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Using Your MBA in a Nonprofit

Although it may seem counterintuitive, nonprofits mean big business. Combined, the nonprofit sector contributes $878 billion to the economy, or about 5.4% of the entire U.S. gross domestic product, according to the National Council of Nonprofits. Nonprofits fuel necessary research, elevate medicine and healthcare, protect our resources, support the young and elderly, and stand up for all who need it.

Nonprofits face some issues that aren’t as pronounced in the for-profit business world. Nonprofits can take on the kinds of work that for-profit companies would dismiss for not being profitable enough. Funding sources might fluctuate from year to year, and sources of federal and state funding can be dependent on politics. Individual donations might shrink when consumer confidence and personal wealth dips.

In addition, there’s an emotional toll that comes from working in nonprofits — especially for professionals who work with people who have been hurt. It’s possible to begin experiencing compassion fatigue and become desensitized to the distress of others.

Despite these issues, nonprofit workers often feel rewarded far beyond the numbers on their paycheck.

If you’re getting an MBA and considering a career in nonprofits, here are some opportunities to investigate:

Accounting, Tax and Financial Management

Tax professionals at nonprofits will have many of the same responsibilities as their for-profit peers. The biggest change for accountants is that the annual reports are not compiled into 10-K and 10-Q reports, which are required for all publicly held for-profit companies and submitted to the Securities and Exchange Commission. The primary method of annual reporting is the Form 990, or the Return of Organization Exempt from Income Tax. The 12-page form is valuable to the government and your donors because it divulges how much senior executives are paid and how much of the money received is actually spent on programming. These are two important considerations for potential investors and organizations that rate nonprofits.

Another difference for nonprofit tax professionals is that the organization must be organized as a 501(c)(3) public charity.

For finance professionals, including CFOs, there must be clear transparency into the organization’s financial operations. This is not easily done. A survey done by Steve Zimmerman and Jan Masaoka for Blue Avocado, a magazine for American nonprofits, shows that the hardest tasks for nonprofit CFOs were preparing year-end-projections, government grant reporting and budget preparation. Making sure the cash flow is actually flowing is also a significant concern — many respondents said it could be difficult to make sure there is enough cash on hand to pay workers.

Marketing

MBAs learn about the marketing mix, or 4Ps, in school — product, price, place and promotion. The same 4Ps apply to the nonprofit sector, but not in the exact same way.

  • Product: Most nonprofits do not exist to make products for consumer or commercial use. The product is actually the service that the organization provides, such as research, caregiving, arts enrichment activities and so on. Like any product, it’s important to sell others on the benefits, not just the features. For example, instead of saying that your product is meals for children (a feature), explain that it’s aimed at reducing childhood hunger so that students are better able to apply themselves at school (a benefit — for children, family and society).
  • Price: MBAs often look at “price” as the cost they charge for their products and services. It may be more helpful for nonprofit agencies to look at price in terms of donations. This includes dollars, of course, but also in-kind donations and volunteer time. A solid pricing strategy can emphasize your company’s mission and make the concepts more concrete in the donor’s mind. An example: $25 might seem like a random value for a donor, but that person might be more compelled to pull out the credit card if he or she can see that $25 is equivalent to 10 meals.
  • Place: This P is usually concerned with distribution of products, but nonprofit organizations can tweak the definition slightly and think of it as distribution of their solicitation message. You need to target consumers where they’re located — in their mailbox at home or in the inbox on their phone. As discussed here, this third P is very close to the fourth P.
  • Promotion: Promotion needs to be more than just ads. Put yourself in your donors’ shoes and determine where they are and when they’re most open to your message. A billboard might raise awareness, but will it really get donations when people are seeing it in rush-hour traffic?

There is a fifth P for nonprofit organizations to consider: people. Your employees and volunteers represent you and your mission. Give them the ability to interact with others and tell their stories, and provide them with resources that will help them do good work.

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