Eli5: How do non-profits make money & pay their employees? Recently saw a video on YouTube where this random dude working for a non-profit for homeless, earns upwards of $200k every year. Where’s the money flowing from? Besides donations of course.
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The difference between a non-profit organisation and a typical business comes down to who owns it and where the profits go.
With a typical business, the intention is that the business earns money for the owners and investors.
For a small scale example, I make a product, I sell it and I keep any profits I earn for myself.
With a non-profit, the intention is to provide a service, generally with charitable intentions. To do this most non-profits will to some degree operate as a form of business – they will make some form of income (from selling a service, donations, etc) which will then be used to pay for all of the business expenses (including paying wages to the staff working for them). The difference comes with what happens to any profits after expenses have been covered – rather than those being paid out to the owners and investors, they are put back into the business to allow them to continue providing their service, or to allow them to do more.
For a small scale example, I may make and sell a product for charity, the money I make on sales will be used to pay for my materials and time to make the product, and all of the profits left over will be donated to my chosen charity.
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