal about this, write about it, you know, have, have a conversation with a trusted friend who is also an entrepreneur.  So seek out a coach, seek out support so that you can kind of break down. What’s showing up for you?  I want you to get clear about your mental messaging around sale.


Why this work is necessary

Because for a lot of people – especially people that wanna give back – they don’t look at sales from a positive view point.   And I want to be clear.  The more confident that you get about the products or services that you’re offering, the more you’re gonna improve your sales, the more you’re gonna get more money coming into your business.


You don’t have to look at sales in a way that’s an “Icky” thing. 

Actually, I’ll give you an example that recently came up in my own business, right? I’ve had to do a lot of work cleaning up some of the mental messaging around sales. I mean, interestingly enough, I thought I had mastered sales.  Like I sold Girl Scout cookies fearlessly.  I would be knocking on folks doors.  We can’t do it anymore.  But I used to knock on folks doors and ask them if they were interested in girl scout cookies or not.  I literally started my first business by knocking on at least a hundred doors  to get the business started. 


But I still had a lot of things I had to clear up in my own life around sales.  

Recently an incident came up where a client was not a good fit for my business. They needed help. But, in my mind, all money is not good money.  But years ago when I was first really understanding about sales. I don’t know this.  I thought sales was sales.  


Now, I know that sales is…

But now, I know, selling is really an opportunity to serve people.  So I can say no and be in service.   Listen, there’s some more work that needs to be done on X. There’s a few more things you need to do on Y and Z. Go ahead and take care of those things and then come back to me later on and let’s do it.


What shifts when you start to examine your mental messaging around sales

Well, that’s the beauty when you’ve examined your mental messaging around sales.  When you then have [15:00]sales moments, the conversations are really organic. They feel very authentic. They feel very, very freeing and very easy to be able to navigate versus this like, oh my gosh, I have to sell. I hate asking people for things.


I don’t hate asking people for things anymore in my business. 

And there’s a reason for that. So I encourage you to check your mental messaging around sales, and then the final piece that I’ll give you. And this is probably much more of a technical detail about nonprofit, but it’s an important one to note as well.


Third reason – Are you comfortable working hard but not having ownership of this entity?

Typically the person who is and thinking about starting their heart centered business  also wants to start a nonprofit. Are you crystal clear? Do you understand that you will not own this nonprofit entity?  The state will. And are you comfortable with that? Does that work for you in terms of the fact that you’ll never own it?


I watched this very example play out recently

There was actually an incident that happened very recently with a nonprofit that I’ve been following for years.  I love the work of this organization.   It’s giving back in a major way.  Now,  I’m not gonna list any details about this organization because they’re dealing with a lot right now.

Well, long story short,  the founder was asked to step down recently. And what’s fascinating  is anyone who’s followed this organization for even a short period of time knows that the founder  came up with the idea for this entire organization and worked really hard to get the organization to where it is.  And now she is being asked to step down for a moment because the board decided they wanted to move another direction.


Ask yourself if you would be OK in this position

I am so infuriated for the founder that this particular thing happened. I don’t know all the details, so I’m not judging. But, the danger of what could happen stood out.  The founder has invested hundreds of thousands of hours into this organization. And at the end of it, she does not own it. And someone else can oust her out. That’s crazy. Do you wanna be in that position? Just think about it.  I’m not saying that you might be in the position where the board is asking you to step down.  It might never happen.  But the chances are much less if you own the for profit. 


You don’t “own” a not for profit

It will never be yours to fully be able to determine what that looks like. And for many of us having ownership is important. I think it’s a valuable part of the process to grow and do the work that we really care about. 

I get this complicated.  There are no easy.  But I  hope that these three questions or these three ideas rather gave you something to think about one. 


  • Idea 1 – Do you have clarity on how you’re going to earn a profit?  And if you don’t, I advise you to get support, get some technical assistance, get a coach, get a mentor to work with you around. 
  • Idea 2 – What is your mental messaging around sales? 
  • Idea 3 – Are you okay with not owning that entity? 


Now, if all of these three answers still check out that you think that the nonprofit is the route to go, run with it.  I’ll be cheering you on and supporting you. But for many people, when you step back and you really start to examine these answers, you may realize the for profit is better.


I hope you found this podcast helpful. Please make sure that you subscribe for future episodes, because I wanna dive in on topics that matter to you and give you the real breakdown so that you can actually make better decisions in your business and find more ways of being able to grow.

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