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Starting Out? Why a Non-Profit Practice Is NOT the Right Answer for You
This is a question – or a statement – I hear frequently from those who wish to be independent health or patient advocates who are considering which business formation they need to set up to be independent.* After considerations of LLCs, or S-Corps or others, they tell me they want to establish a non-profit, then ask me if we offer resources to help them. Fay is one such advocate wannabe. She asked, “Do you have any advice for establishing a non-profit or not-for-profit agency to help patients?” Unfortunately, her question was being asked for the wrong reasons. Why? When asked why they think a non-profit is the right answer for them, I hear a handful of replies: “So many people need help but can’t afford to pay for help. Establishing a non-profit would mean I don’t have to charge them.” (A fair statement – and a solid answer, but requires a follow-up – see below.) “I have only ever done advocacy as a volunteer, so I want to keep doing it that way.” (Also a fair statement, but not helpful to this advocate – see below.) Fay’s reply to me was the one I hear most often: “I hate asking for money, so if I set up a non-profit, I won’t have to.” (A fair assessment of ask-for-money fears, but a ridiculous overall statement about business formation.) The point being… almost every advocate-wannabe who asks about setting up a not-for-profit organization believes that will mean she can deliver advocacy services at no cost to the patient. She may also believe, then, that she can continue doing advocacy work as a volunteer – because she will still get paid by the non-profit organization. The problem is, those who think a non-profit is the cure to the “asking for money” aspects of business, haven’t yet thought of this question: Where will the non-profit organization get ITS money? The leap not made is that a non-profit is just as much a business as a profit-making business is. Both require business skills; both require asking for money. Here’s Where Fay Went Wrong To begin…