Making Money

How do I make money?

If you are starting a nonprofit to make money, you may be in the wrong business. While a nonprofit can make money, all the income must be used to further the nonprofit’s mission.

Furthering the mission can include hiring employees. However, employees have salaries (and often benefits.) This means hiring an employee puts an obligation on the organization. If the organization does not have enough cash flow to meet their obligations, they should not hire people.

Similarly, the board can receive salaries, even though most nonprofit boards serve as volunteers. Again, this assumes the organization has the cash flow to cover the obligations of paying the board.

The fundamental difference between a nonprofit and a for-profit is that income from a nonprofit cannot inure to the owners or board. This is legal speak for “you can’t just take money from the till.” If you are a plumber, and you make $300 one day, and you decide to take $100 and take your spouse to dinner, you can do that. If you run a nonprofit, you can’t take money out for your own use.

So, if you want to earn income from a nonprofit, you need to work for the organization. This means you need to be an employee, probably the executive director. (The executive director is not on the board of directors. It’s an unfortunate name.) There is no reason that a person can’t be on the board and also be executive director, but it is a potential for conflicts of interest. The executive director works for the board. Technically, most executive directors work at the pleasure of the board, which means they can be terminated at any time. The board will also set the executive director’s salary.

For many founders, being on the board will be more important than running the operation day to day. The board sets the mission. The executive director implements the programs that achieve the mission, with guidance from the board.

Choose your roles.