Do you provide serves to nonprofit businesses?
Did you know that nonprofits are not necessarily organizations whose main purpose is being a charity or serving a public interest? Did you know that being a nonprofit simply means that there are no shareholders expecting a return on their investment and that what might have gone into profit may be paid out in high executive compensation and perks, leaving no profit left to distribute? Did you know that nonprofits pay no taxes so there is a very low threshold as to how much money must go to the entity that is a charity or serves a public interest? Many of these organizations have, in fact, come under governmental scrutiny as a way to dodge IRS taxes.
Although some nonprofits do indeed struggle for funds, many do not. However, many firms dealing with them think that nonprofits operate at very low cost which has led vendors that work with them to provide services at a discount instead of at market price. I often I hear, “We can’t charge them our normal price, they are a nonprofit.” The fact is that being a non-profit may have nothing to do with their finances or their ability to pay. If you want to make a donation to your nonprofit client, that can be done as a true charitable donation rather then discounting your service, which will reduce your normal business margins.
Providing your services at a discount may result in opportunity loss — that is, the loss of higher-profit business caused by the diversion of your limited capacity, either the services your provide or those people that service that account, (i.e. sales reps as well as their commissions). How much you decide to reduce your process by servicing a nonprofit should be no different the making a pricing decision for any other account — unless you consciously decide to do this and not because they can’t afford it.
MORE: How to be a Profit Center to Your Client
