Do Nonprofits Make No Profits?

“Nonprofit” is short for “nonprofit business”.

Harvard, the Smithsonian, and the Met (either one) are all businesses. They have employees, bring in money, pay their bills, and offer things people want (like, ahem, exhibitions).

If a business always brings in less money than it spends, it loses money, can’t pay its bills, and has to close. Right?

And when the reverse happens, and at least some money is left over, a business can survive. Right?

So what is the word for that leftover money, that difference between life and death for a business?

You guessed it. Profit.

From the National Council on Nonprofits: The term "nonprofit" is a bit of a misnomer. Nonprofits can make a profit (and should try to have some level of positive revenue to build a reserve fund to ensure sustainability.)

Here’s the thing:
A nonprofit — like a museum — is a business. It has to make a profit, or it will die.

So if “nonprofit” doesn’t mean “no profits” — then what does it mean?

Hit REPLY and LMK what you think. No wrong answers, no judgment. :)

Warmly,
Jonathan.