If I could wave my wand and change one thing about the nonprofit sector, it would be this one pernicious misunderstanding: nonprofits shouldn’t make a profit.
This single, stubborn belief has been held and perpetuated by boards and executives across the sector, quietly underpinning decades of bad decisions, including:
✖️Excusing poor financial management and weak board oversight
✖️Normalizing underpaying leadership / staff and toxic workplace cultures
✖️Rationalizing outdated practices and underinvestment in essential infrastructure…
And, in the worst of cases, undermining the very impact these organizations exist to create.
As we continue in this era of disruption, I have realized it is more important than ever that I keep shouting from the rooftops:
Nonprofit does not mean no profit!
It actually means non-profit-distributing.
So what does that mean, then?
A nonprofit organization can, and absolutely should, generate a profit.
The difference between a nonprofit and for-profit isn’t whether money is made. It is what happens to that money after it’s made:
In For-profits: The surplus (profit) is distributed to owners or shareholders for personal financial gain.
In Non-profits: The surplus is reinvested into the organization to advance its mission and benefit the community.
That’s it. Both otherwise share similar operating realities: real costs and risks to doing business, the need to attract and retain qualified talent, to demonstrate value to its communities (consumers). Both can be values-driven. Both can be mission-focused. But only one requires profits to go back to the community.
So, following that logic, a nonprofit that consistently breaks even, or worse, runs a chronic deficit… it isn’t isn’t more ‘noble’ or ‘pure’ or ‘effective’ than those pushing a surplus. Actually, it is a fragile and failing business… where the loser isn’t the investor, but a community who loses out on essential services and supports.
Bad Mentality > Bad Decisions > Bad Outcomes
When looking across organizations and leaders that have adopted a mentality of “nonprofit means no profit,” you see a common cascade of harmful behaviors and outcomes:
Lost Talent, Weak Leadership, Burned Out Staff. I’ve lost count of how many board members I’ve heard justify underpaying leadership and staff by pointing to the nonprofit designation. ‘They didn’t get into this for the money’ or “‘we’re just a nonprofit’ becomes an undermining cultural mantra and a lame excuse for treating people poorly. As a board member and leader, you should want to pay staff well… because you want talented people taking care of your community. And you should want those people cared for in return. Passion doesn’t pay rent and guilt isn’t a retention strategy. And talented staff will eventually leave.
Increased Tolerance for Bad Behaviors. Financial stress also narrows focus. Leaders in survival mode tend to stop attending to culture and long-term planning. Toxic behavior gets excused because ‘we're all stretched.’ Staff are asked to work overtime without pay. Boundaries disappear. HR complaints go nowhere. Underperformers are allowed to stick around because ‘we can't afford to lose anyone.’ And bad behavior from donors gets overlooked because you can't afford to lose their money either.
Weaker Governance. Boards avoid hard conversations out of fear that any disruption will tip the organization over. Mission drift sets in as organizations chase dollars instead of outcomes, and strategy gives way to survival. Without a financial cushion, every surprise becomes an emergency.
Dysfunctional Operations. Building reserves, investing in systems and technology, and spending on anything beyond direct services ends up feeling somehow immoral…. When ‘overhead’ is demonized, cutting corners becomes normalized, and dysfunction is inevitable.
In summary: Organizations that can’t generate and retain surplus can’t weather shocks, invest in evaluation, or evolve their programs. They can’t keep people long enough to build momentum, or think strategically about how to grow.
And all this together means, at the end of the day, our communities that pay the price.
The Key Lesson: Profit is a Tool, Not the Goal
This is the nuance that matters and the bottom line of this soapbox. For nonprofits, profit isn’t the end goal…but it is an essential tool. When nonprofits realize this and begin prioritizing surplus in strategic planning, they will find they will be more likely to:
retain and develop high quality leadership and staff
pilot new programs and expand reach with improved systems and tech
become more resilient and ready to face an emergency
be empowered to say no to misaligned funding
act strategically instead of reactively
… and the list goes on and on.
A nonprofit without margin has no room to breathe and gets pushed into a corner. A nonprofit with margin has choices. And choices are what enable ethical and exceptional leadership.
A final thought…
Nonprofits aren’t supposed to be poor. They aren’t supposed to scrape by. They aren’t supposed to run on exhaustion and goodwill. When ‘good stewardship’ gets equated with ‘austerity’ … the mission suffers, as does all the people bringing it to life.
Nonprofits are supposed to be mission-driven, financially sound organizations that create public good.
And that requires profit.
Not profit for shareholders.
Profit for mission, for people, for our communities.
👉Read the next post in this series: People Work in Nonprofits Because They Can’t Cut It in ‘Real’ Business
💡 Question: What nonprofit myth should I bust next?
Need more? Additional Reading & Resources
Calabrese, Thad D., and Todd L. Ely. “Nonprofit Profits: Slack, Surplus, and Reserves.” Financing Nonprofit Organizations, Routledge, 2021.
Duquette, N. J. (2017). Spend or Save? Nonprofits’ Use of Donations and Other Revenues. Nonprofit and Voluntary Sector Quarterly, 46(6), 1142-1165. https://doi.org/10.1177/0899764017728368 (Original work published 2017)
Hawkins, Cameron. “Can a Nonprofit Make a Profit?” Law Office of Cameron Hawkins LLC, 13 Aug. 2025, www.chawkinslaw.com/blog/can-a-nonprofit-make-a-profit.
Weisbrod, Burton A., The Pitfalls of Profits (2004). Stanford Social Innovation Review, Vol. 2, Issue 3, p. 40, 2004, Available at SSRN: https://ssrn.com/abstract=1850719
📌 PS - If you found this post helpful, restack and sharing it with your audience! This spreads the word and keeps me writing content that can help shift perspectives in the nonprofit world. 🙏
Seems like many in the nonprofit world think profits = business. As you describe here, profits are not allowed in the traditional sense . . . but you better be running the operation like a business because that's what it is. Too many miss that point.
Very well done Caitlin. This would be a really nice Board presentation for some nonprofit leaders as well as excellent orientation materials for new Board and staff.