Advanced Financial Management:Why Nonprofit Organizations Must Consider Project Profitability

The reasons why nonprofit organizations must consider the profitability of their projects are as follows:

(1) The market economy dominates the way of production and life, making for-profit behavior readily acceptable in the nonprofit world.

With market forces widely celebrated, there is a growing belief in the role of competition and the pursuit of profit in promoting efficiency and change.?

(2) The search for new ways of delivering products and services.

One study found that organizational charity mechanisms can destroy the self-esteem of beneficiaries and create a feeling of isolation and helplessness, so organizations began to charge beneficiaries some fees for their services. Other organizations use commercial means to help people develop the idea of self-reliance and develop their self-reliance.

? (3) Commercialization is the key to financial sustainability for non-profit organizations.

More and more nonprofit leaders are recognizing that self-employed revenue-generating activities are a more reliable source of funding than donations and grants. To achieve financial sustainability, organizations seek to diversify their funding sources in case one source of income declines or disappears.

Commercial financing is particularly compelling because there are no restrictions on the use of these funds and they can be used for a variety of purposes, whereas grants and donations to non-profit organizations are often restricted to specific projects and purposes.

? (4) The need to improve organizational efficiency and seek more external donations.

Competition for philanthropic grants is quite intense, and those organizations that are more market-based are more likely to raise funds. Many foundations limit the funds they provide to the short term in order to promote greater self-reliance on the part of their grantees.

(5) The involvement of for-profit organizations has threatened the viability of nonprofit organizations, forcing them to engage in commercial operations.

For-profit organizations have begun to enter the field of social services, such as the opening of orphanages, schools and so on, when the for-profit organizations to enter the field of the traditional nonprofit organizations operating as a competitor to the nonprofit organizations, some of the nonprofit organizations have also begun to experiment with the commercialization of business, and the other nonprofit organizations will feel the pressure to follow the competitors to turn to the commercialization.