by Mandy Pearce
As a consultant, I get this comment a lot, “I want to start a nonprofit.” Sometimes folks will come to my classes specifically because they have the idea of starting a nonprofit stuck in their head. Keep in mind that I do NOT teach any workshops on how to start a nonprofit. I have a great workshop called Bootcamp for Beginner Nonprofits that walks through many foundations aspects of start-up nonprofits that are in the design phase or have been in existence for 1-3 years. But, this is NOT a how-to class. It is a ‘What You Should Know’ class.
My initial conversation with anyone wanting to start a nonprofit incorporates all of the following questions, most of which we never get around to discussing because there are no answers to the preceding questions. If you are in a fairly new nonprofit, think you might like to start one or work as a consultant with nonprofits, I encourage you to explore the well-developed replies to the following questions.
- Why would you like to start a nonprofit versus a for profit? – If you don’t have a well-developed answer to this, it likely means you don’t know the differences between the two types of organization and might be leading to the fact that nonprofit was chosen because of the ability to fundraise. Not always, but many times this is my experience.
- What is your mission statement? This describes how you will get where you want to be, why you exist, what you do in the present, who your target audience is, what service and/or commitment you have to the, and is a basic overview of your plans as an organization. See the examples below. We know who they are, what they do, who they serve based on this one sentence. Example: Charity Water is a nonprofit organization bringing clean and safe drinking water to people in developing nations.
- What is your vision statement? This describes where you want to be in the future. Example: Charity water believes that we can end the water crisis in our lifetime by ensuring that every person on the planet has access to life’s most basic need — clean drinking water.
- Do you want to lead or work for the organization? – As Marie mentioned in a recent blog: Do you want to serve as a board member so that you can help define the organization’s future? Remember, even if you are the founder, you do have a voice, but you do not have unilateral authority to make decisions. A board member can only exercise decision making power as a collective body when a quorum is present. If you prefer to be “on the front line” serving clients and working in the community, perhaps you have entertained the idea of becoming the organization’s Executive Director. While this is a great way to make sure the organization’s mission is being implemented and that the day to day operations are running smoothly, it is important to remember that the Executive Director works at the will of the board. Founders might find it challenging to “report” to the board especially if the board is making requests that the founder does not align with the original “vision” for the organization. Serving the nonprofit, you helped “birth” as a volunteer might seem like an ideal option for a founder who is confident in the organization’s new leadership. Quite honestly, we rarely see “founders” who are content to sit on the sidelines and leave the decision making to others!
- Who do you need on your board of directors and why? – Understanding nonprofit entities are required by law to have a governing board of directors, ‘who will be on yours and why’ is a vital question to ask. Have you created a list of the needs of your organization as far as the board? What skill sets will you need, do you have fundraisers picked out, folks who are good with financials, potentially folks who are trained in the service your org will offer? How many board members will you start with and how will you recruit them? There are a million questions to ask around your board. This is the group who will be your support, your fiduciaries, and possibly your boss!
- Do you have a business plan? Even if it is a rough draft on notebook paper. Do you have a plan for what you are going to do, how you are going to do it, the timelines for each program or project, who will be responsible for each action item, etc.? Nonprofits call this a strategic plan. It doesn’t matter how rudimentary it is, if you don’t have an idea of how you will operate this new venture, you might not be ready to move forward.
- How will you measure success? This is an all-encompassing question that will ultimately be answered in a comprehensive strategic plan. Initially, you want to consider what can you measure, how will you measure it, and what impact will you report to those supporting your venture. People want to fund your impact, not your existence. Therefore, this is a key step in setting yourself up for success as an organization. Think about what you hope to do, how you can and will do it, and then what you hope the outcomes will be. Be realistic and make sure you are creating SMART goals and objective to measure (Specific, Measurable, Attainable, Relevant and Timely).
- What other organizations do similar work, where are they and how are you different? These questions are utterly important. Are you duplicating services in your area? If so, donors don’t want to support a duplication of efforts. They want to see that folks are collaborating and partnering to have a greater impact. What makes you unique and how do you know this information? You need to do research to learn who does similar work, where they are, how the program or project is different or the same to yours, and be able to express how you are extraordinary. Think of this like a college essay for a scholarship. Everyone graduated high school, everyone got good grades, everyone has lots of stuff on their resume… now you have to say how you are different, unique, extraordinary… why you are deserving of support. This is vital to the success of fundraising if that is one of the diversified funding streams you hope to utilize.
- Who is your target audience for services and how will you get in front of them to share about your organization?
- Who is your target audience for financial support (if you are planning to fundraise) and how will you get in front of them?
- Do you have a projected budget for your first year? Have you taken time to research the costs of running your organization for the first year? Have you included lawyer fees for start-up filing, board and officers insurance, organizational insurance, charitable solicitation license, salaries, program expenses, office expenses, etc.? You need to craft a realistic budget for income and expenses.
- Have you listed diversified funding streams? As with any good business model, you should consider having multiple income streams and not relying 100% on any one income for your organization. Are you going to have fees for service, will you bill insurance, will you be on the city, county or town budget, will you write grants, have individual donors, hold special events, sell a product, have a social enterprise, create investments, create an endowment, have a membership model or establish a planned giving program? There are tons of funding streams to choose from and this list is NOT comprehensive. Which ones can you utilize, and which ones do you want to utilize. Do you have a projection for each funding streams for year one with a strategy for how to achieve it?
I know this seems like a ton of information and a lot to consider. If you haven’t thought through these steps, I encourage you to work through them before moving too far into the world of establishing a new nonprofit. There are many more steps after this initial set of questions.
30,000 –60,000 nonprofits close their doors annually in the US and 8 – 10% of charities say they are in imminent danger of closing their doors because of financial reasons (guidestar.org).