Start-up Nonprofits and Cautions

Start-up Nonprofits and Cautions

A nonprofit founder posted a question about “her” nonprofit, and it started me thinking about what new nonprofits – and their supporters – should be thinking about.

Here’s the original question (in red italic type):

I have a non profit called _______. I will begin working on the 501(c)(3) application. However, we have started working on the 3 projects. Do you know of any sponsors that maybe interested?…

__________ is a nonprofit organization. It was incorporated on October 20, 2011 in _______________ . Our motto is “A Passion to Care. The Ability to Help.” Our vision is for a caring and helping world. Our mission is to proactively do all we can through acts of caring. We do this by proactively advocating for seniors, proactively mentoring youth to volunteer to help our seniors while building their own character with the help from our seniors, and proactively supporting and educating caregivers to care for their senior loved one(s) while empowering self.

My response:

I see a few red flags here.

First, a nonprofit organization is always “we,” never “I”. Nonprofits are “owned” by the community at large and entrusted to a small group of individuals – the nonprofit’s officers and directors – on the understanding that the nonprofit will operate for the public benefit as outlined in law and regulation.

Second (related to the first), I hope that your board of directors and other stakeholders include people with experience in nonprofit leadership, management, and governance who can work with you to develop solid plans and strategic direction.

Third, many funders and/or sponsors will hesitate before offering support to a three-month old nonprofit without its determination letter from the IRS. It’s true that charitable gifts to a nonprofit may be deductible if the nonprofit is successful at securing tax-exempt recognition (and over 98% of applicant organizations are ultimately successful). However, many funders require having the determination letter in hand prior to making an award.

Fourth, your vision, mission, and services are laudable, inspirational, and aspirational. They are also BIG, and especially big for a new nonprofit yet to establish its “sea legs.” It’s tempting to start an organization and immediately jump to service provision. However, your nonprofit’s sustainability is dependent on taking small steps at first and building capacity over time.

There are few resources out there for “business planning” for new nonprofit organizations; this is very unfortunate. I’d recommend looking at business planning for for-profit businesses and adapting the exercises and processes to a nonprofit. Build a team of mentors and experts, critically examine the marketplace and determine who needs your services AND who is willing and able to pay for them. Assess all programmatic and operating costs, including the professional fees, insurance coverages, and other “overhead” expenses associated with operating a business. Develop a marketing plan and an advertising plan, and know the difference between the two. Finally (I know I’m leaving out some steps), set up an evaluation system that lets your board and funders know how successful your organization is and whether results match the time, effort, and monies invested.

I know this advice is a “buzz kill,” but it comes from a sincere desire for you and the nonprofit to be successful, avoiding the pitfalls of poor planning and inadequate capacity to be sustainable.

Good luck!