This is something I fundamentally disagree with. In the case of nonprofits, the profitable venture ends-up being positions that are highly paid and have huge benefits. People tend to have this idea of scrappy, idealistic, ramen-eating organizations when it comes to nonprofits. They are some of the richest companies in the land.

Here's an interesting article on nonprofit pay:

https://www.causeiq.com/insights/highest-paid-nonprofit-ceos...

From the article:

"The highest-paid nonprofit leaders — CEOs, Executive Directors, etc. — all earn at least $900k per year, and into the tens of millions for the largest of hospitals and health systems. While the highest-paid nonprofit CEOs are in healthcare and financial services, things get more interesting when we look at normal charities."

It's interesting that Financial institutions and categories such as "Promotion of Business" are listed in their survey. Nobody imagines an entity promoting the use of petroleum as a nonprofit. Most people think of churches and benevolent community organizations ("feed the X") as nonprofits. Nobody thinks hospitals, oil companies, credit unions, insurance, etc.

I call a lot of their overhead "profit" because, in this day and age, It feels obscene that an organization purporting to "help the X" would need to consume 40% of revenues, own/lease lavish buildings, etc. to deploy the capital they receive. How many on HN could setup a system that could administer, say, a hundred million dollars in donation while consuming just, say, 5% of that to run the show? My guess is many.

If you read through the list of nonprofit CEO salaries on that page you should get a good sense of where my perspective come from. This is profit. We call it something else. Fine. To me this is the individuals running the organization extracting profit from an organization under the cloak of a legal classification with a benevolent sounding name. Who doesn't have a soft spot for anyone who operates without making a profit? Right?

Well...let's look at CEO pay:

Christus Health: $13MM with a $5MM base pay
Star One Credit Union: $12MM
NY Presbiterian: $12MM
Banner Health: $11MM
American Petroleum Institute: $11MM
Electric Power Research Institute: $2.5MM
Jazz at Lincoln Center: $2.3MM
-The CEO takes 9% OF REVENUE as compensation!!!!
University of Minnesota Foundation Investment Advisors: $1.5MM
- This represents 36% of revenue!

The point is, these are profitable pursuits. The profit goes to the people who work there, likely mostly to upper management. If they were scrappy idealistic not-for-profit organizations they would not be paying CEO's and the first layer or two under them tens of millions of dollars.

Another way to look at it:

Profit is what you use to run the organization. It's a percentage of revenue available for this purpose. It is important to understand the difference between gross and net profit.

I buy a blender from a wholesaler for $10 and sell it at retail for $20. My gross profit is $10. My net profit takes into account all the other costs, the ones that are required for the organization to exist. If that boils down to $5 per unit, the net profit is $5 per unit or, 25% of gross income.

In the case of an organization classified as a "nonprofit", things are different. They don't generally sell anything (well, hospitals and others do). They get a million dollars gross income from whatever activities. It could be donations. In the case of the company that promotes the use of petroleum, it is likely to be large membership fees paid by oil companies. For hospitals it is whatever they bill for services. Etc. That's their gross income. From that they have fixed costs in the form of buildings, leases, loans, etc. And now we come to what I am going to term the murky water portion: Salaries and other expenses. Million dollar compensation for executives and advisors. Lavish trips. In the case of the church my mother in law worked for, a couple of top-tier Mercedes Benz cars for the pastor and his underlings. Fully paid luxury vacations all over the world. Fully paid conferences at top tier resorts and hotels (think Waldorf Astoria), etc. Profit? I think so.

Anyhow, we can agree to disagree. I think the nonprofit category is deeply abused and a lot of people are getting incredibly rich through this mechanism. Frankly, had I understood this mechanism when I was a young man I probably would have figured out how to start some kind of an engineering nonprofit. I am being a bit sarcastic, of course, but I can imagine some kind of a scheme where someone creates a nicely profitable engineering consulting firm, pays themselves 40% of revenue and laughs all the way to the bank without paying taxes for decades. I am sure this already exists. That's why I call it profit. These are not poor little innocent organizations. They are some of the richest in the world. Let's start with the Vatican as a prime example.

EDIT:

To be clear, I am not saying all organizations legally classified as "nonprofit" are evil. What I am suggesting is that the classification is likely often abused for profit in various forms. One form would be lavish salaries and benefits (cars, trips, etc.). Another motive could be generating profit for allied or supporting organizations, a good example being oil companies financially supporting the American Petroleum Institute a "nonprofit" that likely generates billions for oil companies and whose top management is showered with multi-millions dollar salaries and benefits.

Here's another one: The NRA (National Rifle Association) is legally classified as a nonprofit organization. Technically, from an accounting perspective, I am sure it is. Does it exist for profit? Absolutely. Does anyone doubt that at all?

The category, the classification, is being abuse for profit disguised as something else. Not by all, yet likely by quite a few.