How do non-profits survive?
Hi,
I just wanted to see if anyone out there can clarify some doubts I have regarding non-profit online educational ventures. In particular, I am referring to the Khan Academy (mentioned in Section 2.1).
1) Would this be considered an OER?
2) They have a lot of permanent staff and a career’s section that promises good wages and perks; how can they afford this? Who decides who get paid what?
3) They ask for donations on their site, but I also read they have received very generous donations from Google ($2 million) and the Bill and Melinda Gates foundation ($1.5 million). My doubts here are:
– What profile does a venture have to have to be considered non-profit?
– Do they pay taxes?
– How can people be sure they are truly non-profit?
4) Are we supposed to be doing a pitch on a non-profit venture we think would be good? And if so, why would someone want to invest $1 million dollars if it’s non-profit?
For the business minded I apologize if these questions are somewhat obvious; I just want to make sure I understand before I decide on my venture.
Cheers,
Adriana
jenbarker 6:26 pm on September 10, 2012 Permalink | Log in to Reply
Great questions… funny enough, the question as to whether or not the Khan Academy is non-profit came up at a family dinner last night. My father-in-law saw an interview with Khan on television. I would be interested in the answer to your questions. I saw the same documentary and I think they are selling programs to districts for teachers to use in the classroom. Knowing this, I skeptically assume they must be making some profit. Best, Jen
jenbarker 10:38 pm on September 10, 2012 Permalink | Log in to Reply
Maybe it is a social enterprise?
David Vogt 11:30 am on September 11, 2012 Permalink | Log in to Reply
Regardless of the Khan Academy specifics, which I don’t know, the answer to the title question, “How do non-profits survive?” is relatively easy to answer.
Every corporate entity has a business model. A for-profit corporation has a business model that is designed to generate profit for its shareholders/stakeholders. A non-profit corporation has a business model designed to generate other kinds of value for its stakeholders. And there are social enterprises that mix profit with other values.
Non-profits survive by being paid for delivering their value, which is usually some form of public good. Their sources of income are typically donors, sponsors, foundations, governments and the general public. They also typically have tax and other advantages to support their viability. If they have any cash left after delivery (nominally a ‘profit’) they are legally bound to reinvest this in creating more/better value. When income drops, so does value delivery.
So for-profits and non-profits both live or die based on the quality of the products they deliver, and the value proposition they present to prospective ‘customers’ of their products.
And while there is no perfect oversight of any kind of corporation, it is very difficult to get away with ‘faking’ a non-profit status – this is a very low percentage proposition.
Hope this helps,
David
tomwhyte1 12:31 pm on September 12, 2012 Permalink | Log in to Reply
Thank you for this information, very informative and enlightening.
Also answers my own questions between the two.