Sure. Revenue minus expenses = profit/loss. "Net income", "bottom line", etc.
Make more than you expend, and you've got a profit. Spend more than you make, and you've got a loss. Equalize them, and you've got no profit and no loss.
Businesses can optimize for profit. Charities are allowed to have a profit, but they don't get to distribute it to shareholders like a business can; it stays with the charity. It's legal for a charity to have a rainy day fund and a positive bank balance, but their legal purpose is not to run it up.
Churches in the US get funky at times, and I'm of the opinion that the IRS should be empowered to crack down the abuses of the non-profit status you highlight, but if they're spending their revenue on buildings, staff, etc., they're eating into their profits when they do so.
The term "nonprofit" is a misnomer that might be the reason for this distinction, at least in the US. The term implies the idea of zero profit, which could not be farther from the truth.
You are right to highlight churches. I remember the first time I went to Texas on a sales call at one of the mega churches. The only way I can describe it was a campus with several buildings the size of a Home Depot and more. You do not do something like that without profit. People might want to bury their heads in the sand and pretend that it isn't, because we legally call them "nonprofits". All we are doing is lying to ourselves. They make a ton of money. And we don't tax them.
I am sure there are churches and religious organizations who do a lot of great value for their communities. I also know there are tons who are there for "management" to live the life of the rich and famous. Not to go too far, my wife's mother worked for a church for a while. The head pastor owned several luxury cars, went on amazing trips to expensive resorts all over the world --all paid by the church-- and more. Profit.
Note I am not saying profit is inherently bad. We would not have most of the things we enjoy in modern life without profitable business pursuits. From clothing to medicine and everything in between, without profit, it would not exist. Can it be abused and misused? Of course. That is true for almost anything that is part of the human experience. We abuse food, power, the environment, other people, position, etc. All good things until they are abused, including profit.
https://news.ycombinator.com/item?id=29404841
Do you think the Vatican is profitable?
Do you think that a nonprofit that pays their CEO 36% --yes THIRTY SIX PERCENT-- of revenue is profitable?
Do you think that the American Petroleum Institute, which pays their CEO $11MM in salary (4.5% of revenue on $238MM in receipts) exists with a real non-profit objective despite what their balance sheet might say?
You see, we get lost in this legal "nonprofit" classification and fail to understand that a lot of these organizations exist for the profit (the enrichment) of either the individuals running them, associated commercial enterprises (oil companies) or both. If we refer to them as "X4132 organizations" (made-up name) we would have no emotional attachment or a mental model to go against what they actually do. When people hear "nonprofit" they think something like "feed the X" scrappy entities with idealistic workers and managers all eating ramen noodles to conserve every dime for their worthy cause. That is FAR from reality. Very far.
And that's why I tend to call it "profit". Yes, sure, this does not fit the technical definition of profit, but it is hard to argue that a CEO taking 5%, 10%, 30%, 40% of revenue isn't actually the profit element of the organization. I give the example of the lavish cars and trips for the pastor and management paid for by the church my mother in law used to work for. That's profit. We might classify it some other way, but it isn't charity.
No idea. I'd have to take a look at their accounts.
> Do you think that a nonprofit that pays their CEO 36% --yes THIRTY SIX PERCENT-- of revenue is profitable?
No idea. I'd have to take a look at their accounts.
> Do you think that the American Petroleum Institute, which pays their CEO $11MM in salary (4.5% of revenue on $238MM in receipts) exists with a real non-profit objective despite what their balance sheet might say?
No idea. I'd have to take a look at their accounts.
> Yes, sure, this does not fit the technical definition of profit,
It is the opposite of profit. It is what you structure if you want to reduce your profit so you don't get taxed.
> I give the example of the lavish cars and trips for the pastor and management paid for by the church my mother in law used to work for. That's profit.
No, it isn't. It might be embezzlement, from the sounds of it.
I get the point that you are trying to make, but doing so by redefining common terms and hoping anyone is going to take it seriously strikes me as remarkably unlikely to succeed. The word you are looking for is not "profit", it is "enrichment", as you say here. They are not the same. Words matter.
Well, then you lack a sufficient exposure to business that is required to understand what I am talking about. It's like someone who never built a brick wall arguing with a master mason and actually believing they understand the craft because they googled a few things. That's OK, most people are in your shoes. As my wife loves to say "A google search isn't a substitute for my medical degree". The same applies to understanding business. No worries.
I am not in the habit of posting comments about things I don't know anything about. I just don't do that. I have done business with people with direct experience working with and through the Vatican, either as direct customers or intermediaries. The only thing I'll say is: The Mafia are amateurs compared to some of the shit that organization has in its history. And I am only talking about the financial part of their closet.
Anyhow, here's the good part.
Ready?
You don't have to agree with me.
Done deal.
Have a great day.
Incorrect. I understand perfectly what you are talking about. You do not have privileged knowledge. You just aren't saying what you think you are. Your words and your meaning are misaligned, apparently intentionally.
You came into this thread with this:
> You cannot have any kind of a company without profit. Period.
That was your opening gambit. It was factually incorrect then, it relied on your being able to emotionally manipulate readers into taking a different understanding of "profit" than any of them likely did, and all you've done since is alienate people from your core point by talking nonsense and claiming to be better than them.
Where did you expect this comment to go?
> Provide the names of ten companies of non-trivial scale who have operated with zero or near zero profit for, say, 25 years, without external donations or other financial inputs to make-up for the lack of profit. Just ten companies. If I am wrong, it should not be too hard to present such a list. > Hint: Even charities have to operate at a profit. Without this they would not have people, offices, marketing and the means to perform their stated charitable objectives.
It is literally, trivially, obviously wrong, and you've said nothing prior or since to change that other than try to crowbar in irrelevancies about what you think a specific form of legal entity should be allowed to do.
> I am not in the habit of posting comments about things I don't know anything about. I just don't do that.
And yet here we are. You may have a point. I may even agree with it. But the way that you are expressing it does not come across as good-faith in the slightest.
> I have done business with people with direct experience working with and through the Vatican, either as direct customers or intermediaries. The only thing I'll say is: The Mafia are amateurs compared to some of the shit that organization has in its history. And I am only talking about the financial part of their closet.
So what? That makes precisely zero difference to the definition of profit. It does not answer the question of whether the Vatican makes any. Is it a grasping, rapacious, self-aggrandising, amoral organisation? You probably have an answer to that. It is utterly irrelevant to the question of profit.
> You don't have to agree with me.
Quite. As someone once said: you are entitled to your own opinions. But you are not entitled to your own facts.
Yes, of course, the accepted definition of profit does not align with what I have presented. That much is obvious.
And yet, "nonprofits" like the American Petroleum Institute, the National Rifle Association and many others exist precisely for profit in two forms. In some cases it is for the enrichment of those who run the organization. There, I used a different word. Happy? In other scenarios, they exist to generate massive profits --sometimes in the billions of dollars-- for supporters. If I remember correctly, the American Petroleum Institute generates some $250 million dollars a year in revenues. These are not $25 donations from Bernie supporters. These are massive membership fees paid for by the oil companies for which this organization works to generate billions in profits.
Disagree as much as you'd like with my out-of-the norm take on the realities of how nonprofits have devolved. The difference is you are bound by the dictionary definition of a word. I am looking at the realities on the street.
Seriously, it is naïve to actually believe these companies are not for profit. The mechanisms abound. A church purchasing manager gives a lucrative multi-million dollar contract to a contractor in exchange for under the table kickbacks. This crap happens all the time. The Vatican has done this kind of thing in transactions worth tens of millions of dollars while servicing as the financial arm for the buildout of television stations in Africa. The problem is you don't know what you don't know and a single-point dictionary definition of a single word is the extent of what you will look at as evidence to fight the idea that the nonprofit thing is seriously broken. But, hey, you are right, the word is defined precisely as you indicate. Good job.
Some guy gets paid ten million dollars to sign over checks to feed the children and you think that's overhead. I think it is an abuse of the system that, while not currently legally defined as such, should be classified as profit. And taxed accordingly. Better yet, it should be capped and the children should get more money.
Since you seem fond of little intelligent-sounding sayings, here's one that's applicable:
"In theory, theory and practice are the same. In practice, they are not."
Nonprofits: In practice, they are not. Not all of them.
BTW, I actually help run a small --real-- nonprofit. We setup a legal nonprofit organization to fund a local high school robotics team. We take-in donations and spend the money to pay for anything the kids need (usually tool, parts, etc.). Fully 100% of the money we receive (about $25K per year) is spent on what the kids need. 100%. Not a single penny goes towards anything else (OK, the occasional bank fee is another expense). Every mentor is a volunteer and most of us are actually donors as well. That's a real nonprofit, in the full sense of the word. Because nobody within the organization derives any kind of financial profit from it. There are no conflicts of interest whatsoever, no murky lines. Not sure what "nonprofits" who consume 40% of revenues should be called.
> They take a percentage of their income and use it to cover these expenses. Right?
> Well, this is semantics. A conventional business does exactly the same thing. They take a percentage of their income and use it to cover the cost of doing business.
Yes, and in neither the case of the charity nor of the conventional business is that profit. That is operating costs, and gets deducted from revenue before tax is paid on what's left precisely because it is not profit.
They take a percentage of their income and use it to cover these expenses. Right?
Well, this is semantics. A conventional business does exactly the same thing. They take a percentage of their income and use it to cover the cost of doing business.
Laws for non-profits generally allow for such things. Which makes sense, because they would not be able to survive without being able to slice off some "profit" to stay alive and grow.
If you've ever seen the massive church campuses in Texas you'd get a sense of the idea that this is, in fact, profit.
The range a typical nonprofit spends on administrative or operating expenses is wide. I would say that 40% isn't rare, with 25% being fairly common. This tracks with the profit margin of small to medium for-profit businesses. In fact, there are millions of for profit businesses that do not enjoy such margins.
The key legal distinction (at least in the US) seems to be that nonprofits cannot exist for the benefit of shareholders (no distributions). Other than that, they can easily spend 40% of what comes in on operations, grow cash in the bank and more.