So You Have an Idea for Starting a Nonprofit Business. Now What?

So You Have an Idea for Starting a Nonprofit Business. Now What?

So, You Have an Idea for Starting a Nonprofit Business. Now What?

If your goal is to positively impact your community or, if you’re especially ambitious, the world, there are few better ways to do so than starting a nonprofit organization. A well-run nonprofit can efficiently turn ideas and funding into direct action. However, turning a brilliant, world-changing idea into a fully operational organization involves forethought and planning. Here are a few considerations you should keep in mind on your journey from brainstorming to launching a new nonprofit. 

Occupy a Unique Space

Particularly successful nonprofits carve out their own niche. This does not mean that your nonprofit’s mission needs to be unique, only that you do something better, differently, or more efficiently. 

There are over a million nonprofit organizations currently operating in the United States. Before you invest a ton of time into starting a new nonprofit corporation, you should run a needs assessment to determine if your goals are already being met by other charitable organizations.  Targeting a different market or using a distinct method for fundraising is another possibility. You do not have to reinvent the wheel, but the best nonprofits research ways to stand out before they launch.

Be Sure Running a Nonprofit Is Right for You

The IRS enforces strict tax exemption rules for which organizations can obtain federal tax exempt status (also referred to as 501 c status). If there are already public charities carrying out your desired mission, you can consider joining with them rather than starting your own nonprofit. There may be a need in your particular area that is already being addressed elsewhere. In that case, you may propose an expansion. You can run the new organization in your local area without needing to deal with start-up hassles like legal compliance and tax status. 

Another way to limit start-up and operational expenses is by finding a fiscal sponsor. Fiscal sponsorship allows you to maintain close contact with your donors and recipients while limiting your exposure to the business side of operations. Alternatively, your personal expertise and passion may be better suited to nonprofit consulting rather than directing. Starting a nonprofit is an immense undertaking, so consider your alternatives.

Focus on Your Mission

Make sure you define a specific aim for your nonprofit and focus all of your efforts on hitting that target. Don’t let yourself get bogged down in trying to solve too many problems. Instead, write a clear and concise mission statement and make sure all future activities contribute to achieving your goals. If issues arise throughout the start-up process, you can address them from a mission-oriented viewpoint. 

Prepare a Fundraising Plan

Before you can carry out your mission, you will need to find the cash you need to launch your nonprofit. Even the leanest organizations can require significant funding. You will at least need to pay to file all of your organizing documents with your state government and register the nonprofit. Such work is complex and may also require the assistance of professionals.

There will also be costs associated with nonprofit websites, events, telecommunications, and insurance that you will incur before any charitable outflows. Calculate how much money you will need to get your new organization off of the ground and the amount of your regular operating expenses. 

Here are a few sources for start-up funds you can consider including in your fundraising plan:

  • Individual donors – Seek out potential donors who believe in your mission and are willing to pay money or donate goods towards your success. Some nonprofits will seek one or a few large benefactors, while others operate using numerous small donations.
  • Grants – Governments and foundations offer money to achieve specific outcomes. Although large individual grants can transform an organization through stability and prestige, grant writing is time-consuming, and there is no guarantee your nonprofit will receive any funds.
  • Membership – Instead of regularly soliciting contributions, offering a membership program can help ensure a steadier stream of funds. It may also increase donor awareness and participation for those organizations that rely on volunteers.
  • Crowdfunding – A more recent development, crowdfunding can raise start-up funds or supplement other donors and grants. Crowdfunding is an online, streamlined tool for small-donor fundraising, and it can help build awareness of your mission and access like-minded individuals outside your local area.

There are funding methods other than those listed above, such as self-funding, but you must be aware of your budgetary needs. Getting too far ahead of yourself without securing funding is a recipe for a failed organization. 

Develop a Business Plan

A well-thought-out nonprofit business plan will compile all the considerations we’ve discussed so far into one focused document. Whether you develop a three- or five-year plan, you will need to consider the likelihood of growth and expansion. Your outline also needs to address the ways you will handle adversity and how you can more effectively carry out your mission.

Your business plan should consider whether you will be employee- or volunteer-driven, your geographic scope, and how your fundraising will shift over time. The plan should also create or consolidate your budget and explain how it will remain balanced in the future. 

Identify Valuable Board Members

There are two primary methods of nonprofit governance: employee managed and board member-managed. In small nonprofits, the board members may be involved in day-to-day operations and have a say in small decisions. If your nonprofit is going to hire paid staff, your board may be able to step back and only weigh-in at board meetings on large issues such as executive compensation, conflict resolution, and the general direction of the organization. 

The members you choose to sit on your board should provide their own value to the organization, even if they decline compensation for their duties. As fiduciaries, board members need to be aware of their exposure before agreeing to a role. They should personally believe in the nonprofit’s mission and, ideally, come from backgrounds that can be drawn upon for expertise. For example, it is common to seek out board members who have legal, fundraising, accounting, or operational skills. Expert networkers are also desirable additions to your board because they can readily help address fundraising needs.

Determine the Extent of Your Physical Presence

You may want to run your nonprofit out of your home, with nothing more than a website and maybe using your garage as a warehouse. Alternatively, you may need large buildings or property to carry out your mission. If you are going to accept donated goods, you need to plan where you will keep them. A center or storefront may be necessary to provide services to the recipients of your aid. Before you begin serving the public, ensure you are prepared for storage, interaction, and delivery.

Consult With Professionals

You have a passion for impacting your community and an idea worth organizing around. However, many of the tasks you will need to undertake between concept and launch require the help of outside experts. If you need commercial, medical, or warehouse space, you’ll need to seek out a realtor, and budgeting and financials are tricky if you do not have a background in accounting. Fundraising and grant-writing have specific patterns that expert consultants make a living explaining and accessing. 

When it comes to nonprofit governance and compliance issues, you will need to rely on lawyers. Here at Mod Law Firm, I have seen nonprofits fizzle because they did not have a stable foundation to build upon. I have also been lucky enough to help people with groundbreaking ideas turn them into successful nonprofit organizations making tremendous contributions to their communities.

The best time to retain an attorney is BEFORE you file your nonprofit articles of incorporation and daily operations take up too much of your time. Schedule an initial consultation with Mod Law Firm today to learn more about how we can help turn your nonprofit idea into a reality.