Making the decision to start your new nonprofit is the beginning to an incredible journey. You have an inspiring mission in mind, people you want to help, and the drive to do what it takes to make it happen.
You knew this wouldn’t be easy and that it would take a lot of hard work. But it’s absolutely worth the effort! This guide will help you make sure you’re on the right track getting your new organization up and running.
The following checklist will help you ensure you have everything you need to get funded, become official, and stay organized:
- Define your nonprofit’s mission.
- Start earning income for the organization.
- Get incorporated.
- Organize your resources.
- Hire a motivated team.
- Plan for the future.
It can be much more difficult to start a nonprofit during a global health and financial crisis. Now might not be the best time to start your own nonprofit, but that doesn’t mean that you should give up on the dream! Make sure to support other organizations and individuals who are making such a difference during the COVID-19 pandemic. Then, use this time to lay the foundation and make a plan for your future organization so that you can jump right into it later on.
Starting a nonprofit is tough work. But with a mission you care about and have passion for, it’s absolutely worth the effort. Let’s go through the checklist point-by-point to learn more about how to start your organization.
1. Define your nonprofit’s mission.
The first step to create and develop an effective nonprofit is to specifically define your mission. Your nonprofit’s mission statement is at the core of everything you do. It’s why you raise money, the purpose behind your programming, and the whole reason you’re embarking on this adventure.
A good mission statement is specific, clear, and answers the following questions:
- Who does this nonprofit serve?
- Why does it serve this audience?
- How does it serve them?
Your nonprofit mission statement ensures everyone, from you to your staff to your supporters, all understand what you’re working for.
2. Start earning income for the organization.
After you’ve defined your mission statement, you’ll have the primary tool you need to start earning money for the organization. Your mission is what drives people to give. Now it’s time to share your mission and convince interested parties to contribute to the cause.
Every nonprofit is different in terms of how much they’ll try to earn in these early stages of raising money. Start by defining your early goals, then consider what you’ll need to accomplish those goals.
We recommend that you talk to an accountant during these preliminary stages. They can help you learn more about the funding you need, the sources where you can find funding, and how you should set up your accounts. An accountant will help you get everything in order so that your finances are organized and well-planned out from the start. To read more about what it’s like working with a nonprofit accountant, check out this article.
Then, you need to identify your primary sources of income. These sources may include:
Grants. Grants are not funds freely provided for whatever an organization needs. Rather, they are used to fund a specific project or purpose for your nonprofit. For example, a nonprofit may request a grant to purchase and install a new security system for its homeless shelter. While grants are extremely rare for new nonprofits and difficult to get in your first three years, it is possible to find and get these funds.
Individual donations. Fundraising from individuals is essential for nonprofits. Private contributions make up more than 75% of the total amount given in the US each year. Monthly donors provide ongoing support while major donors provide large gifts for programs and projects.
Corporate contributions. Corporations may contribute to your nonprofit’s funding in a few different ways. Specifically, they may sponsor specific events or activities, partner with your organization to accomplish something, or they may contribute matched gifts for the contributions made by their employees.
Understanding these sources of income and how you can earn them will help you devise a nonprofit fundraising strategy. This strategy will define how much funding you need for different activities and how you plan on finding and receiving that funding.
3. Get incorporated.
One of the major roadblocks that holds up nonprofit professionals is the paperwork required to start a nonprofit. It can seem daunting. However, when you break it down, this step really isn’t too bad.
Most nonprofits choose to incorporate their organizations because it offers many advantages such as tax exemption and legal protections. The paperwork required for this incorporation is what tends to hold up professionals. It can look like a lot of steps, but with a little organization, you can tackle one thing at a time.
The steps to incorporate your nonprofit include:
- File for an Employer Identification Number (EIN). In order to do this, you’ll need to choose a name for your nonprofit that is legally available in your state.
- Prepare and submit your articles of incorporation. There is a small fee required from your state’s corporate filing office to file these articles.
- Create the bylaws for your organization. Your nonprofit’s bylaws will explain how your nonprofit will be operated. For instance, it will define how many board members you’ll have, procedures for meetings, and the responsibilities of directors and leaders.
- Appoint your board of directors. Your board of directors should be highly invested in your cause and knowledgeable about your organization’s mission.
- Apply for any licensing or permits you need. Different states have different rules and requirements for permits depending on the type of nonprofit you’re starting. Look up your state’s regulations and apply for everything you need to remain compliant.
The papers and regulations you need to meet as a nonprofit getting its start can be troubling or even scary. However, when you break it down and accomplish one thing at a time, getting your nonprofit started is easier than you’d expect.
4. Organize your resources.
Successful organization of your nonprofit’s resources is key to running an efficient and effective organization. Ensuring you have the tools you need to stay organized from the beginning will save you time and money down the line.
Look at your fundraising strategy and consider the resources you’ll need to carry out that strategy. For instance, nonprofits typically invest in resources such as:
- A nonprofit CRM database. Your customer relationship management or CRM is used to store information about your nonprofit donors. This is a database of information that allows you to reach out to them, draft communications, and track fundraising progress.
- Online fundraising tool. Your online fundraising tool makes it possible for your supporters to give from the comfort of their own homes. According to Double the Donation, over 50% of donors prefer giving online.
- Your website. Your nonprofit website is the first place where supporters will go to look for information about your organization and your mission. Make sure you use a content management system (CMS) that is easy for your organization to update with the latest news and information from the nonprofit.
- Event software. Nonprofit events are a great place for your staff members to get face-to-face interaction time with your supporters. Plus, it’s also a great opportunity to raise funds and to spread the word about your mission. Event software will help you organize the event and collect registrations from supporters.
- Prospect research software. Prospect research is used by nonprofits to identify potential mid-level and major donors. This tool uses public information to find philanthropic and wealth indicators that mark good prospects to cultivate.
When you start looking at software in which you’ll want to invest, be sure to consider the integrations available between the solutions. For example, if your online fundraising tool and event software integrate with your CRM, it will be easier to record the transactions and engagement of your supporters automatically.
5. Hire a motivated team.
While going through the incorporation process, you also recruited board members invested in your organization to help vote on important decisions. Now, it’s time to find more invested individuals to make up your staff team members.
As you start your organization, you’ll probably have a limited hiring ability, which means each staff member you do hire will need to wear multiple hats. Some of the important positions you should consider when you hire your team include:
- Director. As the founder of the organization, you’ll likely function as the nonprofit’s primary executive director.
- Project or program coordinator. This is the person who will help organize all of the projects for your organization and the programs to benefit the community.
- Fundraising director. This person is primarily responsible for all your marketing and fundraising efforts.
Keep in mind that hiring is expensive. It can cost a lot of money to recruit someone to your team, and even more to keep them on staff and pay their salaries accordingly. To mitigate this, you might consider the different resources for your nonprofit to outsource certain positions. This solution can help save finances while ensuring you have an expert on your team. For instance, consider outsourcing your:
- Finance department. You didn’t start a nonprofit to sit around and do financial paperwork. If you’re not a financial expert yourself, consider outsourcing instead of hiring. Professional bookkeepers and accountants who work with nonprofits
- Compliance analysis. To make sure everything, specifically fundraising, is in order and compliant with state and federal regulations, you may consider hiring a compliance expert. This type of expert could also help you walk through the incorporation process.
- Human resources.Human resource professionals help nonprofits with everything from employee compensation consulting, benefits discussions, and ensuring payroll taxes are up-to-date.
Of these three examples, some of the services provided overlap a bit. For example, a nonprofit accountant can help with ensuring payroll taxes are correct and ensure financial compliance. Therefore, before you outsource, be sure to see where overlap occurs and invest in a resource that will provide the most value.
If you know you’ll need financial assistance, Jitasa is a great resource specifically focused on helping nonprofits with their accounting and bookkeeping needs. They’ll help you get your nonprofit financially organized and make recommendations about how you can best make the most of your funding from the beginning.
6. Plan for the future.
As we mentioned early on, this might not be the most opportune time to start your own new nonprofit organization. Financial turbulence in the global economy makes it difficult to start any type of organization, whether for-profit or nonprofit. Plus, social distancing regulations make it difficult to gather people together for board meetings or even to get started with programming.
However, as you’re probably at home the majority of the time now, it is a great time to devise a plan! You can start using this information to write a mission statement, get started filling out paperwork, and create a draft of a fundraising strategy.
Then, when the conditions are more suitable for starting your organization, you’ll be steps ahead in the creation process! You can immediately jump into creating your team, beginning to raise money, and plan events for the coming year.
Nonprofits require a lot of planning. Before you start, you’ll need to create a plan that will help you get up and running and another plan specifically to raise money. Then, after you’re established, you’ll need another plan to grow larger and to better meet the needs of your community.
Starting a nonprofit isn’t easy in the best of times. Right now, during a global crisis, it’s a great time to start planning in order to ensure your organization will effectively get up and running once the COVID-19 pandemic has cooled off. Use this time you’ve been given to create your plan and make sure you’re ready when it’s your time to shine.
Jon Osterburg has spent the last nine years helping more than 100 nonprofits around the world with their finances as a leader at Jitasa.