Not all businesses have the mindset of maximising their profits. For instance, most government organisations and charities do not aim to bring in as much revenue as possible. These organisations earn revenue but do not pay any of it to the owners. Instead, not-for-profit organisations tend to focus on social objectives rather than monetary ones.
Non-profit organisation
The non-profit sector consists of various sizes and types of organisations. They tend to serve a charitable or a social purpose.
Non-profits also refrain from paying dividends or any form of profit to their shareholders. Instead, they create social benefits, also known as social capital. By creating social capital, non-profits aim to solve an existing problem or issue in order to advance humanity in a certain way.
A non-profit can be a social enterprise, that has a social aim, and operates to benefit a local community or society as a whole. The mission of social enterprises can range from community service projects, childcare, recycling companies, apprenticeship programs, etc.
A non-profit organisation focuses on a specific social cause. Unlike for-profit companies, non-profits do not distribute their profits to shareholders in any form. They use their revenues to pursue a social cause, donate the money to a social objective, pay for the costs of their operations, and advocate for their cause.
Why are non-profits established?
Non-profits can be established for a variety of reasons.
Owners may share a strong passion for a particular cause, like protecting endangered species, and set up their enterprise to raise funds to help wildlife in a certain way.
Some people might start a non-profit as a hobby. This may include setting up an enterprise for sport or recreation purposes.
Non-profit organisations are accountable to a number of stakeholders. These include those who are receiving their services, volunteers, the community, and government agencies. This is another way in which non-profit organisations differ from for-profit organizations. They tend to serve multiple stakeholders, have a social purpose, and are not set up to make a profit from their operations.
Example of a non-profit organisation
There are numerous non-profit organisations worldwide. Some examples you might have already heard of include the Worldwide Fund for Nature (WWF), The Red Cross, UNICEF, or Doctors Without Borders.
Common non-profit business types
There are a huge variety of non-profit organisations, but they can mainly be categorised into three different general groups:
Philanthropic organisations
These are non-profit, non-governmental organisations that use donated assets and income to provide social services and create social capital. They can take the form of community foundations or charitable trusts.
UK Community Foundations is a charity that is committed to bringing positive social change in the UK.
Advocacy organisations
They are typically formed in order to promote or lobby for a certain social cause or political movement. They can organise fundraisers and other events to campaign for the causes they are striving to support, and encourage the public to also support their cause. These types of organisations typically raise donations through monthly membership programs.
Sisters Uncut is a British feminist group that advocates for survivors of domestic violence.
Mutual benefit organisations
These are a type of non-profit organisation that works for the benefit of its members rather than a local community or society as a whole. A common example of a mutual benefit organisation is a labour union or a chamber of commerce. Their funds come from membership fees, and the benefits of their service are enjoyed mostly by its members. Co-operatives are a common example of mutual businesses and are operated by their members who collectively manage the business.
A detailed example of a non-profit organisation
Today, social media and digital business play a huge role in our daily lives. It does so too in the role of social advocacy and non-profit organizations. An example of a non-profit organisation making great use of its digital resources is Greenpeace.
This environmental non-profit uses GPS technology to let people know about their cause. They have recently cooperated with a team of scientists and experts to make a live feed tracking of whales. With GPS technology they were able to follow the whales as they migrated from the north to the south through the ocean. They were also able to track how the whales hunted and moved through dangerous waters. This campaign was called the 'Great Whale Trail', and it encouraged people to make donations and raise funds through social media in order to support the non-profit and one of their main causes, protecting whales. The campaign ended up being a success and thousands of dollars were raised¹.
Difference between non-profit and not-for-profit
Non-profit | Not-for-profit |
| Operate to benefit the public good. | Exist to fulfil an owner's organisational goals. |
| Separate legal entity to owners. | Not a separate legal entity. |
| Try to earn money but profits do not go to owners. | Operate without the goal of earning profits. |
| Operated by volunteers. | Full-time employees who are paid a salary. |
Public sector businesses
Public sector organisations are usually run by national or local governments. They are often funded by them, too. They provide goods and services that benefit the community. They tend to cover costs with money raised from taxation.
Public corporations
Public corporations are organisations owned by the state but sell products and services to businesses in both the public and private sectors. They are managed by national or local government. Examples include:
BBC
Northern Trains
Pension Protection Fund
Civil Aviation Authority
Public services
This area of the public sector includes organisations that provide services to the entire nation. Opportunities in the public services can be categorised into central and local government. Some common fields for public services include healthcare, social work, teaching and education, and law enforcement and security. Examples of public service organisations include:
Municipal services
Municipal services are services offered by local governments and councils. Examples include libraries, street lighting, and municipal parks and recreation.
Non-Profit - Key takeaways
- Instead of profit maximisation, non-profit organisations tend to focus on social goals.
- Non-profits are social enterprises that aim to create social capital (solve a problem or create social change).
- Since non-profits do not attempt to maximise profits, they also do not pay dividends to shareholders. Instead, non-profits use their capital and funds to cover the costs of their operations.
- Non-profit organizations can be philanthropic organisations, advocacy organizations, or mutual benefit organisations.
- Public sector organisations are owned and funded by either the national or local government.
¹ Marlin Communications, Top 6 Examples of Not For Profit Organizations Making Effective Use of Digital Technology, 2020. (https://marlincommunications.com/blog/top-6-examples-of-not-for-profit-organisations/)
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