What you need to know BEFORE you start a nonprofit

There’s nothing more exciting than making the decision to start a nonprofit!

It’s exhilarating and you want to just launch it already!

Your vision for your new organization probably includes vibrant programs, happy donors, tons of community support, and the opportunity to change lives.

But first, you need to build a solid foundation so your nonprofit will thrive, not struggle.

Seriously, about half of all new nonprofits don’t make it through the first year or so. If you skip on preparation, you will end up with a house of cards that can come tumbling down at any time.

If you’re reading this, you’re the kind of person who understands the importance of taking the right steps from the very beginning. This determination will put you on a path to a successful launch, a solid first year, and a bright future.

There’s so much to do when you start a nonprofit that it’s hard to know where to start.

Here is the first critical question to ask before you do anything else:

Before you get into the nuts and bolts of planning to start a nonprofit, you have to determine for sure that your nonprofit is needed.

Everyone starts a nonprofit to make a difference. How will yours make a difference?

Will you:

• Find homes for dogs in need of families?
• Tutor students so they can reach their potential in school?
• Feed people?
• Provide housing to survivors of domestic violence?

There are countless ways to make an impact. You need to be clear on exactly what need your organization seeks to fill.

What other organizations in your community address this need? How will your organization be different? Why is your organization needed if others are doing this work already?

Sit down and write out the answers to these questions. This will help you gain clarity of mission.

What need will you address?

Why you?

Why now?

As you consider these questions, here are two important exercises that will help you clarify your vision and goals:

1. Complete a needs analysis: Clearly, you see an urgent need in your community, otherwise you could not be going down this road. But have you looked at all the organizations in your area doing similar work?

Are you sure no one else is working in this area? If you want to increase capacity, open another shelter so more people in need of shelter will be able to find a bed, work closely with existing shelters to understand demand. Is the need for more beds seasonal? Or is it for people who are not accepted by current shelters, such as mothers with teen boys? Or are you looking to open a shelter for teens who have left or been kicked out of their homes, a need totally different than the family shelters in your community.

Fully explore the landscape in your community and figure out where your organization will fit in.

Build relationships with the leaders already in the space. When organizations work in competition, the community loses. When organizations work in partnership, everybody wins.

Get an idea of how many people will need the service you are offering. You have to get out in the community and talk to people. Talk to school principals and church pastors. Talk to the people who will need your services, and ask them what they need. Then, really listen. As a service provider, you are not in the shoes of the people who need your help. Be humble, and accept that you don’t know everything. The needs assessment is a learning and listening phase. You can figure out where you fit into the solution.

One of our clients did extensive research before they started their nonprofit because they didn’t want to duplicate services that already existed in the community. They talked with leaders of nonprofits with similar missions to find out where the gaps in service were and that helped them choose their mission.

2. Write a mission statement: A mission statement is a short, clear statement of what your organization does.

Get a pen and paper and start with “This organization exists to…” and complete that sentence over and over, using different words and phrases.

Avoid jargon, acronyms and insider talk. Think about your audience as someone who doesn’t know anything about food insecurity, homelessness, first generation college students, or animal abuse.

Start by writing down everything you want in your mission statement, and then edit it down to something that could fit on a t-shirt.

Habitat for Humanity has a wonderful mission statement: To provide simple, decent, affordable housing to families in need.

(To nitpick, you could even drop in need, as that is implied!)

Your mission should answer these questions:

• Why does this organization exist?
• Who does this organization serve?
• What impact does this organization have on the community?

Your mission statement keeps everyone focused on the goal while communicating to the community the essence of who you are.

A nonprofit is passion in action.

The story of that passion in action brings in the donations that pay for your programs and services, which have an impact and change lives.

To start a nonprofit and have the biggest impact, you have to build a solid foundation. Building the foundation takes a lot of work and it prepares you for what lies ahead, especially if you’re planning to grow your nonprofit.

Here are the 6 tasks you MUST do to create a solid foundation for your new nonprofit: 

1. Recruit your first Board: 

Choose your first Board carefully, as your Board members can be a tremendous help or a hindrance as you launch your nonprofit.

Here in the US, the IRS requires at least three Board members. Your Board members should not be family members, but people who are interested in your cause and have an applicable skill, such as accounting, marketing, social work, or social media, that they are willing to bring to the table.

A Board treasurer is often the hardest role to fill, so focus on this position first. Your local United Way or similar organization may have a bank of qualified people seeking Board roles, saving you some time and work to find the right person.

It is great to have Board members with contacts and are willing to introduce those contacts to your new nonprofit. It’s also helpful to have at least one person from your affected community on your Board. If you work with women transitioning out of abusive relationships, find someone who has lived that experience in the past or who works with that population.

Set clear expectations for your Board. Let them know there is more to being a Board member than simply casting votes. Be realistic that most Board members will only spend five to 10 hours a month on Board responsibilities.

Do not stock your Board with your friends or people who say yes to everything or people you think will rubber-stamp everything you want to do. Find people who care about your mission and have something valuable to contribute.

2. Obtain 501(c)3 or other legal status: 

To operate as a tax-exempt charitable foundation in the U.S., you will need to register with the IRS using a standard form 1023 or 1023-EZ (if you estimate that you will bring in less than $50,000 per year for the next three years). The fee for the standard form is $600 and the EZ is $275.

Expect to wait from two to 12 months for the IRS to approve your status. There are several pieces you’ll need before you can complete the form, like your mission and your first Board, so be ready. Get help from an accountant or attorney if you find the form daunting. Foundation Group can be a huge help in forming your new nonprofit.

Sometimes people want to fill a need in their community, but they don’t want to become a registered nonprofit because of the time commitment, responsibility, and cost. An alternative is to find an established organization you can partner with or who will serve as your fiscal sponsor. This can be an interim solution while you test your program to see if it takes off.

If you are located outside the U.S., check with your local, regional, and national government for requirements and procedures for registering as a nonprofit organization.

3. Determine services and programs:

This is when you hammer out how you plan to change lives. If you want to help first generation college students, how do you want to help them? By advising them on how to afford college without taking out huge loans? Okay, how are you going to do that? Will you offer classes? One-on-one counseling? Will you take a cohort of students under your wing and work with them throughout the process? What is your vision?

Make sure your program aligns with your mission. Will your Board support this program? Will donors give money to sustain the program? How will you find participants? Where will you carry out your program? How will you evaluate your results and measure impact? What resources will you need to launch the program?

Map out as much as you can with as many details as possible. And also think about how you can fund those new programs because you may need some seed money before you can start a nonprofit.

4. Open a bank account and set up a P.O. Box: Use a major bank, a community bank, a credit union, or an online bank for your checking account. Choose a bank you and your Board treasurer are comfortable with. Often, community banks want to help local organizations and give you extra services or waive fees.

If you start a nonprofit without office space or a facility, set up a P.O. Box so you have a mailing address for donors who want to send you checks. Choose a branch that is close to home to make your life easier. Shipping stores and similar retail businesses often offer P.O. Boxes.

5. Draft a budget: When you start a nonprofit, budgeting can be difficult because you don’t know yet exactly what will happen. Yet it’s critical to have a budget for the first year. You have to think about every expense you will incur during the year as well as every dollar of revenue you will bring in.

Start with your startup costs: Registering as a 501(c)3 with the IRS and with your state, subscribing to cloud-based software such as accounting, donor management, and other tools, hiring legal support or other experts, and leasing a facility, if necessary.

Then think about the expenses you will incur as you develop your programming. If you are providing sports opportunities for kids, for example, what will you need? Sports equipment? Coaches? A vehicle?

Next, think about revenue. Create a fundraising plan to bring in the money you need, mapping out all your fundraising activities for the year. Consider hiring a consultant to help you establish a fundraising plan that will help you make sure you can cover your costs.

6. Select and set up software systems: Choose the right tools to help you get the job done right and as efficiently as possible. First things first – accounting software. Quickbooks is an industry leader, but there are other options, including Wave, which is free. Next, donor management. Little Green Light is great for startups, as is Bloomerang, which has a free version that might work for your organization in the very early stages.

These are the tasks you need just to operate as a nonprofit. You also need to build a structure that will enable you to bring in the money you need to operate.

6. Select and set up software systems: Choose the right tools to help you get the job done right and as efficiently as possible. First things first – accounting software. Quickbooks is an industry leader, but there are other options, including Wave, which is free. Next, donor management. Little Green Light is great for startups, as is Bloomerang, which has a free version that might work for your organization in the very early stages.

These are the tasks you need just to operate as a nonprofit. You also need to build a structure that will enable you to bring in the money you need to operate.

When you start a nonprofit, you need to raise awareness and support for your cause right away. Without money, you can’t get your new venture off the ground.

Founders usually provide some start-up revenue as part of their commitment to the cause. But when you start a nonprofit, you can’t self-fund. Unless you have very deep pockets, you’ll run out of money fast.

And even if you do have personal wealth, self-funding your nonprofit means you aren’t giving other people the chance to support the mission, leading to an insular organization that’s all about you. To build a sustainable, thriving organization, you need to bring other people into the fold.

Here are 6 steps to let people know about your nonprofit and how they can get involved: 

1. Establish your brand: What does your nonprofit stand for and what impression do you want to make on prospective donors? Your logo, tagline, key messages, and website will reflect your brand.

Don’t slap your nonprofit’s name on a piece of clipart and call it done. Take the time to clearly define your brand so you can easily use it to help you raise awareness. Consider working with a branding consultant to get this just right.

2. Set up an email account: Most nonprofits use Gmail, which is fine. You can easily set up a Gmail account with your organization’s name @gmail.com. A better way to plan for the future is to set up an account—You can still use Gmail— with your firstname(at)organizationname(dot)org. Once you purchase the domain name you want to use, you can use it for your website and to set up your email.

3. Build a website: Build a website that tells prospective supporters what your organization is all about and invites them to volunteer, donate, and sign up for services. You can build and maintain an attractive website yourself using a builder like Squarespace or you can hire a consultant to build your website and then teach you to maintain it.

4. Spread the word: Send an email to everyone you know. Contact people through Facebook, LinkedIn, and Instagram, if you are active on those platforms. (And if you aren’t active, get active!) Book speaking gigs at your church, community group, garden club, anywhere that will have you. Ask your Board members to do the same.

Set up a table at festivals and farmer’s markets. Contact media outlets and suggest a story about your new nonprofit. People can’t support your organization if they do not know it exists, so spread the word far and wide.

5. Use social media: Start with Facebook and Instagram, then choose other platforms based on where your target audience is. Build up your followings on your personal accounts, as well as your nonprofit accounts, and share your nonprofit’s posts to your personal accounts.

Post engaging content, and encourage your friends and family members to like and share with their networks. Use a tool like Buffer to schedule posts and keep your feeds fresh.

6. Find your first donors: Who is most likely to support your new nonprofit and where will you find them? Start with your family members and your friends. They know you. They trust you. They believe in you. Invite them to get involved in your nonprofit by donating to get your new nonprofit started.

Figure out who your ideal donors are and then brainstorm places to find them. If your ideal donor is a mom with school-age children, set up a table at family-oriented festivals. If you think older women might be more interested in your work, speak to women’s groups at churches.

If your organization will attract support from progressive-minded people, make presentations at community groups that fight for justice and equality.

If you can’t think of anyone who would support your new nonprofit with a donation, then you need to ask yourself if starting a new nonprofit makes sense. I have been at this for many years, and I believe there are always people out there who will happily support a new nonprofit. It’s a matter of going out and finding them, telling them what you do, and making it easy for them to give.

When you start a nonprofit, be prepared to be astounded at how much time, effort, and focus the job requires. Building a solid structure will help you refine your idea and mold your idea into a compelling message you can sell to donors.

Setting yourself up for success will save you from sleepless nights and fear of failure. You will know your purpose, your budget, and how and where you’re going to find donors. You’ll have a bank account to deposit the money you raise and cash flow to fill it.

Donors will feel like their money is making a real difference. Instead of struggling financially, you will be more likely to see an opportunity to expand programs and services so you can change even more lives.

And that’s why you decided to start a nonprofit in the first place!