Like how I worded that? The world of the “non-profit” or “501c3” seems to be very misunderstood. 501c3 is in fact a section of the tax code that allows a CORPORATION created for PUBLIC CHARITABLE purposes to be tax exempt (this is a simplified explanation of course). There are also many other non-profit tax statuses an organization can have.
After 14 years of personal experience in the government/nonprofit industry and being asked numerous times, I thought it was time to share the rationale of why MaberMe, Inc. remained a for profit corporation. A lot of this blog speaks to the culture and expectations of nonprofits vs the legality and real structure of nonprofits.
I feel inclined to start by saying that there are many phenomenal nonprofits doing amazing work all over the world, some of which I have worked with and have great people working for them! Keep it up!
1. Strategic Philanthropy
I do not believe in charity, I believe in strategic and catalytic philanthropy. The difference is, “throwing money at something” vs. “making an ongoing commitment to whatever the cause is.” Philanthropy is also a form of investment whether you are receiving equity or a plan that will result in a social impact. I also believe in philanthropy at the local level based on local needs that is community driven and that has real outcomes which requires REAL investment of the big bucks to fund very smart and able to people to do the work. This blog will further hash out why I feel this way.
2. Diversified Investment
I wanted to freely have the option to invest in other opportunities, companies, and products or acquire companies that will help create change. I want to freely donate as well. Public charities by design do not create a sustainable business models. According to the IRS only 28% of nonprofits started in 2000 are still financially active. In my opinion being “active,” but not “financially active” means you are not running an organization anymore, so I really see no value in those that are JUST "active." Of course for profit businesses see a significant amount of failure, but we DO NOT talk about nonprofit failure. In case you were wondering, just because an org is tax exempt does not mean it isn’t A BUSINESS. It is time to talk about it, just like every other business type so we can start to break down this pedestal nonprofits sit on.
3. The Nonprofit Culture Has Been Watered Down
Culture is important to me, VERY important to me! If the stats published about the low percent of funding that orgs like The Wounded Warrior ACTUALLY put toward services to vets didn’t upset you, I don’t know what will (currently 59.9% of their $300 million dollar budget goes to programs and services to vets which is a jump after all that terrible PR)! I’m sorry, but I can’t help but think about what I could do with 100 MILLION DOLLARS!?
Also, I do not beg for money. In general the nonprofit culture has not been built around generating revenue to provide services. It is dependent on donors, grants, and the like. Unfortunately this has created a situation where nonprofits end up at the mercy of their donors which can make is virtually IMPOSSIBLE to pivot, innovate and change. It also means that if that source of income disappears, the nonprofit can disappear almost overnight. This can be incredibly damaging to communities. I have seen so many nonprofits fail after many years based on this very fact!
You shouldn’t have to live like a poor person. This is another aspect of the nonprofit world culture I do not appreciate. The constant nickel and dimeing can create a culture of burn out and sheer breakdown because employees cannot even take care of themselves!! This just isn’t right and is also not sustainable. The millennial generation has made it very clear that we want to do great work, but we won’t do it at the expense of our own wellbeing, which is why I see so many of my highly talented and innovative friends leave the nonprofit and public sectors. I mean look at me, I came out of my MPH program at 25, despite working for my first health department at age 19, getting a job at the level I was qualified for was a pipe dream!
4. Increased Transparency and Accountability
Unfortunately a part of this nonprofit culture is a lack of communication, transparency and accountability because it isn’t inherently required. We have this idea that nonprofits are doing good and nothing else matters. The IRS also seems to have no desire to stop granting people tax exempt status; including those who have no experience or a desire to run a company. I take no issue with paying taxes really and my books are open to all. This is commonplace in most private companies I know. Mind you, corps may not share ALL of their financials for many reasons, but there is generally some sharing of information. Private companies play a PIVOTAL role in the public health of populations. Knowing that walk and talk goes a long way.
Let me take a pause here and say I realize there has been this major demonetization of “the corporation,” but we forget that small businesses employ over 50% of the US working population and a small business is defined as one will less than 500 employees (SBA, 2015). Newsflash: doing crappy things to humanity is NOT the norm especially with the upswing of millennial entrepreneurs and business owners. MaberMe, Inc. is not the man…obviously.
5. Control
Do I have control issues with my business…perhaps!? I am confident however that I want my board to be well versed in business, innovation, and growth. I need people who will tell me the truth. I need people who believe in profit and sustainability. I need people who believe in philanthropy not charity.
Main Barrier to Entry
Unlike the green building and sustainability sectors, there is a huge lack of funding within the “traditional public health” sector outside of research and medical services for, for-profit companies. Hopefully as the “corp” stigma changes, this will also especially given the huge successes of private companies in the sustainability space. Because of the stigma of the "corporation" there is also a lot of skepticism of their place at the table, but IT IS NECESSARY.
Profit is not the enemy. It is a valuable tool toward change.