Dear Dalitso

Everyday lessons for tomorrow

Where is the Profit?

November 10, 2023
Letter #

A businessman who wanted to invest in our organization asked me a simple question-how does your organization make profit. I stammered, stuttered, and mumbled something incoherent. I must say I had not thought about ‘profit’- especially financial returns. It’s a word that is alien in our work except when used in its negative- ‘non-profit’. A challenge of sorts especially when we consider that we set up our whole sector as focused on being non-profit.

I have since spent a bit of time thinking about the ‘profit’ of a non-profit. Please don’t be confused. The first cop out would be to say we have broadened the term ‘profit’ beyond financial returns to environmental, social, cultural and governance. Whilst that is true, and many others have done the same- it’s a post for another day. Today I will write about the ‘financial profit’ of our nonprofits.

There are many ways to consider profit. Let me start off perhaps with what has always looked like non-profit, the task of raising children or what others have called the care economy. In many instances this has been done by our mothers without charging anyone for the service. The ultimate beneficiaries of that investment have been usually the capitalist sector or any other employment sector.

Their level of remuneration does not necessarily align with investments made by our mothers. But still for one to hold a job of whatever station is ‘profit’ from the investment made by their parents. 

The traditional approach to profit is to compute it as a positive return on a financial investment made. I invest $10 in my daughter’s venture to sell lemonade. I get a return $12.50 back after a month and her business continues to thrive after having paid back the initial investment-that is measured as profit-in a very rudimentary way. In our sector we rarely get that kind of ‘financial return’. Instead, we receive an initial investment (usually in the form of a grant) and carry out work usually to improve how BIG THINGS should work such as policy, accountability of government, raising new entrepreneurs, ensuring that the country or region has world-class investment policies, promoting local participation in the economy etc. These are BIG THINGS- they don’t happen on their own and every society needs them. Governments are not run by saints and angels- they are run by people who despite good intentions are susceptible to greed, do not have adequate capacity to run government and are too busy to understand the depth of a public problem. Society needs this layer of organizations that we have mistaken for non-profits. They are critical for the achievement of profit. When everything has worked together businesses thrive, livelihoods improve, and governments are more accountable. We help in training entrepreneurs who in turn create jobs. Isn’t that financial profit? The only sad part in all this— the profit achieved does not come back to us directly. But at times and especially in other regions it comes back through investments made by successful entrepreneurs and governments into our organizations.

Thinking about profit in its traditional sense is also very limited. The real problem maybe has not been whether we make a profit but instead if that profit accrues to us. So, if one is interested in investing like that businessperson- there is no direct dividend- but the investment contributes towards society-wide profit. We are part of an ecosystem of organizations that ensure there is inclusion of all, peace, a legal system that works for all, consistent and equitable development program, rights for all etc. The presence of these conditions is critical for the achievement of profit. Maybe we have just been under selling ourselves using the tag non-profit. What then should we call ourselves?

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