Emily Cunningham is one of OneSeed’s amazing summer interns. This is her fifth guest blog.
Emily is a sophomore studying economics at Harvard University. She is interested in microfinance and social enterprise, and is currently in the process of starting a fair trade jewelry network in Gujarat, India. In her spare time, she enjoys playing guitar and saxophone, surfing, Frisbee, and being outdoors.
Among the many important decisions a social entrepreneur must grapple with when establishing a new business is whether to incorporate as a for-profit or a non-profit; a seemingly unobtrusive choice between one giant stack of red tape or another.
It’s a question with an obvious answer to the untrained eye. For-profits have always been for businesses that want to make money, non-profits are for organizations that want to do good.
But there is something somewhat disturbing about this dichotomy. In a perfect world, all corporations should want to do good, and more importantly, organizations founded upon a mission of social justice should want to be profitable.
Non-profits certainly have their place for intervening in emergency situations and for the provision of services to victims of injustice, but the decision of whether or not to file a 990 should not be taken lightly by every entrepreneur who wants to change the world for the better.
1. No one really likes handouts
Empowerment is not only a buzzword in recent international development theory, but a revolutionary strategy to give people the tools to bring themselves out of poverty. The ability to earn a living contributes not only to the betterment of society as a whole, but to the pride and self-worth of the individuals who make up that society.
2. Non-profits don’t contribute to infrastructure or tax revenue that a society needs to fully and sustainably develop.
The end goal of international development projects should be to prove that the poor can be viable economic actors, that societies can ultimately function without the help of international NGOs. Haiti, for all its ten thousand (that’s right. ten thousand.) NGOs is still the poorest country in the western hemisphere. At the end of the day, for better or worse, China has probably done more for international development from an infrastructure standpoint than any of the monolithic state sponsored aid agencies of the West, (albeit with certain dire humanitarian oversights). But China and other nations who seek out foreign direct investment opportunities in the developing world have one thing right. Rather than telling leaders what they need, they ask what they want. If we can channel the equal partnership foreign direct investment seems to cultivate with nation leaders in our interactions with the developing world, while maintaining the concern for human rights and social justice western aid agencies claim to pursue, we could truly build a powerful international development strategy.
3. Profitability is good for everyone
Non-profits are limited in the types of investments they can receive, and in their ability to use shareholders and venture capital to expand their business and network. Perhaps as a consequence of this lack of investor accountability, there is a dangerous precedent not to run a non-profit like a business. Fundraising and donor appeals take the place of strategic decision-making. When combating conflict fatigue, it is better to have a long term, sustainable plan in place than to rely completely on outside funds that involve considerable time, marketing investment, and resources to secure over and over again.
So before you embark on your next grand plan to save the world, ask yourself if doing good really has to be so far removed from going about your daily business.