When you’re in the software business you’ll inevitably be asked if your company offers special pricing for non-profits. I wanted to share my thoughts on the topic for a while now, so here’s a blog post.
What’s the difference?
Over the past six years we’ve had hundreds of requests for non-profit discounts. They come from non-profits of all sizes. Some are huge multinational charities, some are small local volunteer organizations, others are somewhere in the middle. Just like there are small businesses, medium sized businesses, and large businesses, there are small, medium, and large non-profits.
The fundamental difference between a for-profit business and a non-profit business is the profit. For-profits are allowed to realize a profit, non-profits aren’t. Non-profits can generate a profit – called a surplus – but they have to reinvest it back into the organization. For-profits can take the profit and distribute it to their shareholders, owners, or anyone else they’d like. That’s the key difference.
There are some other differences too. Some might say that non-profits do good, while for-profits do business, but I don’t believe that 1. matters, or 2. suggests that for-profits don’t do good.
Another difference might be staffing. Many non-profits are staffed by volunteers. But many aren’t. In fact, according to the BLS, non-profits employ 8.7 million people (6% of all workers in the US). Overall, average hourly earnings of full-time workers at non-profits and for-profits are about the same. So both non-profits and for-profits have a lot of paychecks to write.
Yet another difference could be revenue from customers vs. fundraising from donors or funding through grants. But wherever it comes from, it’s still money in the door to sustain operations.
Adding this all up, I’ve never understood how these differences relate to pricing. Why should a non-profit organization pay less for software (or supplies or food or rent or…) than a for-profit company? How is an automatic discount for a non-profit fair to a full-price paying for-profit? They both have employees, budgets, goals, financial pressures, etc. If you don’t look at the tax code or the sign on the door, they are the same.
Who decides who really needs a discount?
Many of the non-profits that have contacted us asking for discounts have operating budgets far north of many of our for-profit customers’ annual revenues. Many of our small business customers are individual entrepreneurs barely making enough to pay themselves. Some of our small business customers are still in the red – making them “non-profits”, literally.
To be clear: We don’t have anything against non-profits. Over the years we’ve donated our products to select causes, schools, teachers, relief efforts, and organizations — some of which have been non-profits. Where appropriate, we try to help when we feel we can. There are plenty of non-profits doing incredibly important work around the world. And many of these organizations are staffed by devoted volunteers who generously give their time for their cause. We respect these organizations and these people.
However, we believe everyone who pays us for our products should pay the same price. We’ve worked hard to keep our prices reasonable. We haven’t increased our prices in years. From the small guy just getting started in his spare time on the weekends, to an established small business, to organizations assembled for a cause, to small groups inside some of the world’s largest corporations, our published prices are the same no matter who you are or what you do. We think that’s the only fair way.
I recognize some companies use discounted software for non-profits as a way to sneak into the for-profit companies some of the people work for at their day jobs. While it may work, it feels like a slimy motivation.
We believe prices should be fair, public, and consistent
We don’t want to be one of those companies that has a “who you are determines how much we can charge you” pricing model. We find those models unfair, dishonest, and flat out unappealing. The best pricing is clear, fair, public, consistent, and predictable.
When you buy from 37signals you should know we aren’t charging you more than someone else just because we can. You aren’t paying a higher or lower price based on your negotiation skills. That doesn’t mean an exception here and there for a rare special case can’t be made — it means that when someone sees a published price on our site they can be confident that that’s the price 99.9% of their fellow customers are paying.