The Business of Running a Nonprofit

by Camille Platt

Did you know that nonprofits are big business? There are more than 1.4 million tax-exempt organizations in the U.S. – 60% more than the number just 20 years ago. Nonprofits, according to the National Center for Charitable Statistics, employ approximately 13.5 million people, or nearly 10% of the American workforce and account for 5.5% of the U.S. GDP.

What’s the difference between for-profit and nonprofit organizations?
That difference rests largely with the classifications established by the IRS. A nonprofit organization can’t benefit private interests such as founders or shareholders. Nonprofits are built around and measured against their purpose, ownership, and public support. They must have a mission that focuses on activities that benefit society and whose goal is not primarily for profit. No person owns shares of the corporation or interests in its property, and income is never distributed to any owners but instead recycled back into the nonprofit corporation’s public benefit mission and activities.
In contrast, a for-profit business seeks to generate income for its investors. Profits generated by sales of products or services measure the success of for-profit companies, and those profits are shared with owners, employees, and shareholders.

Public charities are the largest category of tax-exempt nonprofit organizations defined by the Internal Revenue Code. Classified under section 501(c)(3) (along with private foundations), 950,000 public charities account for $1.7 trillion in revenue and include arts, culture, and humanities organizations; education organizations; health care organizations; human services organizations; and other types of organizations to which donors can make tax-deductible donations.

Foundations, according to the Foundation Center, a leading source of information on philanthropy, fundraising, and grant programs, number well over 87,000. Their grants, a component of private charitable contributions, total about $55 billion.

In 1989, Peter Drucker, the renowned author, educator, and management consultant wrote the book What Business Can Learn from Nonprofits. Since then, Forbes, Huffington Post, and others have written articles detailing the complexities of leading a nonprofit. Among many challenges, leaders must operate to the specific mission and social cause while raising revenues primarily through donations and services, building capital through campaigns, and delivering services through a workforce often made largely of volunteers, all with limited resources for people, sales, and marketing, and a high level of accountability to board members, clients, and funders.

While there are too many nonprofits to profile in any one article, what follows are leaders of several nonprofit organizations that serve a wide range of needs throughout our community.

Phil Acord

President and CEO of Chambliss Center for Children since 1976

Mission Statement:

To preserve family unity and to help prevent the dependency, neglect, abuse and delinquency of children by responding to the community’s childcare needs.

What is your personal passion for this cause?
My mother and father divorced when I was a few months old, so I started life with a single parent. I guess that is why I have compassion for single parent families that are out there struggling – trying to get the job done, making payments, feeding the family. Unfortunately, they oftentimes don’t have the amount of support that they need to make it. A lot of them end up losing custody of their children.

What is the greatest challenge facing nonprofit organizations today?
Staying relevant. You’ve got to constantly monitor the landscape to see where the gaps in service are and where the needs are. We were an orphanage and then, as the community’s needs changed, evolved into a 24-hour early childhood education program for parents working second shift and third shift. We recently started transitional living because we recognized that a lot of youth, about 700 a year across the state, age out of the foster care system and make up a disproportionate percentage of the homeless and the incarcerated. These young adults need support and guidance.

To what would you attribute your organization’s success?
I try to hire people who are smarter than I am, and then I try to let them do their job. We just have a really dedicated staff that has the same passion that I have and are dedicated to making our services available to as many people as possible.

What priorities are crucial for an individual in your role?
We’re very involved in Chattanooga 2.0 and the Chamber of Commerce. Not only am I the President and CEO of a nonprofit and a provider of social services, I’m also an employer. I’ve got to be accountable to a board of directors; I have licensing requirements that I have to adapt to. It’s not for the faint of heart, that’s for sure.

Photo by Lanewood Studio

Julie Baumgardner

President and CEO of First Things First since 2001

Mission Statement:

We’re dedicated to strengthening families.

What misconceptions can make nonprofit leadership a challenge?
Good nonprofits have measureable outcomes and really seek to find those niches where they can serve and do a great job serving. But the standards to which nonprofits are held are pretty intense.  What we tend to do with nonprofits is say you have to come up with new programming in order for us to want to fund you, and we want measurable results immediately. However, if you look at the for-profit world, it took Amazon six years before they really became profitable and got their act together. And when you’re talking about changing a culture or changing behavior, it’s not going to change overnight. We started First Things First in 1997, and have worked very hard to make an impact.

What key programs carry out your mission?
Our goals are to decrease divorce and out of wedlock pregnancies, and increase father involvement in the lives of their children. We teach healthy relationship skills in every high school in the area. We also teach singles, new parents (especially first-time dads), couples preparing for marriage, and married couples how to keep their marriage strong. We also help couples in marital distress. Our class for men who are behind on child support payments is also very successful.

In a given year, how much money do you raise for your beneficiaries?
Our annual budget is $1.5 million.

How do you see those funds make a difference in the community at large?
Our Dads Making a Difference class has saved Hamilton County tax payers $8.5 million in incarceration-related expenses alone. We’ve also been tracking the couples who completed our premarital classes since 2006, and of the couples who made the decision to marry, 86 percent of them are still married and rate their marriage as high quality.

What skills are most important to lead a successful nonprofit organization?
You have to be relentlessly passionate about your mission and clear about the vision. Surround yourself with people who are also passionate and bring a whole host of skillsets to the table. You can’t be afraid to fail, pick yourself up, and try again.

Photo by Lanewood Studio

Jennifer Nicely

President of CHI Memorial Foundation since 2008

Mission Statement:

To strengthen our community by strengthening Memorial’s healing ministry of Christ.

How does your fundraising impact those you serve?
We raise money for a huge gamut of things—for capital equipment, for construction. But we also raise money for programs, things that aren’t reimbursable, that patients don’t pay anything for, it’s just the right thing to do. One example is the Joe and Virginia Schmissrauter Center for Cancer Support, a resource for anyone who has cancer—or a family member, a friend—to be able to come and get answers. We have social workers, nutritionists, a massage therapist. And you don’t have to be a patient of Memorial to use these services. You could have a brother in California who was just diagnosed with cancer and you want to come and talk to someone about what all it means.

What makes a nonprofit attractive to potential donors?
A nonprofit needs to be financially strong. It needs to be viable. It needs to be able to make payroll every month. Donors appreciate that. A strong organization really can garner more interest and giving from the community.

What do you foresee as the greatest changes that nonprofits will have to respond to in the coming years?
It’s all about the new generation and how do we engage millennials. Millennials tend to get involved in very different ways than my generation and older generations. They tend to want to be heavily involved on a personal level with one or two organizations as opposed to writing a $100 or $1000 check to ten or twenty different organizations, which was really more the way giving has historically been for so many.

How will you adapt to these changes?
It’s our responsibility to figure out ways to engage and make sure that volunteers have that hands-on experience.

Photo by Lanewood Studio

Dan Bowers

President of ArtsBuild since 2007

Mission Statement:

To build a stronger community through the arts.

Who do you serve?
Essentially the entire community, since everyone benefits from the arts. Hamilton County School students benefit from our Imagine! Initiative. People in neighborhoods and those served by social service organizations benefit from arts programs and activities supported by ArtsBuild Community Cultural Connection Grants. More than 400 individuals have participated in leadership training through our Holmberg Arts Leadership Institute. There are other examples, but this gives you an idea.

In a given year, how much money do you raise for your beneficiaries? 
On average, we are a $2 million organization.

What are your goals for the next five years?
A key word for us going forward is “access.” Access to the arts is the filter we are using for our investments. We will invest in assuring that those who don’t normally enjoy the benefits of the arts have the opportunity to do so.

What do you foresee as the greatest changes that nonprofits will have to respond to in the coming years?
Continued tightening by funding sources. As this happens, nonprofits will have to be nimble in order to adapt to these changes. Being able to recognize what potential donors are interested in and helping them see how you are addressing these interests will be a key to success.

How will you adapt to these changes?
As in most businesses, sales and marketing are important to a nonprofits success. The key to addressing our challenges is telling our story in an effective manner to as many people as we can. We are constantly tweaking our methodology in doing this. The Chattanooga of today is virtually unrecognizable compared to the Chattanooga of the late 1980s. Our goal is to be, and to stay, relevant to our changed community.

Photo by Med Dement

Dan Challener

President of Public Education Foundation since 1999

Mission Statement:

We help develop visionary and effective teachers and school leaders, and we work directly with students to prepare them for success after they graduate from high school.

What are your goals for the next five years?
We want the community to say that the public schools have improved dramatically and that there is clear evidence that public school graduates are succeeding at college and at work.

What key initiatives do you have in place to meet those goals?
We are working with eight public middle schools and high schools to create VW eLabs, which will develop the skills of students to understand the new world of digital fabrication. We have expanded Project Inspire, where we recruit and then train people who want to become teachers and work in high-poverty schools. A lot of people get out of college and realize they want to teach, but they didn’t go through teacher education so we provide a full year of training for them. When they are done, they work in our most challenged economically disadvantaged schools across Hamilton County. And we will continue to provide leadership training for teachers and aspiring principals.

What are the greatest challenges facing nonprofit organizations today?
People have to have confidence that their investment will have an impact. We can show them that it will. We say, come with us. Let’s have you talk with some students. Let’s have you employ a student this summer. Meet one of the future teachers or future principals. They see just how extraordinary these people are and how important the work is.

What would you attribute your organization’s success to?
Our success is directly attributable to the passion, the commitment, and the hard work of our staff and board. We’re a small organization, so every person who works here matters enormously. Everyone has to be highly effective.

Photo by Lanewood Studio

Dave Butler

President and CEO of Habitat for Humanity since 2013

Mission Statement:

Seeking to put God’s love into action, Chattanooga Habitat brings people together to build homes, communities, and hope.

Who do you serve?
Families are selected based on three criteria: they need to make 30 to 80 percent of the area median income in Chattanooga; they have to have a willingness to partner, meaning sweat equity—they have to put in 350 hours of work and classes; and they have to have the ability to pay a zero percent, 30-year mortgage.

In a given year, how much money do you raise for your beneficiaries?
The total revenue we bring in is approximately $3 million.

Can you give some perspective as to how much you benefit those who you are serving?
The families that we bring on board, because of the income levels, most often are on entitlement programs such as vouchers, food stamps, etc. Once they are into the house, they are able to save a tremendous amount of money—a minimum of $300-400 a month in mortgages versus what their rent used to be. Consequently, they come off of entitlement programs, then start paying property taxes. Last year our families paid $225,000 in property taxes. You and I have gone from supporting them to helping them support other people.

What are the greatest challenges of nonprofit organizations?
The biggest concern I see is federal government budget challenges. Second would be retaining and engaging donors, and third would be maintaining a sustainable business model.

How are you addressing these challenges today?
We diversify our sources. We’re making a series of changes in development in how to attract donors. We have some pretty sophisticated systems now as far as tracking and knowing who our best donors are. Also, everybody has heard of Habitat, but not a lot of people know the extent and the scope of what we get involved in, so we spend a great deal of time speaking in the community and appearing on television, radio, and other media. A big part of my job is to educate the community on what Habitat does.

Photo by Lanewood Studio

Emily Fuller

Executive Director of American Heart Association since 2013

Mission Statement:

To build healthier lives, free of cardiovascular diseases and stroke.

What would you attribute your organization’s success to?
Transformational thinking. Volunteers with great passion. Authenticity. The AHA really does operate with the utmost integrity. What I love is that everything we do is rooted in science, and if it doesn’t fit within our guiding values, we just don’t do it.

What are your goals for the next five years?
By 2020, we want to improve the cardiovascular health of all Americans by 20 percent and reduce death from cardiovascular disease and stroke by 20 percent. Social determinants of health is a particularly big issue. It’s alarming that life expectancy can vary 15 years by zip code and that blood pressure is such a large silent killer. There are many other organizations working on these same issues, and AHA cannot do it alone.

What key initiatives do you have in place to meet these goals?
Because this is a focus of many others, collaboration is really important for us. We are working with school systems, employers, lawmakers, and health systems. These are the biggest ways we can collect data to move the needle on programs.

In your opinion, what are the biggest differences between a nonprofit organization and a for-profit business?
One of the things that I’ve learned in nonprofit is you’re required to do so much more with so few resources. Many of my teammates wear many hats and work long hours for a fraction of the for-profit counterpart’s wages. I would say that both for-profit and nonprofit businesses have really important goals and objectives, and in fact AHA works a lot like a for-profit business. The biggest thing that differentiates us from for-profits is we rely heavily on volunteers to drive our mission forward.

Photo by Med Dement

Gina Crumbliss

President and CEO of Chattanooga Area Food Bank since 2016

Mission Statement:

Our mission is to lead a network of partners in eliminating hunger and promoting better nutrition in our region.

In your opinion, what are the biggest differences between a nonprofit organization and a for-profit business? 
A for-profit business’ principal purpose is to maximize profits and serve the interests of its stakeholders including owners, shareholders, employees, and customers. Nonprofit organizations are formed to benefit society in a tangible way. I think the biggest difference between the for-profit and nonprofit world is the sharing of knowledge and resources. For-profits tend to hold on to proprietary information for a competitive advantage whereas nonprofits tend to share resources freely. It is a sacred covenant when a donor makes a gift to your organization because they are trusting you to be an excellent steward of their money and to use it wisely and for the purpose for which it was intended.

How long has your organization been in place?
The Food Bank was founded in 1972 and renamed The Chattanooga Area Food Bank
in 1983.

In a given year, how much money do you raise for your beneficiaries?
We raise $5 million and another $25 million in food. We are audited by 3 regulatory agencies as well as Mauldin & Jenkins, a prestigious CPA firm. It is important to note that 97¢ of every $1 raised goes to support our food and programs. Also, we can leverage our buying power to stretch $1 to provide 4 meals.

Can you give some perspective as to how much you benefit those whom you are serving?
In the case of our elderly clients, when they are managing their budget, they pay for their rent, medication, utilities, transportation and food in that order. Providing well-balanced, shelf-stable food supplemented with fresh fruits and vegetables makes a huge difference in their health and well-being.

Photo by Lanewood Studio

Rae Bond

CEO of Chattanooga-Hamilton County Medical Society since 2005 and Medical
Foundation since 2003

Mission Statement:

The Medical Society is a 1,100-member physician organization that advocates for sound health care policy, represents physicians, and promotes initiatives to improve community health. The Medical Foundation is the charitable arm for that work, including Project Access and the Youth Leadership Forum on Medicine.

Who do you serve?
We provide advocacy, education, and support for physicians and their practices. We work within the community on initiatives such as the Regional Health Council, Tobacco-Free Chattanooga, and the Youth Leadership Forum.

Can you give some perspective as to how much you benefit those who you are serving?
Beyond our critical work on behalf of physicians, we serve the community through programs like Project Access. Since 2004, Project Access has coordinated $157 million in donated health care services for more than 15,000 of our low-income, uninsured neighbors. People have received life-saving treatment and have been able to continue working to support their families and to live full and productive lives. Project Access is truly the last resort for many working folks who are uninsured.

Why do you do this?
My faith calls me to help those in need and to serve wherever I can. I have always been led to work that makes the community better, and I am honored to support physicians as they do just that.

What are the greatest challenges facing nonprofit organizations today? 
Funding is always tight, but the biggest challenge is that people increasingly are pressed for time. All voluntary organizations face challenges recruiting and retaining new members. You see it in civic organizations, churches, and even in social networks. Family life is a bigger priority, as it should be, and time is precious. We work to provide meaningful ways for our members to be involved and to effectively communicate our value to our members.

How are you addressing those challenges?
Thirty years ago, people would join their professional organization to support their profession. It was seen as being a good citizen of the profession. Today, most people are looking for value to them personally, as opposed to the profession in general. We have developed a new LEAD (Learn/Engage/Advocate/Develop) Student
and Resident Program to engage physicians. Our challenge is to make that volunteer process as easy as possible and to provide meaningful ways to become engaged.

Photo by Med Dement


Looking for the Latest CityScope Annual Business Issue?

The Annual Business Issues can now be found with the rest of your favorite CityScope content!