For Profit vs Not For Profit

PROFIT is our MOTIVE

If two businesses do pretty much the same thing, but one is for profit and the other is not for profit, as a customer, should you automatically favor the one not for profit?

I subscribed to a publication called Consumers’ CHECKBOOK for several years. It publishes ratings for local service providers — plumbers, landscapers, auto repair shops, etc. It’s done by a nonprofit organization called Center for the Study of Services (CSS) out of Washington DC. I decided not renew this year.

Why? Because I see Yelp does a much better job.

By coincidence, right before the renewal, Consumer’s CHECKBOOK sent out the annual service provider survey to subscribers. As subscribers we were asked to tell them which providers did a good job and which ones didn’t. The providers were listed in a paper booklet with a code. We were supposed to enter the code on a survey form, either circle some ratings or fill in some bubbles (I forgot exactly how), and then mail the form back.

I didn’t do the survey because it was too late and too cumbersome. I would rather rate the provider right after the service was done, and do it online instead of on paper.

Center for the Study of Services is nonprofit. Yelp is for-profit. Yet I would rather use Yelp if Yelp charges me the same subscription fee. There are more ratings, more granular comments, and more current experience shared on Yelp than in Consumer’s CHECKBOOK.

Sometimes profit is a good thing. The profit motive gives Yelp the incentive to invest in its services. Their services make it better for both the consumers looking for businesses to hire and for businesses looking for customers. Lack of profit keeps Center for the Study of Services stuck in the world of annual subscriber surveys by paper mail.

In banking we have banks and credit unions. Banks are for profit; credit unions are not for profit. In investing we have Fidelity, Schwab, etc. and Vanguard. Fidelity and Schwab are for profit; Vanguard is customer-owned, delivering services at cost.

I have or had accounts with all of them: banks, credit unions, Fidelity, Schwab, and Vanguard. I must say a not-for-profit isn’t automatically better for me as a customer.  I’m happy to give banks and Fidelity their profit when they provide a better service. When a for-profit company becomes more efficient, it can both make money and provide better products and services to the customers.

Competition is great. Customers win when for-profit companies compete with not-for-profit companies.

What about you? Are you weary of companies that make a profit from you?

[Photo credit: Flickr user pheezy]

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Comments

  1. J says

    In early 2010 I needed to open a joint business checking account with my spouse. However, because of the credit crunch of 2009, all institutions had tightened their requirements for opening checking accounts. At my not-for-profit credit union, joint business checking accounts required that both applicants have a credit score exceeding 600. My spouse had no credit record at all, so we were turned down for a joint business checking account. The credit union representative apologized, and he gave us a helpful tip — the large banks had looser standards than the smaller credit unions.

    So, we opened up a business checking account at the for-profit Wells Fargo, which only required that one of the applicants have a credit score exceeding 600. We were able to open the account on my credit.

    I still prefer using the services of my local credit union and the online Alliant Credit Union. I also like the not-for-profit services of my health insurer, Kaiser Permanente, and my mutual fund company, Vanguard. However, for-profit services like Wells Fargo are useful when I cannot get the not-for-profit equivalent.

  2. Judith B. says

    I too check Yelp before patronizing a local business, but I take the reviews with more than a grain of salt. Search for “yelp extortion” and you’ll find many articles about customers who threaten to post bad reviews unless businesses give them free products.

  3. Annag C. says

    I prefer to send my business to a for-profit organization. I find the “not for profit” world to be just as rapacious as the “money grubbing” “profit chasing” world; it’s just a lot less open about it. Not for profits compete against legitimate businesses — ever thought about the gym that has a YMCA close by as competition? — and they carry an unearned mantle of virtue. Making a profit is a virtue; it means that an entrepreneur has had an idea and carried it into fruition in such a way that even after paying for goods and labor there is a positive number on the bottom line. I will always prefer a company that has to survive and prosper in the rough-and-tumble world of competition over a company that puts on a virtuous halo and claims to be somehow above all such crass considerations.

  4. Bob Wilson says

    I often debate with myself profit vs. nonprofit software. There is a lot of decent free open-source software but when I am looking for something that is critical to my business I tend to use commercial software. I find that getting the last bugs out of the software, making it user friendly and particularly writing documentation is just tedious hard work and it is hard to get volunteers to do it.

    There are cases where open source is best. In particular, things having to do with security such as encryption software where sunshine is the best ‘disinfectant’ to make sure some individual at a for-profit company has not inserted malware into the result.

  5. Bucky says

    Profit vs non-profit doesn’t really make any difference. It’s not like non-profits don’t make any profit. Many non-profits make a ton of profit, they can pay their CEOs multimillion dollar salaries, spend frivolously on trips, buy expensive real estate property, build luxurious new office buildings, whatever they want. They just can’t pay out their earnings to shareholders.

  6. DonB says

    I’m just the opposite of Bob Wilson on the question of software. Every time I come back to a commercial software product I am reminded why I almost exclusively use open source.

  7. AM says

    I’m with Annag C. A non-profit is just a different way of organizing a business from a legal point of view, which is often less consumer-friendly because people are mislead by the “nonprofit” aspect. It plays off the unfortunate popular notion that profit is somehow evil, therefore nonprofit must be the opposite of evil. Popular notions are often wrong, you know.

  8. dave says

    IMHO: The bigger the organization, the more the bureaucracy… And the more the bureaucracy, the less the efficiency.

    One (several?) of our local Credit Union’s have been expanding their scope of membership, becoming ‘community’ credit unions, no longer restricting membership. Why should a Credit Union be the major sponsor for the local Exposition Center? And have increased advertising spending and a nice new office building?

    I’m going back to a nice, solid, small, local Commercial Bank. And perhaps I’ll even become a stockholder.

  9. wdjax0n says

    Some non-profits/public sector providers put their earned revenues to work in the community by paying abominably high salaries and perks: hospital presidents, university officials, football coaches at colleges, endowment managers, trustees per meeting; and everybody gets to go to off-site conferences to strategize in resorts. Even the hired help may get $100K for doing what appear to be routine jobs, especially in water authorities and prisons here in CA. The city manager of where I live (population 80,000) got compensated $400,000+ the last time I checked.

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