Link please

What's in a name? Plenty, it turns out.

I spent my career in the for-profit world where incentives and goals were pretty clear. You formed a company to bring a product or service to market and you charged a price that ensured you made enough margin to cover your costs and leave you with a profit. That profit was what you returned to your shareholders or reinvested in the company to fund growth.

So imagine my surprise when I entered the social sector and was confronted with the concept of the "nonprofit." While I was long familiar with charitable deductions and the concept of the public charity, the idea of being a nonprofit was foreign to me. Not make a profit? How do you sustain yourself if you don't have reserves? How do you grow without growth capital?

The answer, of course, is that you can't. While many successful tax-exempt organizations are able to raise sufficient funds that they can build up a reserve over time, and have budgets that bring in more than they spend, there are many, many other organizations that cannot do so, living hand-to-mouth every year, starting at zero and having to raise their full operating budget just to break even. This is borne out in the 2016 State of the Nonprofit Sector study by the University of San Diego, which found that the average budget reserve on hand of all nonprofits in San Diego amounted to just 1.7 months of operating capital. 

What this tells me is that most tax-exempt organizations are operating as true nonprofits, and that's not good for the social sector, because they can't scale their impact, can't grow and spend precious time and energy trying to find the funds simply to keep the lights on. 

There are obviously many reasons for this problem, and I'm not suggesting that the word "nonprofit" is a primary causal factor. But words matter, and "nonprofit" is a negative term that distorts the public's perception (and that of donors) of what it takes to operate a company in the social sector. People hear the term "nonprofit" and expect that you should spend every last dollar on programs and services, while paying as little as possible to your staff and saving little for growth and innovation. 

The word "profit" comes from the latin word profectus -- which means progress.

Do we really want to call our social sector the non progress sector?