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Non-Profit

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Business Studies

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:

  • The NHS

  • The Armed Forces

  • National Crime Agency (NCA)

  • Her Majesty's Revenues and Customs (HMRC)

  • Security Services, MI5

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/)

Non-Profit

A non-profit organisation is a social enterprise that has social aims and operates to benefit a community or society as a whole. The owners of a non-profit organisation operate them for different reasons. Some might have a strong passion for a social cause like protecting endangered species, whilst others may want to establish one as a hobby. The mission of non-profit organisations can range from community service projects, childcare, recycling companies, apprenticeship programs, etc.

A non-profit is an organisation that is not set up to make profits and distribute these profits to owners. The goal is not to maximise profits. Rather, their objectives are to operate for the benefit of a community or society as a whole. There are numerous non-profit organizations worldwide. Some examples you might have already heard of include the WWF, The Red Cross, UNICEF, or Doctors Without Borders.

The non-profit sector consists of various types of organisations of all sizes. They tend to serve a charitable or a social purpose. Non-profits also don't pay dividends or any form of profit to their shareholders. Instead, they create social benefits, also known as social capital. By creating social capital, non-profit organisations aim to solve an existing problem or issue in order to advance humanity in a certain way.

Final Non-Profit Quiz

Question

What is the definition of a non-profit business?

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Answer

A non-profit organization is a social enterprise that has social aims and operates to benefit a community or society as a whole. The mission of non-profit organizations can range from community service projects, childcare, recycling companies, apprenticeship programs, etc.

Show question

Question

What is one of the key differences between a non-profit and a for-profit organization?


Show answer

Answer

A non-profit is an organization that is not set up to make profits. For non-profit organizations, the goal is not to maximize profits. Rather, their objectives are to operate for the benefit of a community or society as a whole.

Show question

Question

What are the three different types of non-profit organizations?

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Answer

  • Philanthropic organizations

  • Advocacy organizations

  • Mutual benefit organizations

Show question

Question

What are the three different types of public sector businesses?


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Answer

  • Public corporations

  • Public services

  • Municipal services 

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Question

What is the general mission and purpose of non-profit organizations?


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Answer

The mission and purpose of non-profit organizations are to create social benefits, also known as social capital. By creating social capital, non-profit organizations aim to solve an existing problem or issue in order to advance humanity in a certain way.

Show question

Question

Give an example of a potential downfall of privatization.

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Answer

A potential problem that could arise as a result of privatization is short-term unemployment.

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Question


Which of the following statements about non-profit organizations is true?

  1. They do not make any profits. 

  2. Stakeholders are not involved in the business. 

  3. They do not distribute profits. 

  4. They can only be established as hobbies. 

Show answer

Answer

C.

Show question

Question

Which of the following statements about co-operatives is false?

  1. They are run for the benefit of the government.

  2. Co-operative are a common type of mutual business. 

  3. Co-operatives must represent social responsibility. 

  4. Co-operatives are run by members who each have a say in the management of the business.

Show answer

Answer

A.

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Question

Which one of the following does not make up one of the ethical values ​​of a co-operative?

  1. Honesty 

  2. Social responsibility 

  3. Adaptability

  4. Openness

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Answer

C.

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Question

What are the different types of co-operatives?


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Answer


  • Consumer co-operatives

  • Worker co-operatives

  • Producer co-operatives 

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Question

What is the difference between a public corporation and a public service?


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Answer

A public corporation is an enterprise owned by the state but offers products and services to both private and public sectors. A public service includes organizations that provide services to the entire nation. Public corporations include the BBC or Channel 4 television. Public services include the NHS or the HMRC.

Show question

Question

Which one of the following statements is correct?

  1. Non-profit organizations are all charities. 

  2. Non-profit organizations only benefit their members and donors. 

  3. Non-profit organizations do not make any profits.

  4. Non-profit organizations aim to benefit the community. 

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Answer

D.

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Question

What is a municipal service?


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Answer

These are services offered by local governments and councils. Examples include libraries, street lighting, and municipal parks and recreation.

Show question

Question

Which one of the following statements holds true for public services?

  1. Public services only serve local governments.

  2. Public services only serve national governments.

  3. Public services serve the whole nation. 

  4. Public services only serve local communities.

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Answer

C.

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Question

Non-profit organisations tend to serve a ... purpose

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Answer

charitable or social

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Question

Non-profits prioritise creating social benefits over financial profits for shareholders. 

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Answer

True

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Question

Define social capital

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Answer

Social benefit created by a non-profit company

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Question

A non-profit organisation focuses on a specific...

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Answer

social cause

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Question

Non-profits are set up because owners are passionate about a particular cause. 

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Answer

True

Show question

Question

Who are stakeholders of non-profit organisations?

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Answer

People using their services, volunteers, the community, government agencies

Show question

Question

Which type of non-profit promotes or lobbies for a certain social cause or political movement?

Show answer

Answer

Advocacy organisation

Show question

Question

A labour union and a Chamber of Commerce are examples of ...

Show answer

Answer

Mutual benefit organisations

Show question

Question

What is not a characteristic of a non-profit organisation?

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Answer

Operate to benefit the public good 

Show question

Question

Public sector organisations are usually run by ...


Show answer

Answer

national or local governments 

Show question

Question

Name 3 common fields for public services

Show answer

Answer

healthcare, social work, teaching and education 

Show question

Question

Services offered by local governments and councils are called...

Show answer

Answer

Municipal services 

Show question

Question

Who funds public sector organisations?

Show answer

Answer

National or local government

Show question

Question

How do non-profits use their revenues?

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Answer

Non-profits 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 

Show question

Question

Where does the fund for mutual benefit organisations come from?

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Answer

membership fees

Show question

Question

Mutual benefit organisations work for the benefit of a few selected members

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Answer

True

Show question

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