Our Blog - Live Generously

Read the thoughts and impressions on a variety of topics written by Christopher F. Kerrigan, President and CEO of the Community Foundation as well as occasional guest bloggers.

Audi Hilton Head Spotlights Community Foundation of the Lowcountry

Everyday Matters: Every Day Matters


The Nonprofit ROI
By Denise K. Spencer / May 30, 2017

Often I am asked about the differences between for-profit and nonprofit organizations.

Actually, there are many similarities. There are legal responsibilities. There are federal and state filings. There are record keeping, accounting, investment and audit obligations. Establishing a balanced, or even surplus budget is a worked-for outcome in each case. There are facilities, human resources, insurance and equipment to support and manage. There are marketing and “sales” efforts that involve identifying the customer, understanding how they receive their information and what it is they need or want.

And the major difference: While a for-profit business exchanges a product or service for money, a nonprofit usually provides, for donations of any size, an expectation that a positive difference in being made in the world.

A for-profit business is established with one significant purpose in mind—to make a profit for the owner (investors, stockholders, etc.). There is always an expected financial return-on-investment, or ROI. In the nonprofit sector, the ROI is different: Results – Outcomes – Impact.

Measuring ROI is also different. Profit is a relatively easy measurement, but community impact is something else. I remember the story of a pastor who ran a homeless shelter and one of the regulars died. The shelter was small, and someone asked him about the measurable impact it had on the community. The pastor responded that there were six men at the man’s funeral. Connections, relationships, and networks are as critical as a roof in some cases, but how does one really measure that impact?

In the for-profit sector, customers expect most of their dollars to go to the cost of the product or service – including operational overhead – with a small ROI for the owners. In the nonprofit sector, donors expect most of their money to go to the ROI, with a small operating allowance, if any, for the nonprofit to carry out its mission. This difference is real, significant, and causes nonprofits to work extremely hard to keep overhead low – sometimes too low. A larger investment in marketing, or in technology, or in a new program might move the community improvement needle a little farther. Many donors don’t like to think their gifts are being used for marketing or computers or wages, instead of for medicine for sick children, food for puppies, shelter for the homeless, or scholarships for college students. It’s all quite understandable.

But look again at the list of similarities. And look again at the difference in the expectation in the ROIs. Ask the CEO of your favorite nonprofit what keeps him/her up at night. Write a little bigger check. Understanding these differences will help you to live generously, and help the nonprofit sector to help us all.

Denise K. Spencer
President and CEO
blog comments powered by Disqus

Featured Post

  • Make the Most of Year-End Giving Posted last month
    This time of year your mailbox is stuffed with end-of-year giving requests from nonprofits. If your bulging mailbox has motivated you to make a charitable donation, here are some things to consider before you write that check or click that “donate now” button.
  • Paying it Forward Posted 3 months ago
    Student loan debt. Three words that strike fear in the hearts college students and their parents. As college costs have skyrocketed, so has the amount borrowed to pay for it. Roughly 43 million Americans carry student loan debt, estimated to be about $1.51 trillion. (That does not include the estimated $119 billion in student loans from private sources not backed by the government.) The amount of student loan debt in the U.S. now exceeds both auto loan debt ($1.28 trillion) and credit card debt ($850 million). The only category of debt greater than student loans is mortgage loans.
  • All Together NOW Posted 6 months ago
    For many communities in the Lowcountry, “all together now” has taken on a more purposeful meaning. Seven local communities — Long Cove Club, Belfair, Palmetto Dunes, Hampton Hall Club, Colleton River Club, Hampton Lake and Moss Creek — have established funds with Community Foundation of the Lowcountry.
Read More »
Community Foundation of the Lowcountry

Mailing Address
P.O. Box 23019
Hilton Head Island,
South Carolina 29925

Office Location
4 Northridge Drive, Suite A
Hilton Head Island,
South Carolina 29926

Connect With Us

E-News Signup

Follow Us