For-profit vs. Nonprofit
We defined business earlier as an organization that provides goods, service, or both to its customers, clients, or consumers in order to make a profit. That definition, although accurate, does not accurately describe those organizations and businesses whose primary goal isn’t profitability. Instead, some organizations provide their goods and services in order to generate revenues (income) that can be used to further their purpose or mission.
nonprofit business
A nonprofit or not-for-profit business is one that provides goods or services to consumers, but its primary goal is not to return profit to the owners of the business (as is the case with a for-profit business). Instead, it uses those profits to provide a public service, advance a cause, or assist others. Most nonprofits also rely on donations from individuals and businesses, grants, and government funding to help fund their work, since the revenue they raise rarely covers all of their operating costs.
The American Red Cross (emergency assistance, disaster relief, and education), your local humane society (finding homes for homeless pets), and the Trevor Project (suicide prevention and mental health support for LGBTQ youth) are all examples of nonprofit businesses. They use any revenue generated from operations to support the continued mission of the organization.
Much of what differentiates a for-profit business from a nonprofit business goes on behind the scenes and isn’t very visible to the customer. For example, a nonprofit organization is subject to government regulation and oversight in ways that differ significantly from a for-profit business: nonprofits do not pay taxes on their revenue, but how their funds are disbursed and how their operations are managed is tightly regulated.
A Nonprofit Restaurant
We usually think of restaurants as for-profit businesses. There are expenses associated with running a restaurant, such as rent for the physical space, paying employees, and purchasing equipment and supplies. A restaurant may also spend money on advertising. Aside from serving customers at the restaurant, others may want to order food to be served at a different location such as an office or a private home. A restaurant could also sell merchandise such as t-shirts and pre-packaged sauces to customers. At the end of the day, the restaurant will calculate profit by subtracting their expenses from the revenue made by selling food and merchandise. As a for-profit business owner, the owner of the restaurant owns all the profits and can do whatever they want with the money.
JBJ Soul Kitchen is a nonprofit restaurant with two locations in New Jersey. It was established to help alleviate hunger in the local community. You can support the restaurant’s mission by eating and paying like a typical restaurant customer. If you are unable to pay with cash, you may volunteer your time in exchange for a meal and learn about other local resources that may help you.[1]
Like for-profit restaurants, JBJ’s also hosts events such as cooking demonstrations and private functions.[2] However, like other nonprofits, they also accept donations and have volunteers who help support their operations.