[chimeracoder]

> Where does the profit come from if not the margins?

At a high level:

"Margins" typically refers to what is left over after you take all of the revenue from selling a product and subtract all of the per-unit costs (ie, ignoring fixed costs).

"Profit" is then whatever is left over after you take all of your revenue, subtract your per-unit costs, and then subtract all of your overhead (salaries, office space, etc.)

So, whether you are a non-profit or a for-profit, the accounting there is the same. The difference is that for-profit companies can choose to use that profit to issue dividends to people who hold shares. If they don't, that money stays within the company (ie, it's "reinvested"). Non-profits don't have a choice: they cannot distribute dividends.

Many notable for-profit companies don't distribute dividends. From an accounting perspective, if they also reinvest all of their money back into the company before year's end, they are essentially equivalent to a non-profit company.

There are some caveats to this, but that's the general idea.

> The advantage of non-profits is that they don't have to make a profit in the long run

No company "has" to make a profit in the long run, as long as they break even. But again, whether or not they are able to break even is determined the same way, whether they're a non-profit or a for-profit company.

> and might have to pay less taxes.

This is jurisdiction-dependent and is a relatively minor effect, because taxation on profits just encourages the for-profit company to reinvest its capital anyway. Most of the other taxes that a company pays are paid by both for-profit and non-profit companies.

In any case, the difficulty that non-profits would have in raising comparable amounts of money to venture-backed competitors is much larger, by several orders of magnitude.

[kbenson]

> Many notable for-profit companies don't distribute dividends. From an accounting perspective, if they also reinvest all of their money back into the company before year's end, they are essentially equivalent to a non-profit company.

Only if you discount the pressure to raise stock prices for public companies. There are plenty of cases where the pressure to do this in the short term, or even just to mitigate an expected drop in prices, has produced a strategy that is not optimal for the business itself.

[chimeracoder]

> There are plenty of cases where the pressure to do this in the short term, or even just to mitigate an expected drop in prices, has produced a strategy that is not optimal for the business itself.

Non-profits are by no means immune to this. They still have a board, and that board still operates in the exact same way as the board of a for-profit company does, subject to virtually all of the same incentives.

There are countless cases in which non-profits act in ways that are sub-optimal for both the operation of the company and for the long-term mission outlined in the company's charter, because either the board or the executive leadership (or both) were responding to short-term incentives.

Again: focusing on the "non-profit" vs. "for-profit" distinction is essentially meaningless when figuring out how a company is incentivized to run its business. They are both subject to the same underlying economic forces and the same incentives.

[kbenson]

> focusing on the "non-profit" vs. "for-profit" distinction is essentially meaningless when figuring out how a company is incentivized to run its business. They are both subject to the same underlying economic forces and the same incentives.

I think many of the incentives are the same, but not all. Or, better put, all the same incentives exist, but importance is attributed to them differently. I've known desire for recognition and ego to cause problems in an obvious way in a non-profit that while not impossible in a for-pofit organization, would appear to be far less common. I think the converse could be said with regard to monetary incentives. That is, it's not that when I say the incentives are different I mean some exist in one instance and don't in others, but that the relative importance applied to each is apportioned differently, and I view those as "different".