(This column originally appeared in Entrepreneur)
Opinions expressed by Entrepreneur contributors are their own.
Let’s say you’re running a small business. A technology services firm with about 10 people. You’re doing fine, but you’re working very hard to do fine. You’re serving hundreds of clients. And then a new client requests your services. Except, this client is different: it’s a nonprofit organization. And the executive director of this organization is asking for a discount. “I know your hourly rate is $175,” she says. “But we’re a nonprofit — hopefully, you can give us a lower rate?”
This happens to me a few times a year. Does this happen to you? If you’re a small business owner, I bet it does. So what do you do?
On the one hand, you can be a charitable person and offer a discount to the nonprofit. Or you can be a grinch and refuse to do so. But are you really being a grinch? Are you a bad person because you don’t give a discount to a nonprofit? I don’t think so. Which is why I never go down that route. I never offer discounts just because a client is a nonprofit organization. And here are a few reasons why.
For starters, giving a discount means giving a donation, and I donate money elsewhere. My wife runs a nonprofit that helps children without financial means get help to learn how to read. We have very good friends that raise money to fund research that they pray will save their daughter from a fatal lung condition. These are really good nonprofit organizations that are doing really good things. I’m proud to support them. But of course, one can only support so many nonprofits and charities. I’ve chosen the ones I support. You choose yours. That’s all we can do.
I see other companies — usually big companies — that offer special discount programs for nonprofits. Hey, good for them. But I think that’s potentially opening up a can of worms. We live in very contentious times. People judge organizations by the causes they support. Just having a blanket policy that offers discounts to every nonprofit means I have to be consistent. It means I’m committed to doing this for charities or nonprofit organizations that may have as their cause something that I’m personally opposed to, or something my employees or customers may take issue with. Regardless of my own views, do I want my business to give discounts to organizations that support or lobby for guns or abortion for example? And remember that some nonprofits are set up that way to support organizations and people with certain political agendas that may be less than desirable to support. Frankly, I don’t want all that hassle.
And speaking of my business, I’ve got my own cash flow challenges. Giving a discount to a nonprofit essentially means I’m donating to that nonprofit. It’s literally reducing my profits for their benefit. It’s taking money out of my bank account for a cause that’s not a priority for me. Meanwhile, I’ve got a business to run, with payroll to meet and overhead expenses to pay. I don’t drive a Mercedes, and I don’t eat at fancy restaurants (although I do admit to splurging on Phillies post-season tickets but c’mon — a guy’s gotta have some things in life that bring joy!). The point is that my small business isn’t much different than a small nonprofit. I don’t see why I have to feel guilty when I don’t donate through discounts.
Here’s another thing: Just being a nonprofit doesn’t mean the organization is poor or cash-strapped. Some of the biggest organizations in the world are nonprofits. The Salvation Army, The United Way and the Ford Foundation are just a few that come to mind. They’re all doing great things. But does that mean I have to give them discounted rates if my firm is ever hired? When you check out the financials of some of these nonprofits you’ll see lots of money being spent on salaries, benefits, real estate and other perks for their employees and senior managers. Big nonprofits are frequently criticized for spending too much of the money they raise on overhead and other costs not associated with their core missions. Whatever. They’ve got their own recruiting and operational challenges. But is my small business supposed to fund them by giving discounts?
Finally, I don’t believe that merely operating a nonprofit organization automatically allows you to pay less for services. Why do nonprofits need “discounts” anyway? I realize they’re trying to address a societal need, but don’t all businesses in their own way address societal needs? Whose place is it to judge whether nonprofit or for-profit is better for the world? Just saying you’re a nonprofit doesn’t make your organization any more special than someone selling tires or providing landscaping services. We’re all contributing in our own way.
So no, I replied to the client, I am not in a position to offer you a discount on our hourly fees. I appreciate all the good you and your organization do for the world. But then again, my organization also does good things. I can say that we will do a great job for you and provide services that will ensure that your non-profit will operate even more productively and efficiently for your donors than before. That should be enough.
