Let’s Start Treating Nonprofits Like “Real” Businesses
October 23, 2026 | By David M. Wagner
Can we stop pretending that we, as a society*, want nonprofits to operate “like businesses?”
(*In the United States, at least. I can’t speak to other locales.)
You’ve heard the tropes. “‘Nonprofit’ is a tax designation, not a business strategy.”
Many of my well-meaning colleagues will ask, “Don’t you think nonprofits would be better off if they ran more like for-profit businesses?”
So here’s the thing:
I agree with all of those sentiments.
I think most nonprofits – including a great many that I have met, volunteered for, partnered with, and heard about – really would benefit from applying the techniques and practices that most other businesses employ.
And it would also help if funders started treating nonprofits like “real” businesses.
(Rant loading…)
“Business” Practices Could Benefit More Nonprofits
I spent my first career in a corporate environment – large by nonprofit standards, medium-ish by corporate ones – and saw my fair share of good ideas, miscues, fads, and success stories.
Here are some practices I wish more nonprofits embraced:
Risk management – Anticipating negative events that might happen is not an exercise in pessimism. It’s a prudent process for being prepared for the worst. Good risk management identifies possible challenges and mitigates the impact if they occur – or avoids the downside completely.
Project management – A lack of project management skills – the ability to break complex work into manageable tasks and then drive them to completion – may be the most common reason that strategic plans end up unimplemented. A healthy project management practice is the best way to advance new initiatives, handle complexity, and bring about meaningful change.
Professional development – The professional development budgets for many nonprofits are tiny – or nonexistent. The development that does occur often takes the form of brief classes and training for staff members’ current positions, such as in fundraising, marketing, or finance. What’s often missing is twofold: investment in more substantial professional development opportunities, and assistance growing staff into the next phase or role in their careers.
Decision reviews – How does your organization make decisions? If you don’t have a formal process for reviewing alternatives for strategic alignment, or at least pre-deermined thresholds for who can approve what, you may be missing a critical tool. Other businesses use decision reviews to increase confidence that choices reflect the best available information and analysis.
I could probably list a dozen others. My point isn’t to shame nonprofits who don’t implement these practices. A lot of my work involves helping organizations put these, and other techniques, into practice.
Rather, I want to convey two points:
(1) Yes, there are many tools in the business world that would greatly benefit nonprofits; and
(2) More nonprofits could access these tools if they were treated like “real” businesses.
How Funders Treat Nonprofits Differently
Can you imagine seeing a grant opportunity for nonprofit recipients to develop a risk management process?
I’ve never seen one.
Here are a few things that would rarely, if ever, happen in the “real” business world:
Restricting funding so that it couldn’t be used for “capacity building.” No investor in their right mind would tell a business, “here’s the money you need for improving product development – just don’t use any of it for tools that could make your company more efficient, or for the support services that product development depends on like accounting and logistics, or for training for your staff and management team.”
Insisting that all work be done in partnership with similar businesses. Partnerships are normal – with vendors, suppliers, distributors, and businesses that can support each other’s marketing or other goals. But just because there’s an existing coffee shop in down doesn’t mean you have to partner with them to open another. If there’s enough need or demand, running a similar (if differentiated) business on your own is totally normal.
Prioritizing low wages over workforce quality. There are exceptions here, and there is always pressure to keep wages down. But most businesses recognize that they need a workforce that can reliably deliver quality results (or their reputation will suffer) and they need to pay good workers to come, and to stay (or their costs will go up in other ways).
And yet, in nonprofits, institutional funders and individual donors often force the recipients of their money to restrict its use to programs (and not “overhead”), to deliver all their work “in partnership” with organizations that might otherwise be viewed as competitors, and depress staff wages – or express shock at market-level compensation for staff.
Among dozens of other examples.
How could any business expect to operate efficiently and effectively, much less grow, with those restrictions?
Somehow, many nonprofits still do.
But let’s get serious: if you want nonprofits to start “operating like businesses,” then the industry’s closest equivalent to investors need to start treating them like real businesses.
Normally, I aim to make these articles helpful with practical advice and tips you can use immediately. This week turned into a bit of a rant. (Sorry about that…) But if any of this helps you make the case to a funder that yes, you really do need that capacity building grant, or you feel inspired to read up on one of those oft-overlooked practices, then it’s all worth it. I’m happy to try to help with that messaging – just set a time to chat.