5 Compelling Reasons Why Every Entrepreneur Should Consider Starting a Nonprofit Organization You can enhance your business and reputation by focusing on educational, charitable, and philanthropic initiatives.

By Sid Peddinti Originally published

Opinions expressed by Entrepreneur contributors are their own.

When people think of nonprofit (sometimes called not-for-profit) organizations, they generally think of charitable and religious organizations. However, nonprofits can also be created to advance education, scientific research, sport, music, art or entrepreneurship.

In this article, I'm going to break down five compelling reasons why every business owner or entrepreneur, regardless of the industry or market that they are operating in, should consider starting a nonprofit organization as an extension of their business, and how you can grow your business and have a deeper impact in the world by doing so.

Boost your credibility, trustworthiness, and goodwill in the marketplace

One of the major advantages of starting a nonprofit organization is the credibility, goodwill, trustworthiness, exposure, and impact that a business or individual can gain and develop in the community. As a nonprofit organization, specifically one that focuses on education or philanthropy, a business owner has the ability to share their knowledge and expertise in an educational setting which, in turn, helps the business owner gain more credibility in the marketplace, develops more trustworthiness in the eyes of the consumer and the general public, and enables the entrepreneur or business owner to penetrate the market from a completely different angle than their competitors.

For example, if you are a business owner who has specialized knowledge or skills that you have developed, you can create educational videos, training sessions, educational blogs, or even digital courses that enable you to position yourself as the educator, the teacher, and the source of knowledge in your industry. This will instantly elevate your position, your authority, your branding, and also the way people recognize you (and your business).

There is also a good chance that a majority of your direct competitors are not thinking of these strategic angles and are focused only on the bottom line, which instantly gives you a slight competitive advantage in the marketplace. You are positioning yourself as the top source of knowledge, which builds credibility and trustworthiness - the key ingredients to getting more customers and clients.

If you look at examples of large organizations such as Google, Facebook, Apple, Oracle, Dell or Amazon (to name a few), you will notice that each of these organizations has strong educational and philanthropic objectives that they push out through their nonprofit arms.

Think of the practical and the competitive advantages that a business owner enjoys from having more goodwill, gaining more trustworthiness, and building more credibility. You are essentially broadcasting that you are not just a business that cares about the financial bottom line, but you are also focused on changing lives, donating to causes, and advancing humanity through your nonprofit causes and initiatives.

This concept is called strategic philanthropy, one that literally every Fortune 500 company leverages to build a more reputable and trustworthy brand.

Related: 4 Common Traps When Starting a Nonprofit

The ability to qualify and leverage millions of dollars worth of grants and funding

As business owners and entrepreneurs with limited resources, it is upon us to be resourceful and understand how to leverage other people's "money, time, reach, influence, and platform." In some industries, this is called "OPM" (other people's money). The world of real estate investing is premised on this exact principle – leveraging investor or bank monies to invest in real estate.

Every year, over $200 billion in grants and donations are distributed by corporations and government organizations towards charitable, educational and philanthropic missions. These corporations have the same choices we do as small business owners – pay taxes on the total profits or find ways to reduce their total tax liabilities. In other words, whether or not you apply for these grants or funding opportunities, they will be given out and distributed every single year in order to reduce their total tax liability.

As a small business owner with limited resources and funding opportunities, starting a nonprofit organization that complements your business will enable you to qualify for funding opportunities and even partner with Fortune 500 companies that would be delighted to fund your educational or philanthropic missions and initiatives, which in turn only boost your goodwill and reputation in the marketplace.

Tax incentives associated with donating or investing in nonprofit causes

Another compelling reason to think about starting a nonprofit organization that compliments your business is the ability to receive several different tax benefits and deductions. The Internal Revenue Service (IRS) and Canada Revenue Agency (CRA) offer businesses and individuals the ability to write off or deduct the funds and even intellectual property that is dedicated toward nonprofit and philanthropic causes and initiatives.

Think about this example for a second, as a small business owner you have a choice of paying taxes at the end of the year based on the profits that your company declares. The more profits your business generates, the more taxes you have to pay. One way of reducing the total taxable income in your business is to incorporate a strong charitable or educational initiative that enables you to dedicate a certain portion of funds or resources toward advancing those causes. The monies that are invested in these causes or initiatives could be eligible for a complete tax deduction or write-off. You can read more about how this works by visiting the IRS page here.

In other words, you have a choice to make. Would you rather pay taxes on profits or invest a portion towards educational or charitable initiatives that are going to boost your credibility and reputation in your marketplace?

Related: When It Makes Sense to Turn a Passion Project Into a Nonprofit

Increase the net value of your business by adding a nonprofit component

Imagine for a second that you are an investor looking to invest in a company and you are faced with two choices: Invest in Company A or Company B. Let's say that Company B is identical to Company A, but also has a nonprofit arm that is funded and backed by Fortune 500 organizations and government agencies, has strong tax reduction strategies in place, and gets exposure and publicity due to their philanthropic work.

Which company seems more attractive to you as an Investor or even as a buyer - Company A or Company B?

Chances are that the answer is Company B.

Goodwill and reputation are essential components of your business - after all, people are more likely to do business with someone they trust. Creating a nonprofit arm to your business enables you to gain more goodwill and trustworthiness, which not only benefits the business in the short and long run but can also increase the net value of the business.

Goodwill is an intangible business asset on the balance sheet – just like intellectual property. The more goodwill your brand has in the marketplace, the more your business is worth, and an investor or a potential buyer of your business would certainly take that into consideration when analyzing different options.

In short, goodwill, credibility, trustworthiness, and general reputation can not only increase the valuation of your business but also make your business more attractive to an Investor or Buyer.

Creating your legacy and leaving a deeper footprint in your marketplace

Another compelling reason to start a nonprofit arm to your business is to create your legacy and to leave a deeper footprint in your marketplace. When you start a nonprofit organization and commit to a philanthropic, educational or charitable mission(s), you're not just focused on your business and the financial bottom-line, you are also focused on bettering society and humanity through your business.

You get to sharpen your focus, you get to donate money, intellectual property, knowledge, and resources to improving the world and advancing humanity. Nelson Mandela said, "knowledge and education are the keys to advancing humanity," and you can certainly do that through your nonprofit venture.

Creating a nonprofit enables you to think beyond profits and revenue, and enables you to think of your overall purpose in life or business. It's a vehicle that allows you to focus on the big picture and set long-term goals and objectives that can change the lives of hundreds, thousands, or even millions of people. On top of that, Fortune 500 companies and government bodies will be more likely to support your venture and fund your initiatives as well.

First steps towards starting your nonprofit organization

Identify the life-changing moments that reshaped your life and use that information to connect with your mission, your purpose, and your educational or philanthropic goals for life.

Nonprofit organizations are relatively easy to set up, require the same set of entrepreneurial skills that you already use to manage your business, and are fairly straightforward to manage and keep in compliance (just like your for-profit business).

Related: 3 Nonprofit Funding Avenues All Founders Should Know About

Wavy Line
Sid Peddinti

Attorney & Business Growth Strategist

Sid Peddinti is a business lawyer, strategist, TEDx speaker and contributor to several large publications. He specializes in creating innovative strategies that help businesses gain a competitive edge in diverse ways.

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