Why You Should Run Your Nonprofit Like a Business

The nonprofit sector's aversion to profit — and to strong nonprofit financial sustainability practices — is putting missions at risk. It’s time to embrace business practices to create lasting impact, without losing sight of values.

In the Nonprofit Finance Fund’s 2025 "State of the Nonprofit Sector Survey," 36% of nonprofits ended 2024 with an operating deficit, the highest in the survey’s decade-long history. More than half of survey respondents (52%) have three months or less cash on hand, and 18% have one month or less cash on hand.

There is a pervasive myth in the nonprofit sector that financial struggle equals mission purity. But this mindset creates a destructive cycle where organizations operate on the edge of crisis. Many nonprofits fail not because of bad intentions, but because of inadequate financial planning and margin management.

No one wants to point fingers. As nonprofit leaders, we’re here to help, serve our communities, and work toward a shared mission. Our intentions are good. But without a clear understanding of how our services affect financial stability and how they operate day to day, we risk losing everything. We can't be blind to the financial risks at stake. 

In my 26-plus years in senior leadership across higher education, ed tech, and financial lending, I've found that establishing operating principles, setting clear financial targets, tracking program return on investment and using the power of data can dramatically increase mission impact without compromising values. Here are four actionable findings for nonprofit leaders to run their organization like a business.

1. Drive All Business Back to the Nonprofit’s Mission

When I became CEO of Options For All, a nonprofit serving adults with disabilities across multiple locations, I discovered something unsettling: Despite our vital mission, we were one funding crisis away from failing the very people we existed to serve. The culprit wasn't lack of passion or commitment — it was our mismanagement of funds without a tie to a clear goal. As I dove into the financials, I uncovered a lot of programs that were receiving money but were completely unrelated to our mission.

For example, at Options For All, our mission is to “create and support opportunities for adults with intellectual and developmental disabilities in making choices to live, work and love life in their community with dignity and respect.” If programs don’t come back to this specific mission in one way, shape or form, then they should be re-analyzed to determine if they are a good fit for the organization or not.

Take a look at every program and department at your nonprofit to see if there is a way to easily draw a line back to your mission. If a mission isn’t clearly defined yet, lay out the strategic priorities that define the nonprofit and start there. This doesn’t mean you can’t innovate or pivot as you go but installing that foundation from the beginning will help draw a line to financial health and unity.

2. Create a System of Accountability and Trust

Building trust and accountability with the team should be every leader’s top priority. When I became interim CEO, I discovered the previous leader had kept side projects hidden from the executive team. That lack of transparency didn’t just hurt morale — it created blind spots across the organization.

Without trust, your team can’t act. When problems arise, leaders who are left in the dark can’t step in to help. Accountability isn’t just a feel-good value. It’s a business necessity. A nonprofit’s health depends on open communication, shared responsibility and a leadership team built on mutual trust.

This can be easier said than done. Some ways to move the needle include:

• Holding monthly state-of-the-business meetings to keep everyone informed on progress, challenges and decisions.
• Setting up regular cross-functional team meetings to encourage open dialogue.
• Modeling vulnerability by acknowledging what you don’t know and inviting team input.
• Listening more than you talk.

No one person should hold all the cards. Trust your team to own up to their tasks and success will follow.

3. Use Tools That Track Both Financial Health and Mission Progress

Many nonprofit leaders bring deep expertise and passion for their cause. While that passion is essential, it can’t be the only factor guiding decisions about where to allocate resources. To ensure long-term impact, leaders must pair their instincts with clear financial data and measurable mission outcomes when deciding which areas of the organization to fund.

One helpful tool is the Six Sigma method, which helps teams find and fix problems in certain programs. With this methodology, my team discovered a program that was losing a lot of money. We set clear rules for how the program should run and did a full review to understand what was going wrong.

Here’s what worked for my nonprofit:

• Defining key performance indicators clearly and understanding what each number really means.
• Analyzing the activities behind the numbers by understanding what actions are driving those results.
• Being consistent by always tracking and reporting data the same way to discover true patterns and problems.

Through this process, we learned why the program was struggling. Then we used Six Sigma tools to redesign how the program was managed, controlled and reported. Not only do programs need to align with the business mission and strategic priorities, but they also have to make financial sense.

4. Build Revenue Models Without Relying on Risky Funding

Urban Institute found via its 2025 “Nonprofit Trends and Impacts Study” that more than half of nonprofit leaders surveyed said their organization's financial health was their top concern entering 2025, with 92% of those leaders specifically worried about revenue uncertainty.

Poor financial planning and weak margin management — not a lack of passion — are what leave many nonprofits vulnerable. Running a nonprofit like a business means viewing profit as a promise to future clients. Without solid budgeting, reserve-building and diversified revenue, organizations can’t weather rising costs or sudden funding shifts. To avoid this, build a sustainable revenue model that reduces dependency on unpredictable funding.

Just like any business, external factors will always come into play, but strong financial practices ensure your mission can endure them.

As Politico reported earlier this year: "The Trump administration is mounting a sweeping offensive on America's nonprofit sector, deploying a blend of funding cuts, the elimination of tax benefits, bureaucratic paralysis and even installing a small Department of Government Efficiency] team to target organizations that challenge the president’s agenda.”

In this environment, nonprofits that continue to operate with razor-thin margins aren't being noble, they're being reckless with their missions. Financial stability is essential to serving your mission. By embracing nonprofit financial sustainability and adopting proven business practices, you can build a stronger, more resilient organization that protects your values while maximizing impact.

The preceding content was provided by a contributor unaffiliated with NonProfit PRO. The views expressed within may not directly reflect the thoughts or opinions of the staff of NonProfit PRO.