The Untold Realities of Managing Both a Nonprofit and For-Profit: What Every Leader Must Know

Insights from Alice Tyler Milton’s Balancing Mission and Margin

Running one organization is no small feat. But when you run two — a nonprofit and a for-profit — simultaneously, you enter a whole new arena of complexity. This hybrid structure is increasingly favored by visionary entrepreneurs who want to combine the financial muscle of business with the social purpose of nonprofit work. Yet, as Alice Tyler Milton details in her 2025 book, Balancing Mission and Margin: A Comparative Guide to Nonprofits and For-Profits, this model comes with challenges that are often hidden but critical to master.

If you’re considering or already managing this dual path, it’s vital to understand the real hurdles and how to overcome them. Here’s a candid, practical guide drawn from Milton’s expert analysis of the governance, financial, and cultural challenges of running both a nonprofit and a for-profit organization — plus tips on how to avoid the pitfalls.

Why Run Both? The Promise and the Complex Reality

Milton explains that operating both a nonprofit and for-profit entity allows organizations to pursue commercial success while advancing meaningful social or environmental goals. The for-profit arm can generate sustainable revenue, attract investment, and drive innovation, while the nonprofit arm can focus on delivering its mission, securing grant funding, and fostering community trust.

Examples like Patagonia and Ben & Jerry’s showcase how this dual model can amplify impact — Patagonia, with its for-profit apparel business supporting nonprofit environmental initiatives, and Ben & Jerry’s, with a foundation dedicated to social justice.

However, Milton cautions that the appeal of this “best of both worlds” approach masks significant challenges. These two entities operate under very different legal, financial, and cultural frameworks. Successfully balancing them demands strategic clarity, strong governance, and transparent resource management.

Challenge #1: Complex and Conflicting Governance Structures

Nonprofits and for-profits are governed differently. Milton details that nonprofits are mission-driven, overseen by boards responsible for ensuring public benefit, transparency, and legal compliance necessary to maintain their tax-exempt status. For-profits focus on profitability and shareholder value, often with more operational flexibility but also heavier tax burdens.

Running both means managing two distinct legal entities, each with its separate boards, bylaws, and regulatory requirements. Milton highlights common governance challenges such as:

• Conflict of Interest Risks: What benefits the for-profit cannot improperly benefit the nonprofit. Clear policies and boundaries are essential.
• Board Oversight: Each board must focus on its entity’s mission and compliance, ensuring no overlap blurs accountability.
• Regulatory Compliance: Nonprofits face stricter reporting and transparency obligations than for-profits.

Without rigorous governance structures, organizations risk incurring legal penalties, losing tax benefits, and suffering reputational damage.

Challenge #2: The Tug-of-War Over Resources and Funding

Money is often the biggest source of tension between nonprofit and for-profit arms. Milton explains that nonprofits primarily rely on donations, grants, and fundraising, which are often restricted in use and can fluctuate unpredictably. Meanwhile, for-profits generate revenue through sales, investments, or equity financing.

This financial divide creates several challenges:

• The for-profit side might feel burdened if it subsidizes the nonprofit.
• The nonprofit must maintain independence to protect its tax-exempt status.
• Staff, talent, and operational resources must be allocated carefully so that neither side feels shortchanged.

Milton emphasizes the importance of transparent financial management and formal agreements that clearly outline how funds, overhead, and shared resources are allocated.

Challenge #3: Cultural Differences and Mission Alignment

Milton draws attention to the cultural divide between nonprofits and for-profits. Nonprofits often have mission-driven, community-centered cultures focused on social good. For-profits prioritize efficiency, profit maximization, and market competition.

This difference can create friction, especially if leadership or staff work across both entities. Milton advises:

• Developing a unifying mission statement that connects the work of both sides.
• Investing in communication and culture-building efforts that emphasize shared values.
• Guarding against mission drift, where financial pressures overshadow nonprofit goals or vice versa.

Aligning missions effectively creates synergy, leveraging for-profit funding to amplify the nonprofit’s impact while enhancing its brand and purpose.

Challenge #4: Measuring Success in Two Different Worlds

Success means different things in the nonprofit and for-profit worlds. Milton explains that nonprofits track impact metrics, such as community outcomes and program reach, while for-profits focus on financial KPIs, including revenue, profit margins, and ROI.

Leaders managing both must develop integrated reporting frameworks that respect and measure both financial health and social impact, creating a balanced scorecard that paints a complete picture of organizational success.

Practical Steps to Avoid the Common Pitfalls

Milton offers clear guidance for navigating the dual-entity landscape:

1. Create Separate, Robust Governance Structures

   Ensure each entity has its board with clear roles, responsibilities, and conflict-of-interest policies. Boards must understand their distinct legal and fiduciary duties.

2. Maintain Transparent Financial Boundaries

   Use separate accounting systems and formalize agreements detailing shared expenses, cross-funding, and resource allocation to prevent conflicts and ensure compliance.

3. Strategically Align Missions

   Develop a mission statement that connects both entities but respects their unique purposes. Use it to guide decision-making and unify messaging.

4. Invest in Communication and Culture

   Regularly engage employees and stakeholders across both entities to build understanding, shared values, and morale.

5. Integrate Impact and Financial Reporting

   Track and transparently report on both sets of success metrics, using data to guide continuous improvement.

6. Consult Legal and Financial Experts Continuously

   Stay up-to-date on changing regulations and tax laws to avoid compliance risks and penalties.

Why the Effort Is Worth It

Despite the challenges, Milton argues that operating both nonprofit and for-profit entities can unlock unparalleled opportunities — diversified funding, enhanced public trust, and innovation capacity. The key is entering the journey prepared and intentional, ready to manage complexities with discipline and transparency.

The dual structure enables organizations not only to survive but also to thrive — creating a sustainable impact and lasting value both socially and financially.

Final Thought

If you’re serious about running both nonprofit and for-profit entities, Alice Tyler Milton’s Balancing Mission and Margin is an essential guide. It unpacks these hidden challenges with clarity and offers pragmatic solutions to help leaders build organizations that balance mission with margin — not as opposing forces but as complementary pillars of success.