A nonprofit organization is a legal entity that operates for the benefit of others and not for profit generation. There are over 170, 000 nonprofits in Canada and over 1.5 million nonprofits in the United States. Worldwide, there are around 10 million nonprofits.
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These are millions of organizations that face all sorts of challenges to serve noble causes or vulnerable entities. Among the challenges, they face, include misconceptions. Some of these misconceptions are silly or amusing, while others are harmful. Let’s look at some common misconceptions about nonprofits.
Misconception #1 Nonprofits Shouldn’t Make Money
One of the most common misconceptions about nonprofits is that they shouldn’t make money, and staff at every level should work for free. While nonprofits need a large pool of volunteers, they also need full-time professionals to help run things. For example, a nonprofit animal shelter still needs full-time veterinarians to take care of cats, dogs, and other abused animals.
While nonprofit staff may earn less than their peers to help nonprofits run on fewer resources, they still have costs of living. Salaries help meet their expenses. These salaries are raised through donations, government grants, fundraising campaigns, and even products and services.
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Remember, a nonprofit organization doesn’t make a profit, but it still generates revenue. This revenue is used on operational expenses. Any revenues that exceed expenses are utilized for the nonprofit’s mission statement. For example, after a nonprofit hospice meets its fixed costs, leftover income is used for supplies, beds, medicine, and other essential items.
Misconception #2 Nonprofits Aren’t Accountable
Because nonprofits don’t generate revenue like traditional organizations, some people believe that they’re not accountable. On the contrary, nonprofits can be accountable to governments, donors, founders, the public, and program recipients.
Misconception #3 Nonprofits Don’t Use Technology
There’s a misconception that nonprofits don’t use technology; instead of modern technology, they use spreadsheets and other outdated tools.
You might be surprised to learn that some nonprofits use complex technology to enhance their market reach, generate revenue, target specific demographics, and manage staff, volunteers, and other members.
For instance, even the best software for shelter services can be highly sophisticated, featuring resident care action plans, customizable programs and services, and highly configurable client records that manage unique data. Whether a modern nonprofit is a shelter or a clinic, it has highly complex needs that can be solved by equally robust solutions.
Misconception #4 Nonprofits Don’t Contribute to The Economy
A highly inaccurate misconception is that nonprofits don’t contribute to the economy. In Canada, nonprofits account for over 8% of the GDP and employ over 2 million people. Moreover, Canadian nonprofits contribute nearly $200 billion to national economic activity.
The numbers are even more impressive across the border. 10% of the American workforce is employed by nonprofits. The American nonprofit sector contributes around a trillion dollars to the US economy every year.
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These are four common misconceptions about nonprofits. A less common misconception is that nonprofits lack efficiency. In fact, nonprofits are sometimes even more efficient than regular organizations because they often run with fewer resources.
Contribute to your local nonprofit today to support your economy and provide essential services to entities in need.