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What are some typically for profit companies that could work as a non-profit? (lemmy.world)
submitted 9 months ago by to c/casualconversation@piefed.social
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I realized a while ago that in my whole career I've never worked for a for-profit corporation.

Recently I've been wondering if non-profit corporations could succeed in areas typically dominated by for-profit corporations. I'm in the U.S.

There are certainly plenty of non-profits functioning, employing people, and providing services to the public. Schools, Hospitals, public radio & TV, etc. But what areas are there where non-profits could exist and survive where they don't currently?

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[–] 15 points 9 months ago (5 children)

you can turn any for-profit organization into a non-profit one by reinvesting all profit, instead of paying it out to shareholders.

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  • [–] [S] 2 points 9 months ago (4 children)

    I'm not talking about converting an existing corporation into a non-profit.

    I'm also not talking about just not paying money to shareholders. That's not what I mean by non-profit.

    What I'm talking about is an organization that does not have shareholders and does not accumulate wealth as a central purpose.

    To convert a corporation to a non-profit as I'm thinking of, you'd have to have the corporation buy back all stocks until the corporation effectively owned itself. But even then, unless it also had a mission independent of accumulating wealth, it would exist merely to gather money.

    What I'm talking about is an organization that exists for a purpose other than profit.

    My employer charges for services, but all the funds go towards providing services in one way or another (paying salaries and benefits for employees, paying for equipment, supplies, infrastructure, etc.) There are trustees, but no shareholders expecting a return on their investment.

    Is it possible for an organization like that to be created for making widgets, and if so, what sort of widget manufacturing industry could such an organization be able to compete in?

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  • [–] 8 points 9 months ago* (last edited 9 months ago)

    That is exactly what I mean. Any company that currently turns a profit runs 'economically', i.e. output>input. That shouldn't change when you alter the mission statement. Quite the contrary, if a company doesn't have to hand out its surplus to shareholders, it can instead increase wages, lower prices, or invest to maintain/increase its capabilities.

    You mentioned hospitals, which are mostly private in the US. Turning them non-profit would result in any combination of cheaper treatments, better working conditions for employees and more modern equipment. The primary objective would change from making a profit to helping people.

    And even companies operating at a loss could become non-profit, if some actor (like the government) decides to finance it. (Think of welfare organizations)

    edit: basically I am saying anything can be run as a non-profit. If it has a profit: great, that can be reinvested. No profit? Then you need someone (the state) to carry that non-profit.

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  • [–] 6 points 9 months ago (2 children)

    youre literally describing a non-profit

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  • [–] [S] 1 point 9 months ago (1 child)

    Yes. Exactly. That's what I'm asking about.

    What things can a non-profit be created to do?

    In theory, you could just say everything, but there are some things that just wouldn't have a chance of working.

    For example, I don't think you could create a non-profit automobile manufacturer. The financial requirements to start represent an impossible hurdle.

    However, I think you could create a non-profit whose mission was to just manufacture furniture if you were so inclined.

    What I'm wondering is, how far is it reasonable to take the non-profit concept?

    If I said I wanted to create a non-profit soup kitchen, I don't think anyone would see it as unusual. But what if I said I wanted to create a non-profit to manufacturer toasters*? Is that insane? Would it be doomed to failure?

    It seems to me that the assumption is that to do most things you need a conventional, for-profit company, either privately owned or as a corporation. However, when I see the non-profits that exist, it makes me wonder why everything else has to be for-profit.

    * toasters is just an example. I don't want to manufacturer toasters, or anything else really. I just wanted to ask the question.

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  • [–] 2 points 9 months ago

    I think you were spot on with:

    The financial requirements to start represent an impossible hurdle.

    Financing is what investors do, and most investors are out to make a profit, typically private and in the form of money. Can you find investors interested in other types of profit, like "common good"? Probably. But enough investors with enough capital? High-rank investors want that profit to be more money than they invested, back in their pockets (which I think is fair).

    Now, even if you did manage to gather enough capital to start operating, would you be able to compete with for-profit corporations? It's going to be difficult, especially because bringing down production costs or expanding services to keep up with the industry may require additional investment, and for-profit corporations can sell parts of themselves in exchange for that investment (with the hope that they will increase in value at least that much). But non-profits cannot easily do that, because even if they could sell parts of themselves, sustaining market valuation without paying dividends (now or in the future) just does not happen. They can take collateralized loans, but that might be orders of magnitude below what for-profits can gather in investment rounds.

    A different topic is whether it would be generally positive for all any and all for-profit corporations to be replaced by non-profits. I do not think this is the case, but I would be happy to engage in such a debate.

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    • [–] 5 points 9 months ago

    If removing profit reduced cost, then most of them I guess. One of my kids works for an enormous employee owned company. So any profit, meaning billing beyond cost, goes to the workers, they are the owners.

    Most of our good hospitals here are nonprofit though it doesn't make them affordable.

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    [–] 4 points 9 months ago* (last edited 9 months ago) (2 children)

    What are the unique qualities of Non-Profit Corporations? In the US, not only do they get favorable tax status, but they can also accept donations, which entite the givers to their own potential tax benefits. But, the government has an interest in making sure these non-profits actually do have a charitable intent, and are not just some scam to make something off of other people.

    So, perhaps you are asking which other endeavors can benefit from this? Because it is possible that, in some cases the overhead of having to prove you are operating as a charity might get away from the mission of whatever you are trying to do, no matter how paradoxical that sounds.

    Case in point: the Raspberry Pi foundation. It started out life as a UK charitable foundation which aimed to make low cost computing accessible to everyone. But after making their boards, they came to the conclusion that making computer hardware was difficult to do as part of a non-profit, so they split into two organizations. I wonder whether various hardware vendors had issues contracting with or signing NDAs with a non-profit company, or whether their tax exempt status was causing problems when contracting with for-profit vendors.

    The non-profit still does advocacy and charitable work, but there is now a for-profit company which designs and manufactures the Raspberry Pi boards, and in fact went public in the UK a few years ago. The Raspberry Pi Foundation owns almost half of the for-profit company, but still retains its non-profit status.

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  • [–] [S] 4 points 9 months ago (1 child)

    Well, that's it. My focus wasn't primarily on the tax status or ability to accept donations. I was thinking more about disconnecting from the profit motive and wondering about what sorts of things a non-profit could do that they might not be doing now.

    The Raspberry Pi Foundation's experience trying to manufacturer computer hardware as a non-profit is also what I'm thinking of. It seems obvious that some industries would be difficult or impossible for a non-profit to break into.

    I will say that my employer has no problems with contacts or NDAs as far as I'm aware, although our legal department can be challenging to work with. Most for-profit vendors can deal with a tax-exempt customer fairly easily. You just have to make sure they get the correct forms.

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  • [–] 3 points 9 months ago

    Not all non-profits are charities, sometimes they are industry groups, whose charter is to improve cooperation between companies in a common industry who would otherwise by competitors, and not to itself compete with any of them. (Yours might be, if your username is any clue).

    In this case, it's a bit different, because while the organization doesn't seem to make a profit, it's members do, and they may provide most of the group's funding.

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    • [–] 4 points 9 months ago

    According to Hollywood economics, movie production companies are non-profit organisations.

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    [+] 4 points 9 months ago (1 child)
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    • [–] 0 points 9 months ago (2 children)

    The only non-profit I've contracted/consulted with (I think it was the cancer society but it was 25 years ago) was an absolute nightmare for rank and file employees. They had huge turnover and were constantly asking for free work from their employers and from my company. Meanwhile the big wigs paid themselves all kinds of perks.

    You'd know better than me whether that is pervasive, but I'm very leery that non-profits are just a slightly different shade of the same leadership failures as for-profit. That said, I would love to hear your thoughts and experiences on that. My anecdote isn't data.

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  • [–] [S] 2 points 9 months ago (1 child)

    Well, to be fair, my only experience is with my employer, so also only one data point here.

    Pay often isn't great, although you can make a living. However, benefits are fantastic. There have been good times and bad times, but I definitely consider myself lucky to work here.

    They face a lot of the same hurdles that other organizations would face. Managers occasionally suck, and there's still probably the same pressure to meet deadlines. There's a lot of focus on efficiency and income. However, I've never had the feeling that the overall mission of the entire organization isn't about serving the community.

    That's what got me thinking about it: what if the widget manufacturer wasn't driven to maximize profit for the owner/shareholders, but had a different mission (providing employment, or even just making good widgets)

    My employer has existed for a long time, so it has a bit of a leg up. I started wondering: what would happen if someone started a non-profit now that would compete in an industry with for-profit companies, and what industries would a non-profit player have a chance to succeed in?

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  • [–] 2 points 9 months ago* (last edited 9 months ago)

    The way I see it, the problem is investors creating an obligation to return a profit. The function of investors is to mitigate risk or give runway to get up and running. Good fits would be things that basically can't fail because they are non-optional. Insurance, utilities, healthcare — basically the things that we theoretically heavily regulate but is undercut by regulatory capture.

    Other things that don't require a big up front investment. Services. Grocers. Almost everyone needs to buy food and fix plumbing and electrical and vehicle issues — though the investment in tooling and training could be prohibitive in some cases.

    Another thought would be instead of private investors taking on the risk and ultimately socializing loss anyway, a public investment program might be preferable to a private one in any event. It's not really all that different from how municipalities underwrite costs for businesses now through tax incentives or even paying for construction of infrastructure that is then leased to private industry for some ridiculous length of time. I've seen toll roads function that way and I'd rather see a non-profit or citizens reap the rewards of that investment than some billionaire-owned investment firm.

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