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4 Ways Nonprofits Can Start Thinking Like For-Profits

Most nonprofits start the same way for-profits do: an entrepreneur or visionary takes a risk on an idea and gathers a team of people to create success. The same passion is there, but the goals are quite different.

For-profits exist to turn a profit. Nonprofits exist to better society.

To some, the idea of turning a profit is a negative; an obscene result of a business taking advantage of society. However, profit allows for jobs to created, promotions to be offered, investments to be made, and income to grow for all sectors of our economy.

Often times, nonprofits shy away from the goals of growth and income, due to a “culture of martyrdom” that is pervasive within the charity sector. But a truly successful nonprofit needs more than passion. They need to think like a for-profit in order to generate the resources they need to fulfill their mission.

Here are 4 beneficial ways nonprofits can start thinking like for-profits:

1. Retention

For-profit customer retention is not in as dire shape as nonprofit donor retention is.

According to Lynn Thomas, the top five companies in any for-profit industry have a 93%-95% customer retention rate. The average customer retention rate within the insurance industry is 84%. Tech software companies often shoot for an annual customer churn rate of 5%-7% as the maximum allowed for a successful venture.

Compare those figures to last year’s FEP study results, which state that the average donor retention rate among nonprofits is just 39%.

Can you imagine what our economy would look like if for-profit customer retention rates were that low? Meanwhile, the nonprofit sector chugs along every year as if those stats are acceptable.

2. Appreciation

Do your donors feel appreciated?

For-profit companies obsess over customer service and loyalty programs, because they understand that it can cost 7x more to acquire new customers than it does to retain existing customers, and that it costs them $234 every time they lose a customer.

And yet nonprofits continue to stay on the new donor acquisition treadmill, rather than focusing on building loyalty amongst their current supporters.

A year-end tax receipt or form thank you letter to a donor won’t build much loyalty. That’s why you have to go out of your way to make donors feel special, especially new donors. Pick up the phone, take someone out for a cup of coffee, or write a handwritten note showing how much you appreciate their gift!

3. Communication

For-profit companies have mastered the art of communication. Consumers want to know how their food is prepared and how their products are manufactured. They demand transparency, and the most successful corporations give it to them.

Your nonprofit needs to communicate the same way. Tell donors how their dollars are being used!

For-profit companies know exactly how many times a customer has made a purchase, what they’ve purchased and how long they’ve been a customer. They know intimate details about their customer’s personal lives.

As a fundraiser, you should know just as much, if not more. One of the biggest reasons why donors don’t give again is poor communication from the nonprofit. Don’t acknowledge an incorrect gift amount, appeal to the wrong reasons they give, or make the same appeal that someone in your office just made last week.

4. Technology

I chuckle when I hear “well, we have an older donor base, so we stay offline.”

My Dad is over 70 years old and has a smartphone which he uses to check Facebook, watch Netflix, surf the web, answer email and send texts. He reads from his Kindle, and even keeps his home wifi network up and running.

For-profit companies are marketing to him via technology he uses, enticing him to learn more about their products and services.

Don’t ignore new technology just because of your antiquated ideas on age and demographics.

Working in the nonprofit sector is extremely rewarding. I love hearing stories of services being provided, needs being met, and lives literally being saved! All of these goals can be greatly enhanced if nonprofits adopt some of the strategies their for-profit brethren have mastered. After all, many of today’s successful companies aim to change the world in the same way nonprofits do.

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  • Todd Randolph

    Great points, Wayne. I've worked on both sides of the for-profit and nonprofit divide, and have had to stifle many a head shake at nonprofit traditionalists who dismiss good ideas as "too corporate for our constituency." Our firm has been working with fundraisers for decades, including successfully consulting with leading organizations and institutions on marketing. When we expanded on that success with a line of marketing services, we intentionally looked at every example of successful marketing to evaluate it relative to our clients' missions and operating styles. We are definitely beyond a "no more business as usual" philosophy and promoting a "no more nonprofit as usual" frame of mind!
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