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Note: This is the first of three articles aimed at raising awareness around the impact, importance, and struggles of nonprofits in the lead-up to the Big Give 2024.

Nonprofit organizations are complex and influential entities. While commonly perceived as groups of people rallying around a cause for community benefit, they are much more than that. In reality, nonprofits can contribute substantially to the local economy, sometimes surpassing the economic influence of for-profit businesses.

Nonprofit vs. for-profit

One of the most common distinctions between nonprofit and for-profit organizations lies in financial operations. Nonprofits, created to serve the public good, reinvest their income to advance their cause, while for-profit businesses aim to maximize profits for their owners and shareholders. While both types of organizations aim to generate revenue, nonprofits prioritize social impact over financial gain.

Nonprofit organizations must be rooted in charity and are legal entities that benefit from tax-exempt status under the Internal Revenue Code Section 501(c)(3). This status allows them to prioritize their mission and allocate all resources toward it. However, this also subjects them to complex laws and regulations at both state and federal levels, which for-profit organizations do not fall subject to.

These points highlight some of the distinctions and similarities between nonprofit and for-profit organizations. However, the most important misconception surrounding the two rests in their economic impact. Contrary to common belief, nonprofits not only contribute to community improvement through impacting individuals but they also have a significant, sometimes greater, economic impact compared to for-profit entities.

Economic impact

Nonprofit organizations not only impact society with their mission-driven initiatives and services but they also significantly influence the economy. Employment, for example, is one such area of impact.

Nationally, nonprofits employ around 12.3 million individuals, according to the National Council of Nonprofits. In our local community, the sector provides jobs for over 700 residents, compared to just over 100 in the transportation and travel industry. Additionally, the hospitality industry, often touted as a driving force in our community, directly employs slightly over 1,000 locals in lodging, only a few hundred more than the nonprofit sector. This highlights the role nonprofits play in creating community employment opportunities.

Worker earnings also reflect this economic importance. A 2022 report showed that the local nonprofit sector’s total annual payroll was $41 million, surpassing the transportation and travel industry’s $2.5 million and nearing the entertainment industry’s $45.2 million direct earnings, per a recent city economic report.

Moreover, nonprofits stimulate economic activity. For instance, a visit to the Brauntex Theatre in New Braunfels might lead to dining out, purchasing a new outfit, or paying for parking. This underscores the nonprofit theatre’s broad economic impact which fosters jobs, increases tax revenue, and supports local businesses.

A 2022 McKenna survey also revealed that the local nonprofit sector generated approximately $82 million in revenue from various sources, such as state and federal agencies, along with several other entities outside the community. Of this revenue, $68 million was reinvested into the economy by supporting local goods and services, including new construction, purchasing hospital beds, or buying everyday items like office supplies.

The larger picture

Often misconceived as entirely separate from for-profit businesses, nonprofits share more similarities with them than some may recognize. This common misunderstanding leads to the underappreciation of just how much nonprofits contribute to the local economy.

Functioning far beyond generating profit, nonprofit entities are a powerful force. They signify a dedication to a better society and embody the potential of an organization driven by mission, which, in turn, enhances our community both socially and economically.