Nonprofit and not-for-profit mean the same thing, right? Maybe not.

In the association world, these words are used pretty much interchangeably, but I think there is a fundamental and important difference between not-for-profit and nonprofit. To me, the latter phrase conveys the wrong message to the board of directors, staff, and members.

Nonprofit is a word that can easily be interpreted as, “We don’t need to run this operation like a business because, after all, we aren’t trying to make a profit.” Well, last time I checked, organizations where the money-in doesn’t exceed the money-out won’t last very long.

On the other hand, not-for-profit is a tax status. It allows trade associations, professional societies, and charitable organizations to operate almost all operations free of federal and state taxes.

This tax exemption allows organizations to use the amount of revenues greater than their expenses to fulfill their missions by providing benefits to their respective constituencies in the form of products, services, and programs. It also allows the organization to build reserves which are necessary to provide insurance against an economic downturn.

In my 30-plus years of not-for-profit experience, first as a volunteer, then as a board member, and most recently as an association executive for two different trade groups, I’ve seen organizations buy into the concept of the nonprofit struggle and stay barely solvent. I’ve also learned a few ways to preempt these problems to avoid the nonprofit trap.

I’ve seen organizations buy into the concept of the nonprofit struggle and stay barely solvent. I’ve also learned a few ways to preempt these problems to avoid the nonprofit trap.

Eliminate nonprofit mindsets. First, and maybe most obviously, work to eliminate the term nonprofit from your organization. It might not be easy because the word and mindset can be embedded in your organization’s culture. Start with your board members. Have a frank conversation with them about the need to make a psychological shift away from operating like a nonprofit and more like a business. Ask them to help further that message with your membership. And take every opportunity to make sure your staff sees this difference.

Establish financial accountability. An important and critical step is to start by building real budgets that hold people accountable. Involve your staff in building the budget, so they have a sense of ownership. And be sure to share monthly financials with them. Your board members will also be able to help you see the bigger picture, recognizing when a product or service is ineffective and needs to be let go or sunsetted.

Put thought into the price point. Make sure you are pricing your products, services, and events fairly to your members and the market. My experience is that associations routinely underprice their offerings based on the belief that “our members won’t pay more.” That’s simply not true. They will pay for value. And there are simplified ways that help your staff to analyze for price sensitivity

Scrutinize potential new projects. Develop and implement a process for answering critical questions prior to developing a new product, service, or program. These are questions that your board and staff should reflect on, including: Where will the money come from to do this? Is it revenue neutral? What essential value will it bring? Associations typically have difficulty saying no to programs that members request. However, a problem occurs when these organizations take on too many things that don’t generate enough revenue.

If you can shift your business model and organizational mindset from thinking in terms of nonprofit to doing business with a not-for-profit tax status, I think you’ll enjoy greater financial stability and, in the long run, be able to deliver greater benefits to your stakeholders.