A nonprofit isn’t in business to enrich its shareholders, but it still needs revenues and incurs operating expenses while pursuing its community service mission. It, too, can experience cash flow problems or require considerable cash to fund a capital project, or expanded services.
When that happens, the nonprofit faces many of the same choices a for-profit business does, though it draws from different funding sources.
While a for-profit business can offer investors a chance to share in the company’s fortunes by buying stocks, for example, a nonprofit relies on a stakeholder who’s motivated by public interest rather than self-interest. Such unconditional in-kind and cash donations are as sensitive to economic conditions as consumer spending is for profit-driven businesses.
A cash-strapped nonprofit may decide to live within its means, devoting itself to increasing endowments, grants, special event income, donations, or sales of a mission-related product, or service. But this approach can cost the nonprofit in missed opportunities, and it can divert organizational energy into treading water rather than moving forward.