Entrepreneur Office Hours - Issue #71

Correcting a stupid mistake (and probably making some new ones)

Sorry, everyone. I’m an idiot. (Not that you didn’t already know that.) In my last issue of Entrepreneur Office Hours, I excitedly told you all about one of my favorite articles from my archives, and then I forgot to include the link.

Since I’m guessing nobody bothered to find the article on their own, I’ll link it for you here:

“How Milkshakes Helped Get Me 30% More Investor and Customer Meetings”

Just don’t stop reading after that article because this issue has some other great ones, too. It includes the story of a conversation I had with a student — and her mom!— about the relationship between products and marketing. Plus, I explore what happens when you build your startup backwards (and why it rarely works).

The Q&A is also worth a look. It’s the first time I’ve gotten a question about non-profits. Despite what the label implies, “non-profit” doesn’t mean “non-revenue-generating,” and most of the advice given to for-profit companies applies to non-profits, as well. There’s really just one catch. But it’s definitely a big one.

Enjoy the issue! I’ll try not to screw it up too much this time.

-Aaron


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Office Hours Q&A

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QUESTION:

My friend has been building a non-profit for a little over a year. It’s started having some success, she wants to expand it into other cities, and she’s asked for my help since I have experience building startups.

But I’ve never worked in non-profits before and know almost nothing about them from an operations perspective. From the outside looking in, they seem similar to startups, but is that true?

Do you have any experience with non-profits? And, if so, how would you say running a non-profit compares to running a for-profit startup?

Thank you,

Lindsey

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Let’s be clear: “non-profit” doesn’t mean “non-business.” Non-profit is just a legal designation about how revenues can be used and dispersed. Specifically, nonprofits don’t have “owners” (in the traditional sense) who can take profits directly from the success of their businesses. But that doesn’t mean nonprofits don’t have to operate like businesses.

For example, the university I work for -- like most American universities -- is a nonprofit. Despite that, it generates billions of dollars in revenue every year, pays out billions in salaries, and has enormous operating expenses on top of all that. It’s effectively a company, it just doesn’t have stockholders profiting directly from the difference between how much revenue it generates each year versus how much it spends. Instead, any “profits” (or losses) are assumed internally and, ultimately, reinvested in the mission/work of the organization.

From that perspective, deciding whether to join and help run a nonprofit shouldn’t be much different than making the same decision to work with/for any other company. Specifically, you should be asking yourself questions like:

  • Do I believe in this organization’s mission?

  • Will I enjoy working with this organization and the other people involved?

  • Would I prefer to take a job with this organization rather than other work I might be doing?

The biggest difference is, of course, financial “up side.” If you take a job with a for-profit startup and get an equity stake in the company, your theoretical payout is infinite. (Your realistic expectation for a payout should, of course, be much lower than that.) In contrast, by choosing to work for a nonprofit, you can’t receive any sort of equity in the company. Your only monetary compensation is your salary + benefits. The remainder of your compensation comes from job satisfaction and the personal value you get in return for the success of the mission you’re pursuing.

Don’t underestimate that value! There’s more to life than money.

Still, in the case of for-profit versus not-for-profit companies, the main difference is money, so that’s the main difference you have to consider when making your decision.

Good luck!

Got startup questions of your own? Reply to this email with whatever you want to know, and I’ll do my best to answer!