So you want to start a nonprofit organization.
You have identified a problem you want to solve and how you’d like to do it. But there is so much more that goes into starting and running a nonprofit than you may think, there are certain aspects that you must consider to determine whether or not this is the right move.
In 2016, 1.5 million nonprofits were registered in the IRS and although the nonprofit sector contributes to 5.6% of the US GDP, over 30% of nonprofits are destined to fail within 10 years. Of course you don’t start your nonprofit thinking that it will fail, but are you considering how you will sustain it?
5 questions you MUST ask yourself before starting a nonprofit:
- What other foundations are tackling the same problem and how?
- How will the nonprofit achieve long-term sustainability?
- How much time and money will it cost and will it be worth the investment?
- Could I start a for-profit, b-corporation instead?
- Do I have the right candidates for my member board?
1. What other foundations are tackling the same problem and how?
Just like when you start a business and scope out your competitors, you will want to scope out the organizations that are trying to solve the problem and their approach.
Even if there is no one in your community who may be doing it, there might be someone in a different state or country that is trying to accomplish a similar goal. Pay attention to their procedures, what is and isn’t working, and see if there is something that you could replicate in your community or do differently.
Also, focus on the results and impact of those organizations in their communities and if their efforts are actually generating a return. Is there a more efficient way to do something that they are doing? How can you adapt/change models that work for your community? Take advantage of the data and insight their work provides.
2. How will the nonprofit achieve long term sustainability?
When most people think about a nonprofit organization, they think of donations. However, according to Civil Society for the 21st Century, most public charities make 48% of their revenue from fees to their programs, goods and services and the only 13% comes from philanthropic donations, while the rest of the percentage is divided into government support and investments.
So what does this mean for your organization? You need to plan how you will generate an income to cycle back into your nonprofit. If you plan on charitable giving to be the main source of funding for your organization, think twice.
The rule of diversifying your income still applies here, so think how you can generate multiple revenue streams to achieve long-term sustainability.
3. How much time and money will it cost and will it be worth the investment?
The reason for deeming many nonprofits as ineffective is because they are spending time and money in a cause that is not generating an appropriate return to make it worth all the expenses, which ends up being a complete waste of resources and energy.
Take time to write out an appropriate business plan, including a sample budget for how much money you think it will take to get your nonprofit up and running. How much is it to lease a space? How many employees will you hire initially? How much will utilities be? How will you offset these costs? These are some questions you could start asking yourself. Furthermore, consider the reach your organization will have, how many lives will it impact, are you offering temporary solutions to a permanent problem? If so, your organization will be deemed inefficient.
4. Could I start a for-profit venture instead and donate proceeds towards a program?
Don’t discard the option of starting a for-profit business instead. If during your research and planning phase you realize that there are more organizations dedicated to tackling your problem in an effective way, consider partnering with them and adding value to their efforts.
Let’s say you have a product or service that you could sell to generate a profit, you can donate part of your proceeds to an organization whose mission aligns with yours.
Consider setting up a B-corporation, a for-profit corporation that is driven by mission and profit. B-corporations are able to generate for-profit income while still contributing to social and environmental change. https://bcorporation.net/about-b-corps
A great example of this business model is TOMS, the Original One for One Company. TOMS is a for-profit shoe company known for giving a pair of shoes to children in developing countries for each pair they sell. They recently shifted their giving program, dedicating at least one-third of their profits to a charitable foundation, the B-corporation model still remains however. The B-corporation model has proved to be quite a successful one and could be a way to bring sustainability into your cause.
5. Do I have the right candidates for my board members?
Starting a nonprofit will require a lot of time and effort, not just for you but for your board members. It is important for you to have an idea of one or two people you would like to bring on board to become a part of your organization. The job for your board members is to lead your organization into the future. They also have the most influence about where your nonprofit is headed and how it will successfully fulfill its mission. Your board members should be experienced in the field, have a wide network of contacts to connect your organization to and of course, be as committed to the organization’s mission as you are. Read our full blog on what characteristics to look for on your board members.
In conclusion, before you decide and venture into starting your nonprofit, take time to research and plan extensively. Consider other organizations who have a similar mission as yours, what they are doing it, and how you can adapt and improve. Run a cost-benefit analysis and focus on the financials as your plan to make your nonprofit a self-sustainable one. Lastly, think about the leadership of your organization as this will make or break the future of your nonprofit. If you are still convinced that starting a nonprofit is your calling, read our blog on the 10 Steps to Starting a Nonprofit.